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94–605 PDF 2006

S. HRG. 108–505

REAUTHORIZATION OF THE

ECONOMIC DEVELOPMENT ADMINISTRATION

HEARING

BEFORE THE

COMMITTEE ON ENVIRONMENT AND

PUBLIC WORKS

UNITED STATES SENATE

ONE HUNDRED EIGHTH CONGRESS

SECOND SESSION

APRIL 28, 2004

Printed for the use of the Committee on Environment and Public Works

(

(II)

COMMITTEE ON ENVIRONMENT AND PUBLIC WORKS

ONE HUNDRED EIGHTH CONGRESS

SECOND SESSION

JAMES M. INHOFE, Oklahoma, Chairman

JOHN W. WARNER, Virginia

CHRISTOPHER S. BOND, Missouri

GEORGE V. VOINOVICH, Ohio

MICHAEL D. CRAPO, Idaho

LINCOLN CHAFEE, Rhode Island

JOHN CORNYN, Texas

LISA MURKOWSKI, Alaska

CRAIG THOMAS, Wyoming

WAYNE ALLARD, Colorado

JAMES M. JEFFORDS, Vermont

MAX BAUCUS, Montana

HARRY REID, Nevada

BOB GRAHAM, Florida

JOSEPH I. LIEBERMAN, Connecticut

BARBARA BOXER, California

RON WYDEN, Oregon

THOMAS R. CARPER, Delaware

HILLARY RODHAM CLINTON, New York

ANDREW WHEELER, Majority Staff Director

KEN CONNOLLY, Minority Staff Director

(III)

CONTENTS

Page

APRIL 28, 2004

OPENING STATEMENTS

Allard, Hon. Wayne, U.S. Senator from the State of Colorado ............................ 19

Baucus, Hon. Max, U.S. Senator from the State of Montana, prepared statement ...................................................................................................................... 37

Bond, Hon. Christopher S., U.S. Senator from the State of Missouri ................. 5

Clinton, Hon. Hillary Rodham, U.S. Senator from the State of New York ........ 21

Crapo, Hon. Michael D., U.S. Senator from the State of Idaho ........................... 5

Inhofe, Hon. James M., U.S. Senator from the State of Oklahoma .................... 1

Jeffords, Hon. James M., U.S. Senator from the State of Vermont .................... 2

Murkowski, Hon. Lisa, U.S. Senator from the State of Alaska ........................... 15

Thomas, Hon. Craig, U.S. Senator from the State of Wyoming, prepared

statement .............................................................................................................. 37

Wyden, Hon. Ron, U.S. Senator from the State of Oregon .................................. 7

WITNESSES

Gatson, Charles R., vice president and Chief Operating Officer, Swope Community Builders ................................................................................................... 28

Prepared statement .......................................................................................... 75

Gorshing, Gary, president, National Association of Development Organizations ....................................................................................................................... 25

Prepared statement .......................................................................................... 65

Sampson, David A., Assistant Secretary of Commerce for Economic Development, Economic Development Administration .................................................. 8

Prepared statement .......................................................................................... 39

Responses to additional questions from:

Senator Baucus ................................................................................................. 61

Senator Jeffords ................................................................................................ 46

Senator Murkowski .......................................................................................... 62

Senator Thomas ................................................................................................ 60

Saudade, James J., deputy commissioner, Department of Housing and Community Affairs, State of Vermont ....................................................................... 27

Prepared statement .......................................................................................... 72

Singerman, Phillip A., executive director, Maryland Technology Development

Corporation, on behalf of the International Economic Development Council . 30

Prepared statement .......................................................................................... 77

Responses to additional questions from Senator Jeffords ............................. 80

ADDITIONAL MATERIAL

Charts:

EDA Investments and Advance Faith-Based Social Entrepreneurship and

Redevelopment Strategies, FY 2002 to Date and Over $1M in EDA

Funding, May 12, 2004 ................................................................................. 59

EDA Investments FY 1998 to Date In the State of Vermont, May 12,

2004 ................................................................................................................ 52–53

EDA Investments to the Philadelphia Region Office FY 1998–2004 to

Date for Public Works, EA Construction and RLF Only, Average Estimated Private Investment Leveraged per EDA$, May 12, 2004 .............. 54

EDA Public Works, EA Construction and RLF Investment FY 1998 to

Date In the State of Vermont, May 12, 2004 ............................................. 51

Page

IV

—Continued

EDA Revolving Loan Fund Investments, FY 1998 to date, Sorted by

FY and State, May 12, 2004 ......................................................................... 55–58

Letter, Union County Board of Commissioners to Oregon Congressional Delegation .................................................................................................................... 88

Policy Recommendations, International Economic Development Council

(IEDC).................................................................................................................... 80–84

Statement, National Association of Regional Councils and National Association of Counties .................................................................................................... 86

(1)

REAUTHORIZATION OF THE ECONOMIC

DEVELOPMENT ADMINISTRATION

WEDNESDAY, APRIL 28, 2004

U.S. SENATE, COMMITTEE ON ENVIRONMENT AND PUBLIC WORKS, Washington, DC.

The committee met, pursuant to notice, at 9:30 a.m. in room SD–

406, Senate Dirksen Building, Hon. James M. Inhofe (chairman of

the committee) presiding.

Present: Senators Inhofe, Bond, Crapo, Murkowski, Allard, Jeffords, Wyden, and Clinton.

OPENING STATEMENT OF HON. JAMES M. INHOFE,

U.S. SENATOR FROM THE STATE OF OKLAHOMA

Senator INHOFE. The meeting will come to order.

First of all, good morning, and we thank all the witnesses for appearing before us today. A special welcome to Gary Gorshing, who

is here from Oklahoma, from southwest Oklahoma. We are glad to

have you here, Gary, and look forward to your testimony. That is

one thing nice about being Chairman of the committee, you can always have a witness from Oklahoma.

Senator JEFFORDS. I remember my days.

Senator INHOFE. Well, you have one from Vermont; so do not cry.

Senator JEFFORDS. All right.

Senator INHOFE. This hearing today is to discuss the reauthorization of the Economic Development Administration. It was created

in 1965 to provide assistance to economically distressed areas, primarily those experiencing substantial and persistent unemployment and poverty. We have a lot of those problems in Oklahoma

that, of course, Vermont does not have. So I am more concerned

about this probably. These areas count on EDA to help create favorable environments for long-term economic growth. Studies have

shown that EDA uses Federal dollars efficiently and effectively,

creating and retaining long-term jobs at an average cost that is

among the lowest in the Government.

We have had some great successes working with EDA in our

home State of Oklahoma; overall, in the last decade, EDA investments of about $47 million, leveraged by $42 million in State and

local dollars, and more than $1 billion in private sector dollars.

Now, that is what this is all about, that is what we are supposed

to be doing. Altogether, these investments created or saved more

than 13,000 jobs just in my State.

More specifically, just about a year ago, I joined Dr. Sampson as

he presented an award to the city of Durant and the Choctaw NaVerDate 11-MAY-2000 15:24 May 01, 2006 Jkt 094601 PO 00000 Frm 00005 Fmt 6633 Sfmt 6633 G:\DOCS\94605.TXT SENENV2 PsN: SENENV2
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tion of Oklahoma for a public works project. The project is construction of an industrial park and infrastructure to support the

expansion of a Big Lots, Inc. distribution facility. It will include significant local, State, tribal, and private investment and will support more than 300 jobs. I know we will have many more of these

success stories as time goes by. I am sure, Mr. Sampson, you were

impressed with the very large turnout that was there with you and

me on that date.

The EDA contributes to important projects like this all across the

country. Reauthorization gives us an opportunity to talk about the

efficiencies and about areas where we might have room for improvement. One thing I would like to pursue, and perhaps you

could address this in your opening statement, and maybe your

predecessor on the next panel could also do it, is we have been disturbed a little bit recently about some of the language I have seen

on EDA’s work on brownfields that would change the role from redeveloping to remediation of these sites. As you and I talked in my

office, Mr. Sampson, that is the role of the EPA, EDA is supposed

to be creating jobs. So maybe we can talk about that as we move

on. Thank you very much for appearing.

[The prepared statement of Senator Inhofe follows:]

STATEMENT OF SENATOR JAMES M. INHOFE, U.S. SENATOR FROM THE

STATE OF OKLAHOMA

Good morning. Thank you to all of our witnesses for appearing before us today

and a special welcome to Mr. Gary Gorshing from southwestern Oklahoma. We’re

glad to have you here, Gary, and I look forward to your testimony.

Today’s hearing is to discuss reauthorization of the Economic Development Administration. EDA was created in 1965 to provide assistance to economically distressed areas, primarily those experiencing substantial and persistent unemployment and poverty. These areas count on EDA to help create favorable environments

for long-term economic growth. Studies have shown that EDA uses Federal dollars

efficiently and effectively creating and retaining long-term jobs at an average cost

that is among the lowest in government.

We’ve had some great successes working with EDA in my home State of Oklahoma. Overall, in the last decade, EDA investments of about $47 million, leveraged

$42 million in State and local dollars and more than $1 billion in private sector dollars. All together, these investments created or saved more than 13,000 jobs. More

specifically, just about a year ago, I joined Dr. Sampson as he presented an award

to the city of Durant and the Choctaw Nation of Oklahoma for a public works

project. The project is construction of industrial park infrastructure to support expansion of a Big Lots, Inc. distribution facility. It will include significant local,

State, tribal and private investment and will support more than 300 new jobs. I

know we will have many more of these success stories in the future as well. In fact,

just yesterday we announced $2.1 million in EDA project and planning grants for

the State of Oklahoma. I look forward to seeing the benefits of these good investments in the coming months and years.

EDA contributes to important projects like this all across the country. Reauthorization gives us an opportunity to ensure the continuation of this good work and

to provide the tools necessary to improve performance even further. I look forward

to hearing from today’s witnesses and to working with my committee colleagues, the

Administration and interested stakeholders to move a reauthorization bill as quickly

as we can.

Senator INHOFE. Senator Jeffords.

OPENING STATEMENT OF HON. JAMES M. JEFFORDS,

U.S. SENATOR FROM THE STATE OF VERMONT

Senator JEFFORDS. Good morning, Mr. Chairman. Thank you for

holding this hearing today on the Economic Development AdminisVerDate 11-MAY-2000 15:24 May 01, 2006 Jkt 094601 PO 00000 Frm 00006 Fmt 6633 Sfmt 6601 G:\DOCS\94605.TXT SENENV2 PsN: SENENV2
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tration (EDA). I am delighted to be here to discuss the reauthorization of this very important Agency.

EDA and its programs provide vital financial and technical assistance to our Nation and to my home State of Vermont. I am so

pleased to welcome a witness from Vermont, James Saudade, the

deputy commissioner of the Vermont Department of Housing and

Community Affairs. He most recently completed 7 years as executive director of the Green Mountain Economic Development Corporation and has valuable insight into EDA’s performance in

Vermont. Welcome, Mr. Saudade.

During the past 10 years, Vermont has seen an EDA investment totaling over $13 million. This investment has created over 750

jobs and leveraged over $89 million of private sector investment in

our small rural State. Vermont’s State and local match dollars total

$22 million. These are significant economic investments for a small

State. Through regional planning grants and infrastructure project

money, the Economic Development Administration has been a vital

and willing partner in Vermont’s economic growth. In fact, the last

time Dr. Sampson and I were together we were in the bucolic setting of rural Randolph, VT, announcing a new business incubator

initiative. This initiative represents a wonderful collaboration between the Federal Government, higher technical education, and

local Vermont business community.

In addition to commending EDA for its important role, I am here

to explore how the Agency can do its job more efficiently and effectively despite being hamstrung by budgets being authorized levels

and far below the economic development needs of this country. I

am also interested in exploring how EDA’s programs meet the

needs of rural States, like Vermont, which suffer not only from

high poverty levels and unemployment but underemployment as

well.

We all know the critical importance of innovation and valueadded industries. However, where would we be without the preliminary planning process that informs any successful economic initiative. EDA has a very important role to play in supporting planning

at the local level. Nationwide, EDA has spearheaded the development of the business incubators, creating a platform for a variety

of entrepreneurs to grow small businesses. It is a great idea. Small

business is the backbone of our country. The economy and statistics

tell us that it is. A supported startup in a business incubator has

far better possibilities of success.

I appreciate hearing many more people talk about the fundamental importance of linking research universities to businesses.

Ideas need a hospitable environment in which to incubate in order

to create new enterprises. Support for the university centers and

technology transfer they may foster from the laboratory to the marketplace is very important in our economy. These opportunities result in high paying, skilled jobs and prosperity for our citizens.

EDA must continue to make work force development a high priority so that the United States can meet the skill needs of the global marketplace.

Brownfield redevelopment is another area of great interest to me.

The State of Vermont has over 2,000 brownfield sites. Only a handful of these have been declared cleaned up. It is my hope that EDA

4

can play a larger role in the economic redevelopment of these

brownfield sites in order to diminish the amount of industrial property sitting idle.

Mr. Chairman, thank you for scheduling this hearing at the full

committee level. I look forward to hearing testimony from this

morning’s witnesses.

[The prepared statement of Senator Jeffords follows:]

STATEMENT OF SENATOR JAMES M. JEFFORDS, U.S. SENATOR FROM THE

STATE OF VERMONT

Good morning. Mr. Chairman, thank you for holding this hearing today on the

Economic Development Administration (EDA). I am delighted to be here to discuss

the reauthorization of this very important Agency. EDA and its programs provide

vital financial and technical assistance to our Nation and to my home State of

Vermont.

I am also pleased to welcome a witness from Brownsville, Vermont—James

Saudade, the Deputy Commissioner of the Vermont Department of Housing and

Community Affairs. He most recently completed 7 years as the Executive Director

of the Green Mountain Economic Development Corporation and has valuable insight

into EDA’s performance in Vermont. Welcome Mr. Saudade.

During the past 10 years Vermont has seen an EDA investment totaling over $13

million. This investment has created over 750 jobs and leveraged over $89 million

of private sector investment in our small rural State. Vermont’s State and local

match dollars total $22 million. These are significant economic investments for a

small State.

Through regional planning grants and infrastructure project money, the Economic

Development Administration has been a vital and willing partner in Vermont’s economic growth. In fact, the last time Dr. Sampson and I were together, we were in

the bucolic setting of rural Randolph, Vermont announcing a new business incubator initiative. This initiative represents a wonderful collaboration between the

Federal Government, higher technical education, and the local Vermont business

community.

In addition to commending EDA for its important role, I am here to explore how

the Agency can do its job more efficiently and effectively despite being hamstrung

by budgets below authorized levels and far below the economic development needs

of this country.

I am also interested in exploring how EDA’s programs meet the needs of a rural

State like Vermont, which suffers not only from high poverty levels and unemployment, but under-employment as well.

We all know the critical importance of innovation and value-added industries.

However, where would we be without the preliminary planning process that informs

any successful economic initiative?

EDA has an important role to play in supporting planning at the local level. Nationwide, EDA has spearheaded the development of business incubators. Creating

a platform for a variety of entrepreneurs to grow small businesses is a great idea.

Small business is the backbone of our economy. The statistics tell us that a supported startup in a business incubator has a far better possibility of success.

I appreciate hearing many more people talk about the fundamental importance

of linking research universities to businesses. Ideas need a hospitable environment

in which to incubate in order to create new enterprise. Support for University Centers and the technology transfer they foster from the laboratory to the marketplace

is very important to our economy. These opportunities result in high paying skilled

jobs and prosperity for our citizens. EDA must continue to make work force development a high priority so that the United States can meet the skill demands of the

global marketplace.

Brownfield redevelopment is another area of great interest to me. The State of

Vermont has over 2,000 brownfield sites. Only a handful of these have been declared cleaned up. It is my hope that EDA can play a larger role in the economic

redevelopment of these brownfield sites in order to diminish the amount of industrial property sitting idle.

Mr. Chairman, thank you for scheduling this hearing at the full committee level.

I look forward to hearing testimony from this morning’s witnesses.

Senator INHOFE. Thank you, Senator Jeffords.

Senator Crapo.

5

OPENING STATEMENT OF HON. MICHAEL D. CRAPO,

U.S. SENATOR FROM THE STATE OF IDAHO

Senator CRAPO. Thank you very much, Mr. Chairman. I, too, appreciate your holding this hearing and your strong work in this

area. I also want to welcome and acknowledge Dr. Sampson. I

would like to say at the outset that I believe the EDA is one of

those Federal Agencies that is really working well. It is doing its

job. As you can tell from the comments that have already been

made by other Senators, the results are visible on the ground out

in the States. I simply want to commend you for the job that the

Agency is doing.

That is not to say we do not have our issues once in a while. But

the fact is that you personally and your staff have worked very

closely with me when I have raised concerns or when we have

needs and issues. All over Idaho we can see the evidence of the

good work that EDA is doing in helping our communities. I simply

want to note that.

I want to specifically join in the Chairman’s comments on

brownfields. We need to clean up the brownfields in this Nation

and we must give that the attention that it needs. There is a role

that the EDA can play in terms of the economic development and

jobs related to these kinds of issues. But I am very concerned that

we do not want to see funds diverted away from jobs into a separate program that should be operated by the EPA rather than by

the EDA. I am very concerned to make sure that we do not see a

weakening in the focus of the Agency’s efforts so that we turn this

Agency into a cleanup Agency rather than into an economic development and a jobs oriented Agency. So I share in the Chairman’s

comments in that context.

Last, I would simply say that, as you know, Dr. Sampson, I have

some concerns about the formula that has been recently changed

with regard to the trade assistance adjustment centers. We will

work together on that between ourselves and I will not necessarily

bring it up or make it a big issue here. But I am very concerned

about the recent adjustments in this formula that have, in my

opinion, made it more difficult for us to get the kinds of resources

and support into the rural areas that we need. So I will be working

with you personally on that more in the future.

Thank you again very much for your great work and this Agency’s work.

Senator INHOFE. Thank you, Senator Crapo. I have talked to Secretary Sampson about this. I know he shares our views on the

proper role of EDA.

Senator Bond.

OPENING STATEMENT OF HON. CHRISTOPHER S. BOND,

U.S. SENATOR FROM THE STATE OF MISSOURI

Senator BOND. Thank you very much, Mr. Chairman. Welcome,

Dr. Sampson. I would join in with concerns that apparently you

have expressed and Senator Crapo have expressed.

I am very pleased that, under the leadership of Dr. Sampson, the

Economic Development Administration has been transforming itself

into a results oriented Agency, maximizing the economic impact of

each and every dollars while at the same time maintaining its core

6

focus on empowering distressed communities to develop and implement their own economic development strategies. I think EDA has

remained true to its guidelines.

EDA assistance in Missouri has been a great boon to local investment. Over the last decade, some 300 projects have resulted in investments of more than $150 million in Missouri, leading to the

creation of 5,000 jobs and leveraging an additional $1.4 billion,

roughly, in private and State and local funding. EDA has recently

invested in several good activities. Last August, EDA awarded a $2

million grant as seed capital for the North H. Shell wetlab space,

which is tremendously important in moving forward in biotechnology.

I think it is important EDA continue transforming itself from a

culture of compliance to a culture of performance. In the past, too

often, economic development districts would be rewarded for simply

being a member of an economic development district and filling out

the paperwork. I think changing the structure to reward districts

for their achievements while motivating others to improve makes

a lot of sense.

The EDA should achieve its maximum impact with every dollar.

I also think the Administration has to remember its legislative

mandate to aid distressed communities. I am concerned about the

new standards of EDA regarding the minimum amount of money

leveraged and jobs created per EDA dollar. It is my understanding

that under the new Balance Scorecard measurement, a region must

meet an average of no less than $22 non-EDA dollars for each EDA

dollar, and no more than $5,000 of EDA funds per job created. This

could wind up funding only projects that are in a strong position

to leverage a maximum amount of jobs and investment already. A

recent example, a southwest area career center in Monett, MO, was

turned down because it did not have the new direct job creation requirements. I think in Mexico, MO, EDA has looked at putting

some resources into job training in an area where resource-heavy

industries such as refractories industries have been shut down and

we are looking for skilled work forces to replace them.

But I look forward to hearing your testimony and the testimony

of other witnesses as we work toward a reauthorization, a multiyear authorization that will support the good, new path on which

you and this Administration have chosen to put EDA. Thank you.

[The prepared statement of Senator Bond follows:]

STATEMENT OF SENATOR CHRISTOPHER S. BOND, U.S. SENATOR FROM THE

STATE OF MISSOURI

Thank you Mr. Chairman. I am pleased to be here today to discuss the reauthorization of the Economic Development Administration. Under the leadership of Dr.

Sampson the Economic Development Administration has begun the transformation

into a results oriented Agency that maximizes the economic impact of each and

every dollar while at the same time, maintaining its core focus on empowering distressed communities to develop and implement their own economic development and

revitalization strategies.

EDA has been successful over the years because it has remained true to the

guideline that ‘‘distressed communities must be empowered to develop and implement their own economic revitalization strategies.’’

EDA assistance in Missouri has truly been a boon to local investment and economic growth. For instance, over the last decade EDA has implemented over 300

projects and invested more than $115 million in Missouri. Since 1998, EDA funds

7

have led to the creation of over 5,000 jobs in my State and leveraged an additional

$684.7 million in private sector funds and $83.1 million in State and local funding.

Recently, EDA has invested in several economic development initiatives in Missouri that have continued to diversify the job base with a focus on high-tech, highgrowth industry. For example, last August EDA awarded a $2 million grant as seed

capital for the ‘‘North 8’’ shell wet lab space.

It is important that EDA continue its transformation from a ‘‘culture of compliance to a culture of performance.’’ I support implementing further incentives that

reward deserving projects and their communities based on their performance.

Economic development districts are rewarded for simply being a member of an

economic development district. A change in this structure will reward districts for

their achievements while motivating others to improve further.

While it is important for EDA to achieve the maximum impact with every dollar,

the Administration must also remember its legislative mandate to aid distressed

communities.

Specifically, I am referring to EDA’s new standards regarding the minimum

amount of money leveraged and jobs created per EDA dollar. It is my understanding, that under the new ‘‘balanced score card’’ measurement rules, the region

must meet an average of no less than 22 non-EDA dollars per each EDA dollar and

more no more than $5,000 EDA funds per job created. It is my concern that EDA

may become overly focused on funding only projects that can leverage a maximum

amount of jobs and investment.

These new criterion will be devastating to distressed rural and urban communities throughout Missouri.

One recent example of a project that has been rejected based on the new standards is the Southwest Area Career Center in Monett, Missouri. It is my understanding that this project was turned down expressly for not meeting the new direct

job creation requirements.

A better example of EDA’s role in our Nation’s evolving economy can be found in

my hometown of Mexico. As the economy continues to grow and diversify away from

natural resource heavy industries such as firebrick, businesses in the surrounding

area will need a highly skilled work force.

My testimony has highlighted just a few examples of the opportunities and needs

for economic development across my State.

I look forward to hearing the testimony from our witnesses today and look forward to working with you all in the future toward a multi-year reauthorization of

EDA.

Senator INHOFE. Thank you, Senator Bond.

Senator Wyden.

OPENING STATEMENT OF HON. RON WYDEN, U.S. SENATOR

FROM THE STATE OF OREGON

Senator WYDEN. Thank you very much, Mr. Chairman. I really

appreciate your holding this hearing. As Mr. Sampson knows, he

and I have been going back and forth with a series of letters. Anyway you slice it, Mr. Chairman and colleagues, the message is out

in the rural part of the country and in the rural west that you have

to come up with more dollars in the private sector in order to get

some additional help. I am just looking at a letter that I got from

the Union County Board of Commissioners. Mr. Chairman, I would

just ask unanimous consent to have this made a part of the record.

Senator INHOFE. Without objection.

Senator WYDEN. The first paragraph says it all. It says,

‘‘We are writing to express deep concern regarding the new 2004 rule from the

Economic Development Department regarding a $22-to-$1 match for economic

projects. Union County enjoys a wonderful working relationship with our Federal

partners regarding our economic efforts.’’

It goes on to say, as I have heard consistently throughout my

State, that the relationship with your Agency, Mr. Sampson, is exceptional. It is very positive. Ann Berblinger, in particular, has

been an incredibly useful and constructive kind of partner. I think

8

this letter sums it up. It says, ‘‘We see this new rule to be a considerable barrier to our partnership.’’

I am going to have some detailed questions to ask when it is appropriate, Mr. Chairman, and you have always been very gracious

about that. But having looked at these exchanges that Mr. Sampson and I have had, and I appreciate the fact that you have been

willing to do them very quickly, Mr. Sampson, I think it is clear

that the message is out in the rural west in these hard hit towns,

many of which have unemployment way over 10 percent, is they

have to figure out how to come up with additional dollars in the

private sector. I think that is regrettable and I hope we can change

it. I look forward to the time when we can ask some questions.

Thank you.

Senator INHOFE. Thank you, Senator Wyden. That time will be

shortly.

Secretary Sampson, and for the other witnesses on the second

panel, we will confine your opening remarks to 5 minutes. Your entire statement will be made a part of the record. We will give a little more latitude to Secretary Sampson since he is the only person

on this panel. With that, we will recognize you and thank you at

the same time for the fine job you are doing.

STATEMENT OF HON. DAVID A. SAMPSON, ASSISTANT SECRETARY OF COMMERCE FOR ECONOMIC DEVELOPMENT,

ECONOMIC DEVELOPMENT ADMINISTRATION

Mr. SAMPSON. Thank you, Mr. Chairman, members of the committee, it is a pleasure to be with you this morning. Thank you for

this opportunity. I have had the opportunity of touring your States

with many of you and look forward to the opportunity of being in

other Members’ States with you.

Economic development is very near and dear to my heart. I have

dedicated much of my professional career to economic development.

Over the years, I have learned a lot. I have seen what works and

what does not work. I have had economic development responsibilities at the local level in the Dallas/Fort Worth area. I have had

economic development responsibilities for the entire State of Texas.

I have also had work force development responsibilities at the local

and State level. While I do not claim to have all the answers with

respect to economic development, the perspective I offer today in

my role as the Assistant Secretary for Economic Development is

one that has been informed by years of economic development professional experience, careful review of the research, and now almost 3 years as the head of EDA.

It is clear to me that the only constant in economic development

today is change. American companies face changing competition,

both domestically and from worldwide markets, and government

budgets are tied at the State and local as well as at the Federal

level. Just like our counterparts in the private sector, Government

Agencies must adapt and get the most from our resources. As officials entrusted with public responsibility, we ignore this new reality at our peril.

The reauthorization language builds upon the good work of my

predecessor in the previous Administration, Dr. Phillip Singerman.

His efforts and your support secured the reauthorization of EDA 5

9

years ago, after a 16-year gap, and set the stage for the improvements that we seek today.

Today, EDA’s mission is to help lead the Federal economic development agenda by promoting innovation and competitiveness, preparing American communities for growth and success in the worldwide economy. In order for EDA to achieve this mission and for the

Federal Government to be successful in its overall economic development efforts, we need a new economic development strategy for

the 21st century. I believe this new strategy has at least five elements.

No. 1, focusing on regional development. Economies are not hermetically sealed along artificial political boundaries. The evidence

clearly shows that those regions that collaborate are better able to

attract the private capital that spurs job creation.

No. 2, promoting America’s innovative capacity. EDA strongly

supports innovation as a key driver of economic development. At

EDA, we believe the goal of economic development is to increase

prosperity, to increase the per-capita income of the residents in

your State. Productivity and increased rates of productivity growth

is the primary driver of prosperity, and innovation is what drives

productivity. That is why we have made university-led and technology-led economic development a funding priority for EDA.

No. 3, maintaining flexibility and local control. EDA’s development partners laud our program flexibility. However, they have

told us that we can do a better job, and this bill increases our flexibility while maintaining accountability.

No. 4, enhancing coordination with other Federal programs. The Federal Government spends a total of $20 billion a year in economic development programs, spread across nine different Federal

Agencies. We believe that all of our communities, especially the

economically distressed communities, will be better off if we can coordinate our efforts better. This legislation supports a first step in

that direction.

No. 5, focusing on results and rewarding performance. At the end

of the day, results are what matter most. This legislation mirrors

EDA’s focus on results with language that rewards our partners

who exceed job creation and private investment expectations.

Those are the broad thematic underpinnings of EDA’s reauthorization legislation. There are a couple of specific provisions that

warrant your attention. The first involves Revolving Loan Funds.

Twenty-seven years ago EDA created the first economic development Revolving Loan Fund. Today, we have a portfolio of over 600

RLFs around the country, capitalized at over $1 billion. Reforms

are needed to ensure the continued effectiveness and accountability

of these funds. Since 2001, DOC’s Inspector General has conducted

46 audits of EDA RLFs and all but a handful of these audits revealed serious instances of non-compliance or failure to safeguard

RLF assets, such as loans to ineligible borrowers, failure to properly document loan decisions, poor accounting and financial management practices, and failure to meet basic reporting requirements, among other issues. We need additional tools that only Congress can authorize to help us manage this portfolio better.

The second area, Mr. Chairman, is one that you mentioned, and

that is brownfields. I know the committee is keenly interested in

10

the brownfields provisions added by the House. EDA is a very

strong supporter of brownfield redevelopment. We have made 269

investments in brownfield projects since 1999. We average $50 million a year in grants to brownfield redevelopment.

I believe the language inserted by the House will actually reduce

EDA’s effectiveness in returning brownfields into productive economic assets. Specifically, the provisions that tie EDA to the

CERCLA language causes us particular concern. These provisions

will graft limitations of CERCLA onto EDA’s brownfields activities

that are not consistent with our brownfield work. CERCLA is targeted to clean up programs, and EDA’s focus, on the other hand,

is on the phase after the cleanup takes place, the development of

the site for job creation and private investment. As written, the

CERCLA alter and I believe would ultimately wither our

brownfields efforts. Please know that I am confident after visiting

with both majority and minority staff that we can identify language that will address your concerns and enable us to move forward with our core mission, which is economic development and

turning brownfields back into productive assets.

In the interest of time, I have submitted more detailed written

testimony that I appreciate your including in the record. I thank

the committee for holding this hearing and I look forward to answering your questions.

Senator INHOFE. So I would assume then that you are in agreement with Senator Bond and myself and Senator Crapo when we

brought up this concern that we had with CERCLA?

Mr. SAMPSON. I certainly do. I think the CERCLA provisions will

be a very significant barrier. One of the greatest implications of

this is that it would preclude our ability to work on the next round

of BRAC closures, military base closures, because military bases

owned by the Federal Government do not meet the definition for

brownfields in the CERCLA legislation, and EDA is a major player

in getting military bases back into productive assets. That is just

one example of how the CERCLA language would fundamentally

change our program.

Senator INHOFE. As you well know, being very familiar with your

neighbor to the north, Oklahoma, we are a rural State and I expressed to you a concern that I had on the $22-to-$1 policy. So I

would ask you on the record here if this is a rule, how much flexibility there is in this, or is this a goal?

Mr. SAMPSON. That is a very good question, Mr. Chairman. First

of all let me say, it is not a rule. It is a goal. It is one measure

in our Balance Scorecard among many measures that we look at

in evaluating both our regional office performance as well as evaluating individual projects.

The decision to look at private sector leverage is not one that is

arbitrary or capricious on our part. Global Insight, which is one of

the world’s leading econ-metric and economic development strategy

firms, has said, ‘‘Private capital investment is a pre-requisite for

job growth.’’ EDA began tracking private sector investment in its

grants as a result of the GPRA provisions back in 1997. We have

been tracking and looking at the private sector leverage since the

1997 timeframe. The actual data that we have was standardized

and begun to be collected in 1998.

11

So the degree to which the private sector is willing to invest in

a project we believe is a very clear indicator of the successful outcome of that project. Professor Michael Porter at Harvard was in

town earlier this week and was talking to a group of international

economic development professionals and made I think a very compelling point. That is, economic development cannot be focused on

the work of government at any level—national, State, or local—

that it has to be market-driven and private sector led. That is why

we have placed a significant focus on private sector leverage. That being said, the $22-to-$1 ratio is a goal. We have a very

broad diversity in our portfolio. What we are looking at is a broad

portfolio management at the regional level and at the national

level.

Senator INHOFE. Thank you. I agree with your interpretation.

Could you elaborate a little bit on the Revolving Loan Fund audits,

what they consist of now and what you would like to have them

be.

Mr. SAMPSON. Yes. The goal of the Administration under this

section of the legislation is, No. 1, to ensure better financial integrity. No. 2, to allow RLFs to consolidate or expand their lending

area, at their request, not ours. Many economic development organizations around the country manage multiple RLFs. They may

have a general purpose RLF, they may have an RLF that was created as a result of a military base closure, they may have an RLF

that was created as a result of natural disasters. As a result of

that, they have multiple reporting periods for each of those RLFs.

What we are proposing to do in the Administration’s legislation is

to allow them to consolidate those RLFs into a single general purpose RLF which will take them, in the case where they have three

RLFs, from six reports submitted a year to one report submitted

a year.

No. 3, our proposal would allow third party service of an RLF

portfolio. In those cases where we have had RLFs that simply were

not performing, we have had an inability to close those RLFs down

because we did not have the ability to have those RLFs managed

by a third party.

No. 4, the RLF provisions in this bill would allow for possible future securitization of RLF loans. There are other Federal RLF

funds that can be securitized. What we have done is include

placeholder language that if a significant market develops for

securitization, it would allow our RLFs to pursue that course.

Now, with respect to the audits. When an RLF brings in an auditor, the auditor can only look at what the OMB circular says that

they can look at, which is basic program functions. What we are

asking for authorization for in this bill would be for us to define

more broadly what the auditor can look for—basic business practices as opposed to just looking at the broad program practices. In

essence, we have an RLF system around this country that is unregulated. It is a separate banking system. Banks and S&Ls all

have very rigorous national oversight. Our RLF program as it has

evolved over the years does not have that kind of rigorous oversight. The provisions that we are asking for and that are included

in the House bill would enable us to look a little more deeply into

the basic business management practices of those RLFs.

12

Senator INHOFE. Secretary Sampson, thank you very much.

Senator Jeffords.

Senator JEFFORDS. Our country has been losing manufacturing

jobs at a staggering rate. Since the start of the recession, Vermont

has lost over 10 percent of the State’s manufacturing jobs. Could

you tell me what EDA is doing to help communities suffering from

loss of manufacturing jobs and what authorities the Administration

is using?

Mr. SAMPSON. Senator Jeffords, the loss of any job is regrettable.

We believe that we have to stay focused on those kinds of policies

that are going to create jobs in this country. That is certainly what

our focus is at EDA and it is the focus of the President’s economic

growth and jobs agenda. We think we are beginning to see the job

market come back and we are starting to see hiring again.

EDA’s particular focus is at the direction of the Secretary of

Commerce. He has directed us to give priority to those communities that are experiencing the loss of manufacturing jobs. We

have tried to intervene early in those communities as opposed to

just waiting until the factory has closed down and all of the layoffs have taken place. We have tried to move EDA in much more

of a proactive measure, that as soon as the plant closure is announced or as soon as significant lay-offs are announced, we come

in with a cross-disciplinary team, bringing our colleagues from the

Department of Labor in with the Employment and Training Administration to early on develop a retraining program, enhanced

job training programs for those workers who have been dislocated

to help them get easy access into continuing health care benefits.

While we at EDA are working with the community on developing

a comprehensive adjustment strategy, a strategy that is focused on

retaining their existing manufacturers, No. 1, but, No. 2, diversifying their economic base, and then No. 3, helping that community

plan for and then implement the kind of economic infrastructure

that is going to enable them to tap into and compete in a worldwide economy.

We have had some great success stories in that effort. I think of

an event that I did with Senator Bond I guess about a year and

a half ago now in St. Louis, where Ford announced a closure of a

major truck manufacturing plant in St. Louis. We came in very

early on, as soon as that closure was announced, working with the

St. Louis economic development authority and the surrounding governments, providing them with funds to do an economic adjustment

strategy to look at some of the fundamental business environment

issues. The good news is, as a result of that study and the teamwork that was involved both at the Federal delegation level, State

and local, they made a very compelling case to Ford that made a

decision to keep that plant open. I think that is the kind of scenario we would like to replicate around the country.

Senator JEFFORDS. Is EDA considering a regional reorganization

plan? If so, will this allow regional staff to visit States more often?

Mr. SAMPSON. Senator Jeffords, we are operating under a very

tight budgetary environment. We have been flat funded now in

terms of our S&E account for 3 years running. That places some

very significant operating constraints on us. We were concerned

about that when we arrived 3 years ago as we looked at the S&E

13

funding level. As you know, we went through a headquarters reorganization. We worked in very close cooperation with committee

staff and members on this committee as we went through that

process. The reason we did that was to try to free up more resources to place out in the regional office level where that direct

interaction with the clients and the communities take place. I am

very pleased to be able to tell you that we accomplished that headquarters reorganization without a single involuntary separation.

That is a commitment I made to you personally, that is a commitment I made to this committee’s staff, and we were able to keep

that commitment.

What we are looking at now is if we continue to be flat funded

at S&E moving forward, what are the implications for our cost

structure in the regional office level. I have asked our six regional

office directors to look at their business processes to see where we

can standardize and streamline those across our six regional offices. They have made a report to me. We are very carefully considering that. My commitment to you, Senator, is that we will work

very closely with you and this committee staff, in the same way

that we pursued our headquarters reorganization, to make sure

that we maintain the capacity to deliver speedy and accurate service to the communities and clients that we have around the country.

Senator JEFFORDS. Thank you. I see my time has expired. I will

submit my other questions.

Senator INHOFE. Thank you, Senator Jeffords.

Senator Bond.

Senator BOND. Thank you, Mr. Chairman. Dr. Sampson, Senator

Jeffords touched on the very important issue of job loss and manufacturing job loss. As I understand it, the Department has been

dealing with this job loss problem in manufacturing for quite a few

years, it did not just come with the recession that began in 2000,

and there is a lot of talk about outsourcing. Now I understand that

the Department figures indicate that I think it was $78 billion of

job outsourcing was going on but $134 billion worth of job

insourcing was coming in. I would like to know what your experience has been through your administration with this job loss, and

are you able to facilitate more of the job insourcings so more foreign companies are investing in the United States and hiring people. How is that working? I think you are in a good position to give

us some how idea how that is working.

Mr. SAMPSON. Mr. Chairman, that is a great question. The reality is that participation in the worldwide economy has tremendous upside potential at the macro level and at the macro level

there is no country in the world that is better positioned to take

advantage of the worldwide markets than the United States. You

are right, the United States imports more jobs from foreign companies than what we outsource. Last year, we had a $77.3 billion surplus in jobs that are insourced into the United States.

That having been said, clearly there are industry sectors and

there are sections of the country that are harder hit by those

changing trade patterns than other industry sectors. The manufacturing sector has been particularly hard hit. Manufacturing has

been losing jobs as a percentage of the private sector work force for

14

the last 40 years. It has been losing about 3⁄10 of a percent of its

percentage of total employment over a period of about 30 years

now. We believe that we have a special and unique responsibility

to work with those communities and those regions that are going

through this structural economic change and dislocation and we

have placed a great deal of emphasis on that at Secretary Evans’

direction. We have been very active in the textile impacted regions

of this country, we have been very active in steel-based regions of

this country, and manufacturing-based regions of this country,

even as in previous years and previous administrations EDA has

focused on those economies that have been particularly hard hit as

they moved away from natural resource-based economies.

There are communities that are making that adjustment faster

than others. We believe that one of the real key elements of success

in making this transition is tapping into the power of universities

in States around the country really pursuing technology-led economic development strategies, wedding work force development efforts with economic development efforts. The Federal Government

spends $23 billion a year in work force development. We need to

make sure the work force development and economic development

system are closely wedded together.

Senator BOND. Well, coming from a part of my State which has

been hit hard by natural resource outsourcing, refractories was dependent upon the steel industry and then they were decimated by

asbestos litigation. The jobs in northeast Missouri have been

outsourced thanks to asbestos litigation.

What specifically can EDA do in those areas to bring in, you

have mentioned the insourcing, what is it that EDA can do to facilitate insourcing? We do not care where the jobs come from, we

just need jobs in northeast Missouri.

Mr. SAMPSON. We can help your communities buy down the cost

of basic infrastructure to attract new jobs into your State. Some 6.4

million Americans work for companies that are owned abroad. Just

last week I was in the poorest county in Alabama, Loundes County,

Alabama, where we awarded a $2 million grant to open the first

county-wide industrial business park in that county’s history. They

already have a tier I supplier to Hyundai which is opening a major

manufacturing plant outside of Montgomery. This tier I supplier in

the poorest county in Alabama has already committed to invest $25

million in a plant there and employ 200 people. I think that is a

very dramatic example of the role that our infrastructure grants

can play in helping communities be able to attract those jobs in the

future.

Senator BOND. Thank you very much, Dr. Sampson. You can help

also as well by developing technical training facilities, for which we

are most grateful. Thank you, Mr. Chairman.

Senator INHOFE. Thank you, Senator Bond.

It might be helpful for the record, I was very much impressed

with the statistic you used of the $77 billion surplus of insourcing

versus outsourcing, and it would be kind of interesting to see this

over about a 20-year period to see where the trends are. Maybe you

could get someone to do that for us for the record.

15

Mr. SAMPSON. I would be happy to do that, contact my colleagues

at the Economic Statistics Administration that actually run those

numbers.

Senator INHOFE. OK. That is great.

Senator Murkowski, as you know, the rules of the committee are

that once opening statements are concluded and we are into questions we do not revert back to that. But certainly your statement

will be made a part of the record. We will recognize you for questions at this time.

OPENING STATEMENT OF HON. LISA MURKOWSKI,

U.S. SENATOR FROM THE STATE OF ALASKA

Senator MURKOWSKI. Thank you. I appreciate the opportunity to

submit my opening statement for the record. I just want to state

my very sincere and genuine appreciation to you, Mr. Sampson,

and all the efforts that EDA has made in Alaska. I think we recognize in Alaska we really are seeing true investment coming out of

EDA. We have had a chance to talk about some of the projects. We

have a dry dock in Ketchikan, we have an all tides dock in

Dillingham, and both are huge investments in very small communities. As you know, in these depressed communities where oftentimes there is only one real economy, this is an effort to really expand on the economy and we are seeing those efforts.

The conversation up at the table here has been focused on how

you are making an impact in those industrial or manufacturing

jobs. I would like to hear your comments about how you balance

that with the needs in the rural areas, creating these jobs and

these opportunities in the rural parts of the country. I would like

to know that there is balance as you weigh these projects and your

investments.

Mr. SAMPSON. Senator Murkowski, that is a very important dimension of our overall management of our portfolio of economic development grants. Over the last 3 years of my stewardship of the

Economic Development Administration, 56 percent of our grants

have gone to rural areas, 38.7 percent have gone to urban areas.

I know that does not add up to 100 percent. The other 6 percent

roughly have been either statewide grants or they have been national technical assistance grants. That is an average or a split of

our portfolio that has been consistent historically. As of April 24 of

this year, we have awarded 34 rural public works investments totally $40.2 million, and 20 urban investments for $34 million. So

we take that management very seriously.

Our goal is not to penalize the rural and remote regions, but it

is rather to help rural and remote regions plug into a growing national economy and to develop strategies that they can link into the

growing State economies. Some of the research that we have funded over the last 3 years, and I believe just this week we posted a

ground-breaking new national research grant on rural economic development strategies that was completed for us by Professor Michael Porter, one of the leading thinkers and practitioners in competitiveness and cluster development anywhere in the world, on

how rural areas can better develop their economies by linking into

broader regional economies. That is something that we are very focused on and that we are committed to. We are committed to workVerDate 11-MAY-2000 15:24 May 01, 2006 Jkt 094601 PO 00000 Frm 00019 Fmt 6633 Sfmt 6601 G:\DOCS\94605.TXT SENENV2 PsN: SENENV2
16

ing with our partners at the Department Agriculture and Rural Development, where there are billions of dollars in grants available,

to really ensure that there is an integrated focus on rural economic

development strategies.

Senator MURKOWSKI. So as you are evaluating where you go and

how you go within the regions, are you taking specific steps to encourage programs in these rural areas in non-traditional projects

as opposed to the bricks and mortar type of an approach that you

would see in the urban areas?

Mr. SAMPSON. That is certainly our desire. I have made it a point

during my leadership of EDA to spend a significant amount of time

rural America. As a matter of fact, I have been called the ‘‘Captain

Kirk’’ of the Commerce Department because I have boldly gone

where no Assistant Secretary of Commerce has gone before. I can

assure you the places I go to in rural America you do not fly into,

you spend a lot of time in cars. But we believe that is important.

We are holding 20 economic development forums around the

country this year specifically focused on rural economic development strategies and we have held those forums in rural America.

We have not gone necessarily to the major metropolitan area in

those States. We have gone into the more remote places, like

Millinocket, ME, in the middle of January, and places like that to

deal directly with the economic development practitioners who are

on the ground there.

Senator MURKOWSKI. I appreciate your efforts in our rural areas.

You will not be able to drive to them, but we will fly you out and

keep you there for a while. Thank you.

[The prepared statement of Senator Murkowski follows:]

STATEMENT OF SENATOR LISA MURKOWSKI, U.S. SENATOR FROM THE

STATE OF ALASKA

Mr. Chairman, thank you for moving forward with this hearing, and I would like

also to offer my thanks to Dr. Sampson and the other witnesses for appearing today.

I am pleased to have an opportunity to make sure that my strong support for the

reauthorization of the Economic Development Administration (EDA) goes on the

record. I sincerely hope that this important reauthorization measure does not become hostage to other issues and will progress briskly from here to the floor.

Along with many of my fiscally conservative colleagues, I am concerned about the

appropriate role for the Federal Government in encouraging private industry. I believe industry is healthiest when it does as much as possible for itself.

However, after carefully watching the activities of the EDA in my State of Alaska,

I have been very positively impressed. Mr. Chairman, the dollars disbursed by the

EDA are not going to waste. They are building economic capacity so that the private

sector can step in to provide real, long-lasting economic activity and employment.

That is absolutely vital in a State like mine, which continues to lag far behind most

others in the kinds of infrastructure that make a vibrant economy possible.

Quite frankly, Mr. Chairman, many times Federal funds are committed for

projects that are quick shots in the arm but product no lasting impact. EDA projects

are linked to private sector job growth. As such they are both different and deserving of our support.

In Ketchikan, for example, we have a shipyard capable of doing almost any job

on vessels up to and including our own marine ferries, Coast Guard cutters and

NOAA research ships. This yard has an exemplary reputation for high quality workmanship, it has won high praise from almost all its clients, and it is capable of providing upwards of 200 highly skilled, well-paid, year-round private sector jobs in a

local economy that was shattered by the loss of the timber industry and where seasonal fishing and tourism just can’t carry the whole load. Unfortunately, it has one

problem—although it can DO the work, it cannot ACCEPT all the work it is offered,

because when its drydock is in use by one vessel, it cannot move any other vessel

into an area where work can be done. EDA is helping solve that problem by supVerDate 11-MAY-2000 15:24 May 01, 2006 Jkt 094601 PO 00000 Frm 00020 Fmt 6633 Sfmt 6621 G:\DOCS\94605.TXT SENENV2 PsN: SENENV2
17

porting the construction of facilities that will allow it to accept additional work—

and provide additional jobs.

Another example occurs in Dillingham, a relative remote community in Alaska’s

Bristol Bay region. For years, all goods delivered to Dillingham and through

Dillingham to nearby villages have had to arrive in shallow-draft barges, from

which the goods are transferred to other, smaller vessels before coming ashore. The

reason is that Dillingham has lacked a dock structure that will support larger vessels at all tide conditions. What it means is that every item that comes into the region arrives at a higher price because of increased shipping costs, and every item

shipped out of the region is sold at a lower profit margin for the same reason. EDA

is changing that by helping the region build a dock suitable for use anytime.

These two simple projects, for very modest amounts of money, are making new

economic development in those communities not just possible, but probable—and

that is no small thing.

In short, Mr. Chairman, I consider the programs of the EDA to be an ‘‘investment’’ in the very best sense of the word.

In the interests of time, I won’t go into detail on other aspects of the reauthorization except to note that the EDA’s involvement in economic adjustment grants and

trade assistance programs are also very important both to many communities.

I do, however, want to mention one other requested change that has my strong

support. The Administration has suggested the inclusion of a provision regarding

‘‘Special Impact Areas,’’ which would allow the Secretary to waive certain requirements for assistance in the event there is a finding that a grant or technical assistance will fulfill a pressing need and be useful in easing excessive unemployment.

Mr. Chairman, I don’t anticipate this provision would be abused, and I think it

would be very important for the most economically depressed areas where the regular process may be difficult to accommodate. I, for one, would like to see it included

in the bill we send forward.

Finally, Mr. Chairman, I want to note my support for authorizing full funding for

the EDA at the requested level. We on this committee will not actually be providing

appropriations, but it is nonetheless important that we provide this support, so as

to ensure maximum flexibility for those who will.

Thank you Mr. Chairman. I look forward to hearing from our witnesses.

Senator INHOFE. Thank you, Senator Murkowski.

Senator Wyden.

Senator WYDEN. Thank you very much, Mr. Chairman. Mr.

Sampson, let me review where we are with respect to economic development. I think, first, everybody understands that it is important for towns to generate private sector involvement. It is just

crystal clear that that is important. During the Clinton administration, they began an effort to sort of monitor that effort, as you announced in your testimony, and that was a constructive step by the

Clinton administration as well. You all then come in in 2003 and

come up with this so-called goal of the little towns having $20 of

private sector money to get $1 of help from EDA. Then we go to

the new so-called goal of $22-to-$1. As I have told you, my small

towns are just up in arms about it. What is especially troubling to

them is that they say they were not consulted. We have heard from

the small towns in Oregon who work with your Agency and love

working with your Agency that nobody consulted with them before

this new so-called goal of $22 private sector dollars before you got

$1 from EDA. What would be your response to them on the question of whether you consulted with them before you put in place

this new, as I call it, so-called goal?

Mr. SAMPSON. Senator Wyden, I believe that we have had the

greatest degree of collaboration with our partners around the country in many years at EDA. We have met with each of our regional

offices around the country, I have discussed our funding priorities

from day one when I arrived, I have discussed the investment policy guidelines that we have developed over the course of the last

18

3 years. In virtually every speech that I have given out there I

make myself available for questions, for dialog as I meet with economic development practitioners, economic development districts

around the country. We have held economic development forums in

Oregon where I laid out all of these policies and goals. So I think

we have provided ample opportunity for dialog and discussion of

the direction that we go. But ultimately, I believe that my responsibility as the leader for EDA, in consultation with Secretary Evans,

is to set the policy guidance and direction that ensures the best

stewardship of these taxpayer dollars.

Senator WYDEN. Well, tell me then how you came up with the figure of $22 private sector to $1 from EDA? Let me make it clear,

the people that are on the ground in Oregon feel that you did not

consult with them. Maybe you had some conferences, maybe you

gave some speeches. I am just telling you that is how they see it.

These are people who like your Agency. These are not people who

are opposed to your Agency. So that is No. 1. But, No. 2, tell me

how this figure was arrived at. Why not $9, or $31, or—how did

you get the figure that you had to generate $22 private sector dollars?

Mr. SAMPSON. First of all, as I mentioned earlier, the GPRA

measures that we started to collect in 1998 tracking private sector

investment and private sector leverage has been a part of the evaluation of grant proposals ever since that period of time. It may

have been before but the numbers were not tracked then. The

GPRA measures in 1998 were $9-to-$1. So that was the baseline

from which we started.

As we faced decreasing budgets appropriated by Congress, we believe that it is our responsibility to try to achieve the maximum

economic impact for those decreasing Federal dollars and so we

began to look at increasing competition for EDA dollars. There are

more grant applications coming into us than what we have dollars

to fund. So we began looking at regional economic impact, looking

for drivers of regional economic growth, not focused so much on

small one-of-type projects like landscaping main street, but looking

for those kinds of projects that are going to drive regional economic

growth.

Before I arrived up here, I met with a number of equity fund

managers that manage equity funds or VC funds that specifically

do business in urban areas, inner-city areas, or economically distressed areas where they are really focused on a triple bottom line

as opposed to just a single bottom line of return on investment. I

asked them what kind of return on investment are you looking at.

The numbers that I got were far higher than $20-to-$1. So in consultation with our regional directors of our six regional offices, we

settled on a $20-to-$1 ratio as our goal.

The reality on the ground is that last year we actually achieved

a $28-to-$1 ratio, which was far in excess of our goal. So as we set

goals for this year, we did what we think any good manager does,

we increased that ratio by a modest 10 percent. As I mentioned

earlier, when you look at the split between rural and urban, even

though we set that $20-to-$1 goal, we still achieved that historic

rural-urban balance.

Senator INHOFE. The time has expired.

19

Senator Allard, do you have questions?

OPENING STATEMENT OF HON. WAYNE ALLARD,

U.S. SENATOR FROM THE STATE OF COLORADO

Senator ALLARD. Yes, Mr. Chairman, and I also have a statement

I would like to make part of the record.

Senator INHOFE. We have a policy, and I explained that to Senator Murkowski, that once our opening statements are made and

we go to questions, we do not revert back to opening statements,

unless you want to make it using your question time.

Senator ALLARD. I would just like to have mine put in the record.

Senator INHOFE. Without objection.

[The prepared statement of Senator Allard follows:]

STATEMENT OF SENATOR WAYNE ALLARD, U.S. SENATOR FROM THE

STATE OF COLORADO

Mr. Chairman, thank you for holding this hearing. As someone who is a Member

of both the Banking and the Armed Services Committees in addition to this committee, I have a great interest in the work that the Economic Development Administration does. The Economic Development Administration does important work in

many economic sectors throughout the county in communities large and small.

As we are aware, the House has already passed a bill reauthorizing the Economic

Development Administration. There are some positive changes in that bill, but there

are also portions that deserve a second look. That is at least part of what we are

doing here today.

The Economic Development Administration is in charge of a budget of around

$300 million. While that is a lot of money to pretty much every individual person

in this room, it is quite a small amount in the scheme of the entire Federal budget.

However, even with such a modest investment, the EDA is able to leverage many

times over that amount in private funds with every dollar that they spend. I think

that deserves praise.

As a Member of the Banking Committee, and the Chairman of the Subcommittee

on Housing and Mass Transit, I get to see a lot of projects that aim to bring about

redevelopment in communities around the country. The projects that are most successful are those that bring Federal and private funds together. There will never

be enough Federal dollars to fund every project that someone deems worthy, by

bringing in private funds which, in turn, guarantee private sector involvement, the

EDA is setting communities and organizations with partners that help them to succeed on their own. The need for perpetual Federal funding is just not there with

this kind of arrangement.

Mr. Chairman, again I thank you for bringing the EDA, and the projects that they

help fund, to the forefront of the committee’s attention. After reviewing the witness

testimony I look forward to a productive discussion on the issue of why and how

the Economic Development Administration’s reauthorization will move forward.

Senator ALLARD. Thank you. Your budget is one of the few budgets that does not get earmarked during the congressional appropriation process. Would you talk a little bit about how this affects

your ability on spending the money that Congress sends to you.

Mr. SAMPSON. Well, we believe that we are very fortunate in that

we have not had earmarks historically. We believe that what that

enables us to do is to be responsive to the economic development

organizations and the communities around the country and respond to their needs on a competitive basis and ensure that the

grants that are awarded are truly grants that score well on a competitive process. We certainly hope that moving forward our appropriations will not be earmarked.

Senator ALLARD. You have public-private partnerships that you

work with. Has this been working out satisfactorily with you?

20

Mr. SAMPSON. I guess that depends somewhat on who you listen

to around this table this morning. But, yes, I believe that our private-public partnerships are working well. We think we have demonstrated an ability to significantly crowd in or attract significant

private sector money for every dollar of Federal appropriation that

goes out—a $28-to-$1 ratio last fiscal year.

Senator ALLARD. We have a nuclear site in Colorado that is in

a cleanup stage right now and getting close to termination. But

with the private contractor and cleanup there has been incentives

built into the contract where there was a reward for getting the

project done ahead of schedule and doing various desirable things

like keeping the injury rate down low and that kind of thing. Do

you have performance-driven contracts that you work with in trying to get that accomplished, because this has worked so well in

Colorado. We are one of the few States that has actually had some

cleanup occur as far our nuclear sites are concerned, with the sites

ahead of schedule and under budget. Do you try and utilize this

process in your projects?

Mr. SAMPSON. We certainly do. In the Administration’s bill, we

have proposed a transferable performance credit that would reward

the grant recipient if they met or exceeded a number of performance measures, including coming in on time, under budget with

their economic development expectations met or exceeded. In negotiations with the House, what emerged were three performance

awards. One, an award for under-cost underruns, where the grant

recipient could keep the underrun and use it to enhance the

project. The second is a performance award where if they meet or

exceed the private sector leverage or job creation projections, they

are eligible for up to a 10 percent award on the project cost. And

then the third element of the award was for a planning performance reward, moving away from a passive process-oriented award

to a reward for planning districts who actually have projects that

are not just planned but are actually implemented and then meet

or exceed their expectations. So we have three performance awards

in the House-passed version.

Senator ALLARD. One of the issues happening in Armed Services

Committee is BRAC. Could you discuss some of the successes and

perhaps some of the difficulties that EDA has encountered during

these projects? We have a BRAC situation in Colorado and it has

had some problems and other parts of it have done very well. So

I would like to have you talk just a little bit about that.

Mr. SAMPSON. I think that we have learned a great deal in terms

of how to take former military bases and return them to productive

use. There have been a number of very successful bases around the

country that have been converted; Pease Air Force Base in New

Hampshire and Kelly Air Force Base in San Antonio. Perhaps one

of the greatest success stories anywhere is the former Fitzsimmons

Army Medical Center right in Aurora, CO, where they have now

successfully attracted already $1.3 billion of new private sector investment onto that base. It is a magnificent redevelopment. It is

not primarily a land development, it is a cluster development, a

biotechnology cluster that has been developed there. As a matter

of fact, Senator, I was so impressed with that project that I hired

away the executive director of the Fitzsimmons Reuse Authority

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who is now our regional director for our Denver Regional Office

and he will be an extremely valuable resource for EDA as we move

forward into the next round of base realignment and closure.

Senator ALLARD. I see my time is running out. Just briefly, Mr.

Chairman, one last comment on GPRA, the Government Results

and Performance Act. I think this is really important and if you are

not in conformance with the GPRA law and everything that we

have passed, I hope that you would look at making sure that is implemented. I think about 60 percent of the Agencies in the Government are now considered in compliance with GPRA or close to it.

I hope that you can set these parameters, measure results, because

I think it is very beneficial to committee members as well as people

in the Administration like yourself. So I would encourage that you

use that.

Mr. SAMPSON. Senator, not only do we take it seriously and are

in compliance, but we view GPRA as a floor and not the ceiling for

our performance measures. It is the basic performance measure requirements. But our goal is to develop performance measures that

are even more rigorous than GPRA.

Senator INHOFE. Senator Clinton.

OPENING STATEMENT OF HON. HILLARY RODHAM CLINTON,

U.S. SENATOR FROM THE STATE OF NEW YORK

Senator CLINTON. Thank you, Mr. Chairman. I, too, would like

to submit my opening statement for the record.

Senator INHOFE. Without objection.

[The prepared statement of Senator Clinton follows:]

STATEMENT OF SENATOR HILLARY RODHAM CLINTON, U.S. SENATOR FROM THE

STATE OF NEW YORK

Thank you, Mr. Chairman for holding this important hearing. I strongly support

reauthorization of the Economic Development Administration. I think we can all

agree that economic development and the job creation that goes with it has to be

one of our top priorities.

It is certainly a high priority for me, particularly with respect to upstate New

York. We are losing manufacturing jobs in upstate New York, as I know is happening in many other parts of the country. And while job creation has to occur in

the private sector, the Federal Government can and should play a role in spurring

job creation.

In the case of the EDA, its mission since being established in 1965 has been to

help economically distressed areas address conditions of substantial and persistent

unemployment. While many economic conditions have changed in the intervening 40

years, that core mission remains relevant today.

I think that EDA is doing a good job with the resources that we provide them.

In the last 10 years alone, EDA has funded 280 projects in New York State. I want

to mention just a few examples.

In fiscal year 2003, EDA provided $2.8 million to support the 72-acre Cornell Agriculture & Food Technology Park in Geneva, New York. Cornell broke ground on

that project just a couple of weeks ago. This will help companies to carry out cutting

edge research in food, agriculture and bio-based technologies, and will existing research and extension programs of the New York State Agricultural Experiment Station and Cornell University.

In Rome, New York, EDA has put four rounds of funding to assist in the conversion to civilian uses the former Griffiss Air Force Base property. These grants have

helped attract private funding for the Griffiss Business and Technology Park, which

has helped retain and develop more than 3,000 jobs.

And in 2002, EDA provided $3 million in funding to the Essex County Industrial

Development Agency for infrastructure work related to the development of the Chesterfield Commerce Park. EDA’s investment will leverage private investment, and

will help lead to the creation of 200 new jobs.

22

So I know that EDA can be helpful.

I note that in his testimony, Dr. Sampson states that EDA’s mission today is to

lead the Federal economic development agenda by promoting innovation and competitiveness, preparing American regions for growth and success in the worldwide

economy.

This is certainly no small task. And while EDA can only be a catalyst for public

sector development, I strongly believe that current funding levels are totally inadequate. In fiscal year 2004, we appropriated $318 million for EDA, and the Administration has requested a similar amount for fiscal year 2005. This is simply not enough,

and I hope that we can work together in this committee to increase the funding for

EDA.

I also look forward to working with Chairman Inhofe, Senator Jeffords and other

members of the committee as we move toward markup on several proposals that I

have been working on, such as new ways to promote business incubators, training,

and entrepreneurship.

Senator CLINTON. I strongly support reauthorizing the EDA. I

appreciate the work that you have done in New York over so many

years because, as with many of my colleagues, part of my State has

been very hard hit by the loss of manufacturing jobs, mostly upstate. There is a proposal currently pending at EDA, submitted by

the Rochester Institute of Technology, applying for a $300,000

grant for the Roadmap Project, which is a project focused on analyzing 10 manufacturing clusters in New York to develop a roadmap to enhance competitiveness for manufacturing and attraction

of private sector investment. This is a very important project. RIT

is a first-class institutions with the intellectual brain power to really make a significant difference in the State. Can you inform me

about the status of this particular grant application, Mr. Sampson?

Mr. SAMPSON. Senator Clinton, I am very pleased to be able to

tell you that that grant has been processed. It will be on my desk

by the end of the week for me to sign and prepared to be announced. It is a model example of what we are looking for in economic development projects. No. 1, it is regional in nature and

scope; No. 2, it focuses on developing industry clusters; and No. 3,

it is a university-led economic development strategy. So it is a

model example of what we are trying to give priority to around the

country.

I will tell you in the way of how it has worked through the process, I believe, as you are familiar with, that money was actually

appropriated to the Office of Economic Adjustment at the Pentagon, then transferred to us. As a result of the delay in getting

an appropriation for Commerce this year and being in the Omnibus—and then we faced three recisions after the Omnibus was

passed—we got our allotment in three different crunches of funds

that were released, we were not able to process all of the grants

as early in the fiscal year as we would normally like to do. But that

grant has completed its processing and I will be signing that grant

this week.

Senator CLINTON. I am very, very glad to hear that. I agree with

you, I think it is a model project that I hope has implications not

only for other parts of my State but other States as well.

I also wanted to inquire about the status of work that Congressman Walsh and I have been doing with respect to the workers laid

off at Carrier. As you know, Carrier Air Conditioning laid off 1,200

workers in the Syracuse area and moved them to the far East, even

though it was a profitable plant, which caused a lot of angst beVerDate 11-MAY-2000 15:24 May 01, 2006 Jkt 094601 PO 00000 Frm 00026 Fmt 6633 Sfmt 6601 G:\DOCS\94605.TXT SENENV2 PsN: SENENV2
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cause they kept doing everything they could to enhance profitability and nevertheless those jobs were lost. Congressman Walsh

and I have worked hard to try to figure out how to fill the hole left

by this announcement. I know that the Congressman convened a

meeting to get EDA’s assistance to develop a comprehensive, coordinated plan to reuse the potentially available space at the Carrier campus. It is my understanding that local officials are working

on the final details to submit that proposal to EDA and that Congressman Walsh has received commitments that the proposal

would receive a very high priority. So I just want to publicly reinforce the importance that Congressman Walsh and I place on this

and ask if I can get the assurance that it will receive the high priority attention that we think it merits.

Mr. SAMPSON. Senator, I have been to Syracuse and met with

State and local officials, I have met with the labor leaders that

were there. We had a very extensive discussion about the challenges that community faces. I brought with me my regional director that serves New York who operates out of Philadelphia, had our

economic development representative for New York who was there

at that meeting as well. I made very clear to my staff that this was

a very high priority issue. Further, Secretary Evans has directed

EDA to give high priority to all of our grant applications to those

communities that have been impacted by manufacturing job loss.

So I can give you my personal assurance that that will receive high

priority consideration.

Senator CLINTON. I appreciate that very much. Finally, Mr.

Sampson, the whole question about outsourcing, off-shoring, whatever we want to call it, I think many of our companies are missing

the opportunities in low-cost rural areas throughout our country. I

know Senator Murkowski asked about rural areas. When you take

into account the full cost of off-shoring, there is an article in I

think it is The New York Times this morning talking about there

are lots of hidden problems and costs that businesses are only now

recognizing—customer relations problems, monitoring problems,

depth of knowledge and experience challenges. Many rural areas

could be great competitors to keep these businesses in America but

right now they do not have the infrastructure. They do not have

the fiber optic communications, the office parks, the trained work

force clustered sufficiently to be a viable competitor.

I think it would be very helpful for EDA to make a special effort

to look at call centers and back office processing. I predict that

many of our companies that have made these moves in this particular sector are going to be having second thoughts. Therefore, we

need our rural areas, whether it is Colorado, Missouri, Oklahoma,

Vermont, New York, to be better positioned so that we basically

can compete for in-shoring, so we can tell people in New York or

Chicago or Los Angeles you do not need to go off-shore to another

country, you can come to the rural areas of this country, we have

the assets that you need.

So I would ask that perhaps I could work with you and your colleagues and my colleagues to try to figure out if there is some special way that we could get positioned for this in the next several

years so that we stop the flow of jobs overseas and we actually are

competitive enough so that when the tide turns, which I think it

24

will for security reasons and so much else, we have the assets

ready to take those jobs and be competitive here at home.

Mr. SAMPSON. Senator, I can tell you that we believe that making telecommunications, broadband infrastructure available in

rural areas is certainly a high priority for us. Last week I was in

New Mexico where we announced a major point of presence grant

there that will serve the entire State of New Mexico. We have a

grant that is in processing right now that will serve very rural

areas of Virginia, Kentucky, and North Carolina in a partnership.

We believe that is a high priority for us. Further, I would just say

that in the Agriculture bill that was passed I guess the last session

there was a significant amount of money that was included in that

for deployment of broadband technology in rural areas. I think this

is another example where we need to work very closely with Agriculture and Economic Development close together.

Senator INHOFE. Thank you, Dr. Sampson. We are not going to

have a second round. However, if any of the members have a very

high anxiety level for one more minute, we would cooperate with

that.

Senator BOND. One high anxiety minute. I commend you on having the $22-to-$1 ratio that you have been able to achieve. I think

that is great for banks and private investors. But I would look forward to discussing with you and your staff whether that means

that some of the really poor or distressed areas might be shut out.

This has been raised by Senator Wyden and others. It may be the

social investment may be great even though you cannot meet that

$22-to-$1 private investment. I hope that does not become an albatross and drive you from the poorer to the wealthier but still needy

areas.

Senator CLINTON. Mr. Chairman, could I just add on to Senator

Bond’s point?

Senator INHOFE. Surely.

Senator CLINTON. It might be very useful if EDA could give us

some breakdown of exactly how that ratio is reached. I think that

the Senator from Missouri is right on target, that in some areas

that is a ratio that probably not only can be met but exceeded,

which then raises the average, when we know that when we are

talking about poor or distressed communities, at least a lot of the

places I represent in up-state New York, they could never meet

that kind of requirement. But we do projects all over the State that

have merit and that raises the average. So I think it would be useful to get a breakdown of this information as to how the $22 and

$28 figures actually were arrived at.

Senator INHOFE. Thank you, Senator. We did discuss that earlier

on in this meeting. Of course, we reemphasize that is a goal, not

a rule.

With that, I would just say to you, Secretary Sampson, that you

have done a great job. In the OMB performance assessment, I

think you are among the highest, if not the highest, of all these bureaucracies that we have around here. They even recommended a

higher budget, which is most unusual. So let me just congratulate

you on the fine job you are doing.

Mr. SAMPSON. Thank you, Mr. Chairman.

25

Senator JEFFORDS. I would like to join in your accolades. You are

doing a fantastic job.

Mr. SAMPSON. Thank you, Senator Jeffords.

Senator INHOFE. We will now move to the second panel.

The next panel consists of Mr. Gary Gorshing from southwest

Oklahoma, Mr. Jim Saudade from Vermont, Mr. Charles Gatson,

and Phillip Singerman. Dr. Singerman, we would be very interested in any comments you may make on any of these things. Since

you are the predecessor in the job of Dr. Sampson, you might have

comments to make during the course of your presentation relating

to how you view things from your perspective.

We will start with Mr. Gorshing. Because of the late hour, I

would like to ask you to confine your remarks to 5 minutes and

then we will have a round of questioning. Your entire statements

will be made a part of the record.

STATEMENT OF GARY GORSHING, PRESIDENT, NATIONAL

ASSOCIATION OF DEVELOPMENT ORGANIZATIONS

Mr. GORSHING. Good morning, Mr. Chairman and members of

the committee. My name is Gary Gorshing. I am the current president of the National Association of Development Organizations,

and the executive director of the South Western Oklahoma Development Authority, an EDA-designated economic development district headquartered in Burns Flat. Thank you for the honor and the

opportunity to testify today in support of the work and achievements of the Economic Development Administration. We have submitted a lengthy and detailed statement for the record, so I will be

brief.

Mr. Chairman, the members of NADO believe there are four

major reasons for Congress to support a multi-year reauthorization

of EDA. The Association and its members make these recommendations with observations in more than 35 years of experience with

Federal community and economic development programs including

EDA. I would also like to mention that NADO is a member of the

Coalition for Economic Development.

First, Mr. Chairman, EDA has a clearly defined role within the

broad portfolio of Federal economic development programs. As the

only Federal Agency focused solely on private sector job growth,

EDA is a vital resource for distressed communities. Through its diverse portfolio of programs, the Agency has the flexibility to meet

the needs of local communities. This applies from a programmatic

standpoint where EDA has resources for strategic planning, infrastructure improvements, business investment capital, and technical

assistance. It also applies from a community standpoint, whether

a locality is struggling with long standing poverty, declines in traditional industries such as coal, timber, or fisheries, or even if a

community is impacted by a natural disaster, a military base closing, or a manufacturing plant closing.

My second point is that the EDA planning program for multicounty economic development districts is proven and cost-effective

resource for our Nation’s distressed communities. As reported in a

2002 program evaluation by Wayne State University, the national

network of 320 regional development districts ‘‘provides the critical

backbone for economic development planning at the local level.’’

26

Therefore, we specifically urge the committee to retain the leadership role of the districts at the multi-county and local levels. This

involves both the crafting and, most importantly, the implementation of regional roadmaps for economic growth and sustainability.

It is important to note that the EDA planning program is far more

than simply developing strategic economic development plans for a

region. It also involves providing hands-on technical assistance to

local government officials and business leaders in our regions.

Without the flexibility and expertise of the EDA planning districts,

most of our local communities would lack the capacity to package

infrastructure and development deals.

My third point is that the EDA public works program is essential

and cost-effective. It is a primary resource for distressed communities who are striving to develop the most basic building block for

economic development—the public infrastructure. In my home region of Oklahoma, EDA has made several valuable investments. In

1992, for example, the city of Clinton received EDA assistance to

meet an overwhelming need for improved sewer treatment infrastructure. Without the assistance of EDA, it is most certain that

the BAR-S Company, a major local employer, would have been

forced to close its plant in Clinton, with the loss of approximately

400 jobs. As part of any EDA reauthorization package, we encourage the committee to maintain fair and flexible eligibility criteria

for public works grants. Over the years, the success of EDA has

been rooted in its bottom-up approach. The projects originate from

a local planning process, with EDA coming into the process later

as a key catalyst. The bottom line is that most impoverished communities, especially small town and rural America, would struggle

by themselves to build the infrastructure and facilities required to

support new and expanding businesses without the EDA public

works program.

My fourth and final point, Mr. Chairman, is that the EDA Revolving Loan Fund program is a powerful tool for addressing the

credit gaps that exist in many underserved communities, especially

rural areas. The participation of locally controlled EDA RLFs in a

business deal usually encourages once-reluctant banks to participate in the project. EDA RLFs are a vital source of capital in areas

underserved by traditional lending institutions. You will note that

I included numerous examples in my written statement of the success and power of the RLF program.

Mr. Chairman, we generally support the modifications made in

the House bill to the RLF program, including a provision allowing

local RLF grantees to consolidate their funds. We would like to see

Congress allow the defederalization of RLFs, meaning that all of

the funds would become local or nonfederal after the money has

been loaned out and fully revolved.

I see my time is up. Thank you.

Senator INHOFE. Thank you, Mr. Gorshing, for a very timely and

excellent opening statement.

Mr. Saudade, you are recognized.

27

STATEMENT OF JAMES J. SAUDADE, DEPUTY COMMISSIONER,

DEPARTMENT OF HOUSING AND COMMUNITY AFFAIRS,

STATE OF VERMONT

Mr. SAUDADE. Good morning, and thank you for the opportunity

to provide testimony to the committee this morning. I am really

glad to hear the Senator remind folks around here that Vermont

is a very small State that is facing substantial economic challenges.

The median income for a family of four in Vermont grew only about

$500 from 1989 to 1998. Our poverty level actually increased during that period from 8.1 to 9.6 percent. While our statewide unemployment averages below the national average, Vermont hosts regions of high unemployment such as our Northeast Kingdom and

substantial underemployment is pervasive throughout Vermont.

To address these disturbing trends, we have undertaken economic development planning and projects to stimulate new businesses, train workers, and grow the businesses we have. In this effort, we have enlisted the assistance of EDA as our partners to

help underwrite the cost of new infrastructure, capitalize Revolving

Loan Funds, and build small business facilities. In fact, Mr. Chairman, as we are meeting here this morning, the ribbon is being cut

on a new business facility in St. Johnsbury, VT, one of our most

economically distressed areas. This center, which is largely underwritten with EDA funds, resides in an industrial park that was

originally established with EDA assistance and also expanded with

EDA assistance.

I actually helped to establish the business incubator in Randolph, VT, that Senator Jeffords and Dr. Sampson visited last year.

That will open in a couple of months and provide much needed jobs

to a community that was devastated by a series of fires and has

suffered recent plant closures. Both the Randolph and the St.

Johnsbury projects were planned and executed in accordance with

comprehensive economic development strategies, CEDS, as they

are known to us. These CEDS are a requirement for participation

in EDA activities and are a planning feature which I, and the

Agency that I represent today for the State of Vermont, strongly

endorse. The process to complete these plans is arduous, time consuming, and not without cost, but their value for smart development is indispensable.

This week, perhaps even as we are meeting right here, our

State’s legislature is considering changes to our limited liability

program for brownfields reclamation. I believe the improvements in

these laws will result in a watershed of new interest in brownfield

reclamation. With over 2,000 brownfields in Vermont, as Senator

Jeffords noted, we will need the help of EPA and EDA to remediate

and reuse those sites.

Vermont is a rural State by character and it is very different

than urbanized areas of this country. As such, we sometimes find

ourselves working within constructs of the Federal Government

that do not work quite as well as they might in more populated

States. This is true with EDA. We recommend that EDA allow

some discretion in the design and implementation of its programs

to absorb inherent differences that exist across the country, and

particularly in small States.

28

I am very glad to hear this morning that the $22-to-$1 ratio is

a goal that is not necessarily shared by everyone in all regions because, I can tell you, it is unattainable in Vermont and would

threaten to make EDA an anachronism in our State.

Also characteristic of very rural States is a lack of professional

staff for small communities. EDA relies heavily on regional representatives to provide technical assistance. These EDRs, as they

are known, are responsible for large geographic areas that prohibit

frequent visits and limit accessibility. This dependence on very few

individuals to provide both technical assistance and firewall review

of new proposals for a huge area does not do justice to the otherwise well thought out EDA system of resource deployment.

We would also appreciate an improved EDA application process

that did not place project viability in the hands of one person initially, and also allowed for the capture of time sensitive and unusual, but creative projects. The existing application process is

multi-tiered and cumbersome. We recommend a special review

process for applicants that can demonstrate a need for an extraordinary procedure. We might also suggest a closer partnership with

EDA field representatives to State community development departments. In Vermont, as is the case in many States, development department staff have become proficient in the review and administration of CDBG small cities projects and may offer EDA some assistance in extending field capacity and offering field support to

EDA.

In conclusion, we enthusiastically recommend reauthorization of

EDA. While we recommend some flexibility and discretion in applying program standards to small States, EDA’s major program features are sound, its products are invaluable, and Vermont’s economic distress would become further exacerbated without EDA

support.

Senator INHOFE. Thank you, Mr. Saudade.

Mr. Gatson.

STATEMENT OF R. CHARLES GATSON, VICE PRESIDENT AND

CHIEF OPERATING OFFICER, SWOPE COMMUNITY BUILDERS

Mr. GATSON. Mr. Chairman, Senator Jeffords, and members of

the committee, thank you for inviting me to testify in front of your

committee on the EDA reauthorization bill. I want to particularly

recognize Senator Bond who has been a friend and a champion of

our efforts to improve the lives of thousands of folks living in Kansas City, MO.

I am currently vice president/chief operating officer of Swope

Community Builders, a position I have held for the past 13 years.

Swope Community Builders is one of the Nation’s 3,600 community

based development organizations represented by the National Congress for Community and Economic Development. We are a nonprofit community development corporation with a $7.5 million annual budget. On December 31, 1991, our total assets were approximately $60,000. On December 31, 2003, our total assets exceeded

$61.4 million. We have completed in excess of $120 million in development projects—single and multi-family housing, as well as

commercial and institution projects—over the past 10 years. Every

dollar the Federal Government invests in our work leverages anVerDate 11-MAY-2000 15:24 May 01, 2006 Jkt 094601 PO 00000 Frm 00032 Fmt 6633 Sfmt 6601 G:\DOCS\94605.TXT SENENV2 PsN: SENENV2
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other $7 to $12. We manage more than $100 million in investment.

We have over $100 million of new investments in our development

pipeline.

One of our most important projects, the H&R Block Technology

Center, was completed in December 1999. This project, a corporate

technology center built using cutting edge construction, cabling,

and computer technology, relocated 150 employees earning an average of $45,000 per year from suburban Kansas to Kansas City’s

urban core and created 400 full-time equivalent jobs with starting

salaries of $15 per hour. The total annual payroll at the H&R

Block Technology Center exceeds $20 million.

Swope Community Builders is in the development phase of a new

project called the New Village at Technology Center, a 480,000

square foot office/warehouse project, accompanied by a 50,000

square feet in companion retail/service space and 175 units of work

force and market rate housing. This will be a $48.6 million project

that will employ over 1,200 people.

None of the projects that we have done to date would have been

possible without Federal involvement. But the one Agency missing

from that list is the Economic Development Administration. Despite our best efforts, Swope Community Builders has never received any funding from the EDA. Indeed, none of the 14 Community Development Corporations in Kansas City has received substantial funding from the EDA in the past 16 years. It is not an

isolated case. NCCED has surveyed our membership nationwide

and, with the exception of the western region, none of the CDCs

have had real good access to EDA.

We are in the pre-application stage of the New Village at Technology Center, as I described earlier. It has been very difficult to

make that project work and it will not be able to work without substantial up front cash from the Federal Government. As mentioned

before, the $22-to-$1 leveraging factor for us just does not work. I

hear people talking jobs, leaving their communities. Our communities do not have jobs in the first place. So to get investment at

a $22-to-$1 ratio is almost impossible for us, yet we have been successful using other techniques and we would like to be able to access this one.

I have 1 minute and 39 seconds left. It normally takes me that

much time to introduce myself. But I want to use part of that other

minute and a half to just basically talk about the Senator from

Missouri, who has been very instrumental in every project that we

have done for the last 13 or 14 years. He understands how it works

in urban areas. He understands how we do what we do.

I am here today basically because he invited me to talk about

EDA. I do not pretend to be an expert about EDA. What I am an

expert on is taking dollars and leveraging them into projects to create jobs in the urban core. Again, we have not been successful with

the EDA. We plan on being successful in the future. But if you are

going to have a $22-to-$1 leverage, it is going to be very difficult

for us. We would recommend, however, maybe a special set aside

for not-for-profits like us that we could access on a national level.

We would also like you to take a look at special impact districts

that could be created to deal with projects specifically in the urban

core. We have also discovered from looking at rural opportunities

30

for our organization that it is no different. There is disinvestment

in rural communities, there is disinvestment in urban communities. We feel that the EDA can help that particularly with public

infrastructure dollars. I will yield my 22 seconds to the next speaker.

Senator INHOFE. Mr. Gatson, thank you very much. I will pass

on your complimentary comments to Senator Talent.

[Laughter.]

Mr. GATSON. Senator Talent is too new. He is just getting here.

Senator INHOFE. Dr. Singerman.

STATEMENT OF PHILLIP A. SINGERMAN, EXECUTIVE DIRECTOR, MARYLAND TECHNOLOGY DEVELOPMENT CORPORATION, ON BEHALF OF THE INTERNATIONAL ECONOMIC DEVELOPMENT COUNCIL

Mr. SINGERMAN. Mr. Chairman, members of the committee, I am

really honored to be invited to testify before you. I currently serve

as the executive director of the Maryland Technology Development

Corporation. More relevant to this proceeding, from 1995 to 1999

I served as Assistant Secretary of Commerce and in that capacity

was responsible for EDA when you reauthorized the Agency in

1998. That was a milestone achievement of the Congress, carried

out in a bipartisan fashion, and I want to congratulate you for that

visionary action.

I also want to commend Assistant Secretary Sampson for his

leadership of the Agency. He and members of his staff have made

a special effort to reach out to me and my colleagues in the local

economic development community. I want to thank him for these

personal and professional courtesies.

I am also here today as a member of the board of director of the

International Economic Development Council, IEDC, which is the

leading association of 4,000 members serving economic development professionals around the world. IEDC is holding its 2005 conference in St. Louis this September and we look forward to seeing

you there, Senator.

I have carefully reviewed both the House-passed legislation and

the Senate introduced Administration bills. I have attached a set

of policy recommendations provided by IEDC to my written testimony. I just want to briefly highlight three points: No. 1, the importance of prompt passage of EDA reauthorization; No. 2, the importance of providing adequate funding authorization levels; and

No. 3, the importance of allowing more efficient management of

EDA’s Revolving Loan Fund.

In 1998, I had the privilege of testifying before this committee

then chaired by the late Senator Chafee, joined at that hearing by

Senator Baucus, the Ranking Member, and Senator Warner, the

Subcommittee Chair. I was told afterwards that during the hearing

Senator Warner turned to his colleagues and asked, ‘‘Does everybody like this Agency?’’ The answer then and the answer now is,

yes, because EDA, as members of this committee have stated, is

perhaps the most efficient and effective Federal Agency to assist

local economic development communities and can play a significant

role in addressing the decline of manufacturing jobs.

31

I respectfully urge the committee to consider prompt passage of

the reauthorization prior to the August recess. Here is why. This

spring the Congress will be reviewing the Administration’s budgetary request for fiscal year 2005, and this summer Agencies will

be submitting their requests to the Administration for fiscal year

2006 funding. In the normal give and take of the budgetary process, an Agency that is not reauthorized will suffer. To those who

care about the ability of EDA to provide critically needed support

to our most distressed communities, tardiness in reauthorization

will limit the Agency’s competitiveness. I can talk about this at

greater length in the question period.

Second, it is essential that robust funding levels are authorized.

The House-passed legislation proposes an authorization level of

$400 million for fiscal year 2004, rising annually to $500 million

by fiscal year 2008. This legislation provides Congress with the authorization flexibility it needs to address unanticipated economic

difficulties. What we learned in the 1990’s is that every region in

the country and nearly every community will inevitably face sudden and severe economic distress—tornadoes in Oklahoma, floods

in Missouri, ice storms in Vermont, closures of military bases and

DOE facilities across the country.

During the latter part of my tenure we were faced with economic

crises in the steel and textile industry, yet the lack of sufficient authorization levels prevented an adequate response to address these

problems. The result was that funding to communities suffering

long term deterioration was taken away and a pernicious competition among equally needy communities was created. This new authorization language does not eliminate the ultimate authority of

Congress to make judgments about budget priorities, but it does remove an artificial constraint to your ability to exercise an appropriate level of discretionary flexibility.

My final point, Mr. Chairman, relates to the Revolving Loan

Fund modifications, which have already been mentioned. Just let

me state briefly that modifications of this legislation will eliminate

an unnecessary and, frankly, unmanageable administrative burden

on EDA and its local partners. This is really a very modest step.

Defederalization of local loan programs is already guaranteed by

other Federal Agencies and EDA already releases its interest in

construction projects after 20 years. So if this is applied to Revolving Loan Funds, it will level the playing field. You should note that

it would only be carried out pursuant to formal regulations issued

by the Secretary and under the guidance of the Inspector General.

I think I used up my 22 seconds as well. Just let me thank you

again for the opportunity to testify before you.

Senator INHOFE. Thank you, Dr. Singerman. I will confine my

questions to Mr. Gorshing and Dr. Singerman since I am sure that

my colleagues from Vermont and Missouri will have questions for

the other two witnesses.

Mr. Gorshing, we in Oklahoma, or you are responsible for using

technology that I dare say is not used nationwide. I am talking

about your mapping with GIS and GPS. Do you have any idea as

to how many other States—are we ahead of the pack in technology?

Mr. GORSHING. We like to brag we are, Senator.

Senator INHOFE. That is all the answer we need.

32

[Laughter.]

Senator INHOFE. I compliment you for that. I am not saying this

just to blow smoke at you, but you are doing such a great job. We

are doing a great job in Oklahoma. I am just so appreciative of Dr.

Sampson and his predecessor for all the things that have taken

place in Oklahoma. But of all the programs that come to your

mind, which one do you think would serve best as a model? Could

you single out one that has had unusual success?

Mr. GORSHING. You mean a specific EDA investment?

Senator INHOFE. Yes.

Mr. GORSHING. There are a great many of them out there. I can

share with you one incident in a very small community which certainly is not unique across the national landscape. But there is the

small town of Thomas, a population of 1,000, and the city, because

of its size and lack of resources, has no management staff whatsoever. They had an opportunity in the year 2000 for a new manufacturing company. We are losing manufacturing jobs all over, so this

was a great opportunity. W.W. Manufacturing Company made cattle handling equipment—loading chutes, temporary pens, et cetera.

It was a $3 million project. But EDA invested a public works grant

of $500,000 to the city’s economic development authority in order

to support the infrastructure that was needed in terms of water

and sewer. The company itself invested $2 million into the project

and the differences were provided by a variety of State and Federal

funds. But it was a packaging project which the city clearly had no

capability of putting together. It was our economic development

staff, through our economic development planning program, that

was able to put that package together. Today, that company has

grown from about 8 or 10 employees to a little over 80, and additional growth is in sight.

Senator INHOFE. That is great. I appreciate that very much, and

we appreciate very much your being here to testify.

Dr. Singerman, you said during your opening statement there

are a couple of things you would elaborate on. I will give you that

opportunity with the remainder of my time. I think you have already covered your feelings on the $22-to-$1 issue, but perhaps you

could elaborate a little bit more on brownfields.

Mr. SINGERMAN. Yes, Mr. Chairman, thank you. I concur with

Secretary Sampson’s remarks. EDA’s ability to provide flexible

funding focused on job creation is very important and to have it entangled with a very complex set of legislation and regulations that

flow properly from the EPA and their approach to brownfields

would severely restrict EDA’s ability to address those communities

and those problems. I had not thought about this before, but Secretary’s Sampson’s comments about the impact of future BRAC

communities I think is very significant because that will be a major

issue coming before the Congress and EDA’s ability to assist those

communities has been historically very important.

Senator INHOFE. Specifically, how? What ideas do you have on

how you could assist someone after this BRAC round takes place?

Mr. SINGERMAN. Well, I believe you will need, as you did in the

earlier BRAC rounds, supplemental funding to address the problems of those communities. EDA gets in pretty quickly right after

the Office of Economic Adjustment’s planning grants and, as SecVerDate 11-MAY-2000 15:24 May 01, 2006 Jkt 094601 PO 00000 Frm 00036 Fmt 6633 Sfmt 6601 G:\DOCS\94605.TXT SENENV2 PsN: SENENV2
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retary Sampson mentioned in regard to some of the communities

in Colorado, I believe in Oklahoma as well, Texas, providing flexible funding not just for construction projects but for Revolving

Loan Funds, and for planning, and for training, and for the kinds

of technology transfer projects that you have mentioned, Mr. Chairman, and that Secretary Sampson has mentioned, the ability to

provide timely, flexible, and adequate funding is really critical to

be able to help the communities affected by the BRAC process.

Senator INHOFE. Thank you very much, Dr. Singerman.

Senator Jeffords.

Senator JEFFORDS. Jim, pleased to have you here. I would like

to get your views on a couple of things here. What key changes

would you make to EDA’s programs to improve your working relationship with the Agency?

Mr. SAUDADE. I think that having one EDR, Economic Development Representative that covers all of up-state New York, all the

State of Vermont, and all the State of New Hampshire provides a

unique challenge for anybody to try to provide a reasonable level

of service and technical assistance. To me, I think we would like

to help EDA through our community development department at

the State level to try to extend that field capacity, provide support,

maybe an initial level of review on applications so that the EDR

has a little bit more assistance in the region closer to its constituents to provide that assistance that is very much needed.

Senator JEFFORDS. Please elaborate on how EDA’s planning process could be improved.

Mr. SAUDADE. The CEDS is a terrific process in that it enlists

the planners, businessmen, bankers, and other interested parties to

take a sobering view of the economic picture in a region, to take

a look at its resources, and then to come up with a solid plan for

action. The problem with the CEDS process in Vermont that we experienced is that it seems to be geared to more of an urbanized environment. In Vermont, we do not have lots of people that are

closely aggregated that can serve on boards and committees and

can make a lot of meetings and things of that nature. It is tough.

We also do not have the diversity representation that you might

find in Philadelphia or New York or some other cities. So it is very

difficult for us to assemble the type of committee that has been the

model for EDA.

What we did in Vermont was we took the boards of existing regional planning commissions, three of those, and two regional development corporations to assemble about 74 individuals that were

broadly representative of the region. However, this model was simply very different than anything EDA had seen before.

So I would recommend flexibility and a higher level of understanding that small States are not necessarily going to have the

type of constituencies and the type of organizations that you would

find in more urbanized and populated areas.

Senator JEFFORDS. As you know, Vermont historically was the

machine tool industry of the Nation. As a result of that, I think we

have a lot of brownfields. What problems does that give to you in

trying to find suitable sites for industries?

Mr. SAUDADE. Well, along our rivers where most of the manufacturing originally started because of water power, we have many,

34

many, many of those sites, as you say. The machine tool industry

is just one of the many industries that contributed to this problem. We recently had a site that cost $800,000 to do the testing and

to write the corrective action plan for remediation, but it only cost

$300,000 to actually remediate it. That is still $1.1 million to get

over the hurdle of one small spill. The reason why we need EDA

and EPA is EPA can help us with the testing and the remediation,

but the costs are so extreme in this spots that EDA assistance can

help us to underwrite and credit enhance the redevelopment of

those sites. A developer is not going to arrive at a feasibility decision on a project that has that kind of up front cost related to the

brownfields problem. However, I am optimistic because our

brownfield legislation in Vermont had a catch. Even if you did everything right, if there was something found wrong at the end of

the cleanup, even if it was completely within the corrective action

plan, the secretary could make you do more. This left a blank

check, basically, wide open. Frankly, attorneys for our banks would

not allow anybody to get involved with such projects. We think that

hole is going to be plugged this week or next week in our legislature and I think you are going to see a lot more people excited

about getting involved with brownfields. I am hoping that EDA is

going to be an important player along with EPA to help us address

those sites because they are critical to the stability of our towns

and our village centers, they are important to the creation of jobs,

and they help us to protect our undeveloped countryside.

Senator JEFFORDS. Thank you. Thank you, Mr. Chairman.

Senator INHOFE. Thank you, Senator Jeffords.

Senator Bond.

Senator BOND. Thank you, Mr. Chairman. I guess Mr. Gatson

blew the cover, so I might as well tell you that he has an extensive

background in urban affairs and economic development, more recently he is branching out from the great work he has done with

Swope Community Builders in Kansas City to work in rural areas,

and he was a recipient in 2002 of Fannie Mae Foundation’s Johnson Community Fellows Award for leading development professionals. He is currently serving a 3-year term on the Federal Reserve’s Consumer Advisory Council. So with that background, without getting into the Kansas City Chiefs, Chuck, I would like you

to tell us briefly why your organization has been unable to tap into

the EDA funding? What do you see as the problems of accessing

EDA funding for urban and to the extent that you have experience

in the rural areas? What impedes your ability to go to EDA?

Mr. GATSON. I think the biggest issue that we have with accessing is staffing. The gentleman to my right talked about that in

Vermont. We have one person in the State of Missouri that everybody goes through and it is very difficult to get his ear, to get time

with him. That is No. 1 for us. No. 2, it is the difficulty in taking

the EDA funds and getting them into our projects at the appropriate time. We have not on a regular basis attempted EDA because we have had other paths to go through. I guess the district

in Kansas City, MO, that deals with EDA is administered by two

separate agencies, Economic Development Corporation and the city

of Kansas City, MO, and those two are not often talking to each

other or dealing with each other. So that is a problem for us, the

35

local politics, the local bureaucracies. That is why I spoke earlier

about special set asides for not-for-profit community development

corporations that can by-pass those kinds of local issues and deal

directly with the office in Washington, DC, based upon the kind of

projects that we do. I think the third thing is just a fear from our

organization of spending the kind of time and effort it takes to put

together that kind of application and then not being successful. As

I said, we have assets of about $61 million but that does not mean

that we have a lot of time and a lot of staff. We have about 25 people and they are all assigned to projects on a regular basis. So to

take somebody off of a process that we know that we can go

through and be successful and put them on a process that is a lot

more difficult, a lot less reasonable for success, that is the third

reason, Senator.

Senator BOND. The $22-to-$1 ratio you feel would be beyond the

ability of your organization and others with which you deal?

Mr. GATSON. We thought we were pretty hot when we said we

were doing $7-to-$12-to-$1. In the communities I work in, if you

have $22 to do a project, you do not need $1 more. We have $5 to

do a project, we need $5 or $6 more to make it work. Everything

we do we thought was pretty highly leveraged, everything from

Community Development Block Grant funds to home funds, to philanthropic program related investments, to bank dollars, special equity funds. We use all of that. So for us to go out and find another

$10 or $12 to do a project, it will not work for us. If there were

those kinds of returns on investment in the communities we

worked in, the private sector would be doing it already.

Senator BOND. Thank you, Mr. Gatson.

I wanted to followup with Dr. Singerman on a couple of little

ideas. Again, I join with Dr. Sampson in expressing appreciation

for the leadership you gave the Agency. We have a local EDA

project in my part of the State where a group of farmers, a cooperative were trying to qualify for a private loan from a bank and the

bank could not lend the money without assurance of EDA funding,

but that cannot be announced until the EDA completes its prevention of unfair competition study. Is that really still necessary to do

that? How important is that?

Mr. SINGERMAN. I do not think it is important at all and I think

we tried to get rid of it 6 years ago and were unsuccessful. I believe

the Administration’s bill ends that anachronistic provision, and I

think the House agreed with that. So that would be a step in the

right direction.

Senator BOND. Finally, some people are saying that the House

bill gives EDA too much room to rewrite rules and regulations. You

have been in the other seat and now you are in the International

Economic Development Council, and I know you have to watch

your step because you have to apply to Dr. Sampson, but is it going

too far in giving him leeway to rewrite rules and regulations?

Mr. SINGERMAN. Well I do not know the provision in the House

legislation that does that. But I do know that between the Department of Commerce’s lawyers, the Department of Commerce’s budget office, OMB, congressional appropriating committees, the congressional authorizing committees, and the Office of Inspector General, there are lots of people who have their eyes on EDA’s proVerDate 11-MAY-2000 15:24 May 01, 2006 Jkt 094601 PO 00000 Frm 00039 Fmt 6633 Sfmt 6601 G:\DOCS\94605.TXT SENENV2 PsN: SENENV2
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grams and it is very hard to sneak something through without the

proper vetting. So I think you would agree that the problem in the

Federal Government is not too much flexibility but really too little

flexibility and too many burdensome and onerous regulations and

rules.

Senator BOND. Thank you, Dr. Singerman. Thank you, Mr.

Chairman.

Senator INHOFE. Thank you. I have no further questions but if

either of my colleagues do, feel free to ask.

Let me thank all five of our witnesses. Dr. Sampson is still here

and it is very unusual to stay for the second panel. I appreciate

that very much, Dr. Sampson. If anyone of you has one or two

things that you should have said and just realize you did not, and

you too, Dr. Sampson, get up here, we will give you that chance

to do so. Mr. Saudade?

Mr. SAUDADE. I would like to say that one of the problems I had

when we first got into planning our CEDS was that the website

was not very good at EDA. I want to commend EDA for improving

that website enormously. Today, it is such a great resource and

they have done a wonderful job with that. I really appreciate that.

Senator INHOFE. Well, that is good. All right, anybody else? Yes,

Mr. Gatson?

Mr. GATSON. I would like to say I do recognize that there are two

Senators in the State of Missouri.

[Laughter.]

Senator INHOFE. That is what is unusual about Missouri.

[Laughter.]

Senator INHOFE. Dr. Sampson.

Mr. SAMPSON. Thank you, Mr. Chairman, for your flexibility. I

know we will have an opportunity to respond to questions, and we

look forward to that, written questions, and, again, I certainly want

to make myself available to members on both sides for a personal

sit-down with questions. But I do want to clarify one thing in the

public setting.

We have heard a lot about the $22-to-$1 as a goal. The reality

is that we have many, many grants that are far below the $22-to-

$1 ratio. We have some grants—as a matter of fact, and I am sorry

Senator Wyden is not here—we have one grant that is in the process now for Port West in Oregon that is a $980-to-$1 ratio, in a

very poor, very rural community that is going to have a significant

impact on that whole region of the State. Clearly, when the Seattle

regional office has one grant that has a $980-to-$1 ratio, that enables us to have a great deal of flexibility on the small side of the

scale to do small projects that are not highly leveraged. That is

why I talk about this as it is an overall goal for a very broad portfolio at the regional level but then at the national level.

What we look forward to is providing you with the full range of

grants so you can see that we do extremely small leveraged grants

as well as some that are very highly leveraged. But the important

principle is economic development cannot be successful at any level

unless there is significant private sector money leveraged into that

deal.

Thank you very much, Mr. Chairman.

37

Senator INHOFE. I appreciate that and I am sure that Senator

Wyden’s staff will convey that, that we are talking about averages.

Mr. Gorshing or Dr. Singerman, either of you have anything further?

Mr. SINGERMAN. Yes, Mr. Chairman. I would just like to emphasize one point that I perhaps rushed through, and that is the significance of this committee’s action and your ability, I know you are

not the appropriators, but by sending a message through the authorization levels that you set in the legislation, to really set a

benchmark for not only your colleagues in Congress but members

of the Administration to pay attention to EDA and provide the

level of funding that I think you all would agree is necessary to

support the kinds of projects that you endorse.

Senator INHOFE. Well I appreciate that. I think our sentiments

have been conveyed to all of you as to our feelings about the EDA

and the work that you do. Again, we thank you very much for all

of your efforts.

With that, we are adjourned.

[Whereupon, at 11:20 a.m., the committee was adjourned, to reconvene at the call of the chair.]

[Additional statements submitted for the record follow:]

STATEMENT OF SENATOR CRAIG THOMAS, U.S. SENATOR FROM THE

STATE OF WYOMING

Mr. Chairman, I thank you for holding this hearing today. I believe it is important that we as legislators continually review the functions of the Federal Government so that the policies and programs remain effective and efficient.

All too often it seems that all sorts of assistance programs continue without review only to be duplicated by another Agency, administration, bureau or nook in the

Federal Government to address a similar challenge as the previous program.

The EDA is an organization that many people look to when local development,

jobs and creating lasting improvements to the business environment are needed.

This is a unique organization with a mission that cannot be understated, and we

are fortunate to have Dr. Sampson as its administrator.

As the American economy continues to grow and change, we must be prepared

to address the challenges that lie ahead. By allowing communities to access funds

for infrastructure and capacity, technical assistance and other obstacles, we can see

a one stop shop that will, hopefully, allow an economically depressed area get assistance or get training or get construction so folks can get back to work. In Wyoming,

we have seen a number of successes and it is important that as we hear testimony

and review the reauthorization, we capture the essence of this program that will

focus our resources to our rural and urban communities to create jobs.

I am particularly pleased that we have Assistant Secretary of Commerce Dr.

Sampson here today to give us some insight on where his program is and where

he wants to take it. As I mentioned, this is important to ensure our Federal dollars

are used wisely. I know the President has made the implementation of responsible

and accountable policy changes a priority and I am glad the EPW Committee can

hear testimony today.

STATEMENT OF SENATOR MAX BAUCUS, U.S. SENATOR FROM THE STATE OF MONTANA

Mr. Chairman, thank you for convening this hearing. As you know, I am a big

supporter of the Economic Development Administration. This Agency has been a

major contributor to the development of Montana’s economy over the years and has

been a solid partner in state and local efforts to move our state’s economy forward.

My support for EDA comes from first-hand experience in working with EDA on virtually every major economic development project and initiative over the past dozen

years or more.

I also have first-hand experience in EDA’s reauthorization, as former Chairman

and ranking member of the Environment and Public Works Committee. In 1998, I

sponsored S. 2364 along with my original co-sponsor, Senator Snowe. The bill evenVerDate 11-MAY-2000 15:24 May 01, 2006 Jkt 094601 PO 00000 Frm 00041 Fmt 6633 Sfmt 6621 G:\DOCS\94605.TXT SENENV2 PsN: SENENV2
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tually attracted co-sponsorship of more than 60 Senators. That bill was unanimously

reported out of this committee and passed under unanimous consent in the Senate.

Later that year, the House of Representatives passed S. 2364 unanimously and it

was signed into law. This marked the first passage of an EDA reauthorization bill

since 1980, a period of 18 years.

That bill not only reauthorized EDA, but significantly improved EDA’s authority

to advance this nation’s efforts in improving the economies of economically distressed communities. I am the first to admit, however, that we cannot rest on our

laurels. There is a need for constant improvement. That improvement should be accomplished with a recognition of the core mission of EDA and should recognize its

strengths while identifying ways to increase its effectiveness.

With this in mind, I feel that we should identify some of EDA’s key strengths.

First and foremost is this Agency’s efforts at the state and local level. It is widely

recognized that economic development is inherently locally driven. That is, economic

development is only effective when state and local leaders engage the private sector

to realize economic development goals and objectives. EDA’s strength is that it is

built on this premise.

A critical component in local economic development, for example, is the Comprehensive Economic Development Strategy, or CEDS. These strategies, a key requirement for investment, provides the basis for consensus among local government

and business leaders as they plan for critical infrastructure improvements, publicprivate partnerships and investment strategies that are needed to support economic

growth and job creation. In addition, EDA’s assistance programs engage key partners at the state and local level. These include state and local government, economic

development districts, local development organizations, university centers, and tribal governments. Consensus is created before a project is designed, much less implemented.

The effective word here is ‘‘Partner’’. EDA’s programs do not operate in a vacuum,

directed by Washington bureaucrats. Instead, assistance is directed by local and regional planning, with EDA staff at the local level providing technical assistance

where it is needed most—on the ground, where the action is! EDA operates as an

active partner, working with state agencies and other Federal Agencies to make a

difference at the local level. This important partnership is greatly enhanced by the

actions of the Economic Development Representative. I have witnessed first hand

in Montana on many, many occasions the excellent working relationship between

the EDR and many Montana entities. This is a core strength that we need to enhance. I will be interested to hear Dr. Sampson’s ideas regarding how we can augment this important component of how EDA programs are delivered at the state,

regional and local level.

A major factor contributing to the success of EDA is its ability to maintain its

local partnerships over many years, ensuring continuity and stability as economically distressed areas struggle to make lasting economic improvements. A prime example is EDA’s support for economic development districts. Montana currently has

four economic development districts, providing economic and community development planning and assistance to communities in 22 of Montana’s 56 counties. The

planning grants provided by EDA have allowed these districts to develop and maintain critical expertise to assist communities in addressing their needs. However,

funding for economic development districts literally has not increased for more than

30 years. In fact, it has diminished over that time. In addition, Montana has four

economic development districts that have been designated by EDA but do not receive any planning funds. This means that the remaining 34 Montana counties do

not receive the substantial benefits of EDA’s planning grant program.

In addition to economic development districts, some Indian Tribes within Montana

only receive $35,000 to support their economic development planning efforts. Indian

reservations are some of the most economically distressed areas of this country.

Quite frankly, I do not know how we can expect advancements in the economic development of our reservations with such limited resources. I would be particularly

interested in hearing Dr. Sampson’s ideas for increasing funding for economic development districts and Indian Tribes.

In my state, we also have an EDA-funded University Center. The University

Technical Assistance Program (UTAP) provides critical technical assistance to small

manufacturers using engineering students from Montana State University. I cannot

think of a more cost effective way to provide valuable ‘‘hands-on’’ technical assistance to small manufacturers than UTAP does. In fact, this program eventually lead

to the formation of the Montana Manufacturing Extension Center (MMEC). These

services are critically needed at this particular moment in time, when manufacturers are moving jobs overseas. I would be interested to know how EDA will strengthen its commitment to organizations such as UTAP.

39

Another critical component in EDA’s ‘‘tool box’’ of programs is the successful Revolving Loan Fund program. In Montana, we have realized significant private investment in our communities because this program was available to economic development districts and local development corporations. The program is responsible for

literally thousands of jobs retained or created in Montana communities. We need to

build on this program to ensure its effectiveness in combating low per capita income, high unemployment, and high out-migration rates in our distressed communities. Montana’s EDA Districts, local development organizations and other political

entities have utilized the RLF program in many innovative ways to leverage millions of dollars of local, state and private sector funds to create significant employment opportunities.

EDA’s programs have proven to be effective in addressing local economic development needs. These programs avoid duplication of other Federal programs while providing assistance that complement other Federal, state, and local efforts to create

lasting improvements in economically distressed areas.

In summary, I would like to stress that the success of EDA in carrying out its

mission is dependent on its partnership at the state and local level. Assistance that

is based on locally driven planning through the Comprehensive Economic Development Strategy process, coupled with adequate funding of our economic development

districts, tribal economic development programs, University Centers and the Revolving Loan Fund program is the key to EDA’s future success.

STATEMENT OF DAVID A. SAMPSON, ASSISTANT SECRETARY OF COMMERCE FOR

ECONOMIC DEVELOPMENT, ECONOMIC DEVELOPMENT ADMINISTRATION

Chairman Inhofe, Ranking Member Jeffords, Subcommittee Chairman Bond, Subcommittee Ranking Member Reid and Members of the Committee, thank you for

this opportunity to appear before the Senate Environment and Public Works committee regarding the reauthorization of the Public Works and Economic Development Act of 1965 (PWEDA), as amended.

We are at a critical time in our economic history and the decisions we make today

will have profound impact. The challenges of today will require policymakers to be

forward-looking and innovative. Tomorrow’s Challenges will not be answered with

yesterday’s solutions.

Mr. Chairman, I am convinced that the only constant in economic development

today is change. Nowhere else is this more evident than the scope of competition

that American companies and communities face both domestically and from worldwide markets. American companies and communities must be able to operate in a

worldwide marketplace and American political leaders must be in synch with business and labor leaders to adapt to this reality.

One significant step in this effort is to reauthorize the Economic Development Administration. I urge the Senate to quickly pass this legislation so the valuable program changes in this legislation can be employed to help the economy grow.

On October 21, 2003, the House of Representatives passed H.R. 2535, legislation

to reauthorize the Economic Development Administration (EDA). While H.R. 2535

is not the same as S. 1134, legislation the Administration proposed to Congress on

May 15 of last year and introduced by Chairman Inhofe and Bond in on May 22,

the House bill is a bipartisan compromise that passed the House without dissent.

In 1965 EDA was created to help communities generate new jobs, retain existing

jobs, and stimulate industrial and commercial growth in economically distressed

areas of the United States primarily through the construction of infrastructure. Assistance is available to both rural and urban areas of the Nation experiencing high

unemployment, low per-capita income, or other severe economic distress.

EDA’s work to help communities was greatly advanced by my predecessor in the

previous administration, Dr. Philip Singerman. His work with your committee in

1998 to reauthorize EDA for the first time in 16 years, set the stage for the improvements we seek in our proposed legislation. I believe his testimony today will be valuable to your efforts.

Today, EDA’s mission is to lead the Federal economic development agenda by promoting innovation and competitiveness, preparing American regions for growth and

success in the worldwide economy. In order for EDA to achieve this mission and for

the Federal Government to be successful in its overall economic development efforts

we need a New Federal Economic Development Strategy for the 21st Century.

A NEW FEDERAL ECONOMIC DEVELOPMENT STRATEGY FOR THE 21ST CENTURY

As I travel across the Nation, it is clear to me that economic development is a

top agenda item for almost everyone. However, it is also clear to me that America

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needs a smarter economic development strategy for the 21st Century. We need to

set clear expectations and develop an overall strategy for these efforts by establishing a coherent design—including some common management goals and common

performance measures among Federal economic development programs.

WHAT IS THE FEDERAL ROLE?

The bottom-line of economic development is prosperity—a high and rising standard of living. Productivity and productivity growth are the fundamental drivers of

prosperity and innovation is the key driver of productivity. President Bush has said,

‘‘The role of government is to create conditions in which jobs are created, in which

people can find work.’’ The economic development focus of the Bush administration

is supporting innovation and competitiveness on a regional level across America. Increased innovation and competitiveness empowers distressed regions to attract private-sector investment thereby improving the opportunities for American workers.

THINKING REGIONALLY

Economies are not hermetically sealed in artificial political boundaries. The dominant reality of economic development today is that all communities, cities, towns

and counties alike, must think regionally and pool their resources to build a strong

economic platform for growth. By pooling their resources regionally, communities

can attract the private sector investment necessary to spur job creation, because it

is the private sector that creates jobs and spurs economic growth.

Let me give you an example: I was in Georgia meeting with officials from four

counties who were encouraging EDA to assist in the development of a development

project in one of the four counties. I asked them, why three of the counties were

asking us to invest in a county outside of their own. They told me that they understood that this project would be a driver of job growth for the entire region and it

would benefit all of their constituents. By pooling their resources they could attract

more private sector investment than if they each went it alone.

Encouraging regional collaboration should be one of the key goals for defining the

Federal role in economic development—and it is at EDA.

EDA is guided by the basic principle that distressed communities must be empowered to develop and implement their own economic development and revitalization

strategies through close collaboration with the private sector, local governments,

and universities. Based on these regionally developed priorities, EDA partners with

state or local governments, regional economic development districts, public and private nonprofit organizations, and Indian tribes to help them attract the critical private sector investment that is necessary to overcome long-term economic distress as

well as sudden and severe economic dislocations due to natural disasters; the closure of military or other installations; changing trade patterns; or the depletion of

natural resources.

PROMOTING AMERICA’S IMMENSE INNOVATIVE CAPACITY

The innovative capacity of the United States has always been one of our greatest

strengths. The innovation infrastructure of our country is built on over 200 years

of invention, discovery, development and commercialization. It is an intricate system

that exists no place else on Earth.

Innovation will drive the growth of American industry by fostering new ideas,

technologies and processes that lead to better jobs and higher wages—and as a result, a higher standard of living. America’s capacity to innovate will serve as its

most critical element in sustaining prosperity. New products and new production

methods embedded in the oldest of our mainline manufacturing businesses will raise

our productivity and ensure that our economy remains the most competitive in the

world. Only by focusing on innovation and competitiveness can we ensure that the

jobs created will be good jobs that provide a higher standard of living for Americans.

America’s economic infrastructure is dependent upon innovation and one key

place innovation occurs is on America’s university campuses. One of EDA’s investment priorities is to advance technology-led economic development by supporting the

commercialization of university research and development efforts by linking them

with regional economic development. We must foster technology transfer and entrepreneurial ecosystems, in which private industry, universities and communities can

partner to drive economic expansion.

NATIONAL ECONOMIC DEVELOPMENT STRATEGY

EDA has a unique position in the national economic development strategy. Since

its creation nearly forty years ago, EDA has invested over $12 billion dollars to help

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distressed communities create an environment conducive to sustained job growth

and economic opportunity. This is a small fraction of the overall Federal investment

in economic development activities over the same period.

According to a General Accounting Office study of Federal economic development

programs conducted in 2000, there are at least 30 Federal economic development

programs, providing approximately seven billion dollars to support economic development activities. Some more recent analysis lists the budget for economic development at over $20 billion.

EDA’s fiscal year 2004 budget of $318 million may seem insignificant when compared to the nation’s $11 trillion economy. Indeed, it is critical to job creation and

long-term economic growth for the overall economy that the much larger macroeconomic policies in President Bush’s Six Point Economic Plan are passed by Congress as well.

These critical six items are:

• Making Health Care Costs More Affordable.

• Reducing the Lawsuit Burden on Our Economy.

• Ensuring an Affordable, Reliable Energy Supply.

• Streamlining Regulations and Reporting Requirements.

• Opening New Markets for American Products; and

• Enabling Families and Businesses to Plan for the Future with Confidence by

Making Tax Cuts Permanent.

However, at the local and regional level, EDA has a proven ability to provide catalysts for economic growth in areas the marketplace bypasses or that are experiencing sudden and severe economic dislocation. The legislation before the Senate to

reauthorize EDA will enhance our ability to address these important economic

needs. EDA’s legislation was crafted with the following three principles:

• Being flexible to deal with change;

• Enhancing our coordination with other Federal programs; and

• Rewarding Results.

INCREASED FLEXIBILITY

As I travel across the country talking with our economic development partners,

they repeatedly comment on the value to them of our programs’ flexibility. They like

the existing flexibility of our programs, but note that EDA can do better in some

areas. We’ve listened to their ideas about increasing that flexibility while maintaining, even increasing, accountability for taxpayers’ dollars.

To increase our flexibility, we have reorganized our work force to improve and

streamline our internal operations and through our reauthorization we are seeking

to transform EDA into a flexible, forward-looking Federal resource that focuses on

investing in economic infrastructure that will promote development of regional engines of economic growth.

Many of the Administration’s proposed changes included in both S. 1134 and the

version that passed the House are related to this objective. For example, H.R. 2535

clarifies that certain non-profit organizations and special units of government are

eligible for EDA assistance. As key players in the economic development arena, it

is important that we be able to work along side community development corporations and municipal utility districts to promote strategies that will result in economic growth. These types of entities were not envisioned when EDA was created

in 1965.

This Administration’s proposal allows the savings, from construction projects completed under budget, to be recaptured to fund additional economic development

projects. Under current law, these funds are either returned to the Federal treasury

or are used to improve the project. EDA needs the flexibility to use these funds to

invest in additional projects in distressed communities. The House has agreed to

allow the EDA the opportunity to utilize these funds for additional projects but

modified the language to allow recipients of EDA funds to keep under-run costs as

an increase in the Federal share of their grant.

Finally, both the Administration’s bill and the House version eliminate the provision in our law dealing with overcapacity (Section 208). This provision was relevant

to our programs when EDA made large loans to entire industry-sectors but has

proven to be administratively burdensome to both our grantees and our staff. We

would also note that communities providing mandatory matching funds will not invest in projects creating over-capacity because they will not be viable over the long

term and the private-sector will not invest in a project unless market demand exists. We will use investment policy guidelines and our regulations to achieve the

purposes of this section in a less burdensome manner.

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ENHANCING OUR COORDINATION WITH OTHER FEDERAL PROGRAMS

A highly trained and skilled work force is crucial to our economic growth. The legislation we sent to Congress proposes several changes to existing law to promote coordination among Federal economic and work force development programs, such as

those authorized under the Workforce Investment Act. The House bill includes similar provisions.

The President has stated that a better-educated work force means America is

more productive resulting in more jobs and higher paychecks. This Administration

is committed to developing closer linkages between work force development and economic development. I have been working closely with my counterpart at the Department of Labor’s Employment and Training Administration to build these linkages.

Our proposed statutory changes would make it easier for these partnerships to be

built at the local level.

Additionally, the House added a provision to require EDA to coordinate our efforts

with other economic development programs, which dovetails with our ongoing efforts

to partner on a governmentwide basis to coordinate Federal Economic Development

Efforts.

REWARDING RESULTS

EDA has demonstrated through measurable outcomes the value of its leading programs. We have adopted a Balanced Scorecard as a tool to measure our performance

and scored relatively well in the Office of Management and Budget’s Program Assessment Rating Tool (PART).

But these achievements are not enough. We have also focused the agencies core

values on results. Our values include:

R esponsibility

E ntrepreneurship

S ecurity

U rgency

L eadership

T eamwork

S uccess

Responsibility: We act with integrity and respect for others and are accountable

for our actions.

Entrepreneurship: We seize opportunities in the midst of change and take marketbased risks, challenging the status quo. We seek partners with similar attributes.

Security: We enhance economic security. At work, we operate in a safe, secure,

and alert work environment.

Urgency: We act now—with alacrity.

Leadership: We develop leaders, communicate concisely, and exhibit a high degree

of professionalism. We make tough choices.

Teamwork: We are passionate about economic growth and build synergy by collaborating. We expand relationships.

Success: We set high goals, stretch our abilities, and exceed expectations. We

focus on critical items first and commit to implement them fully.

EDA evaluates its programs by measuring the results in such areas as the number of jobs created and the amount of private-sector funds leveraged. Correspondingly, EDA also requires its grantees to measure the results of their projects.

This Administration expects high levels of results from EDA’s investments and

commits to providing recipients an incentive to reach these performance goals.

When an EDA-funded project provides excellent results taxpayers gain: prompt

project implementation, better overall stewardship of taxpayer resources, faster creation of higher-skill, higher-wage job opportunities, and timely investment of private

sector funds—all of which help communities become more competitive and economically vibrant.

REWARDING PERFORMANCE

EDA’s proposed legislation contained a performance-based incentive recognizing

the importance we place on achieving results and the critical role that our partners

play in transforming distressed communities into successful, economically stable

communities. Currently, applicants have an incentive to overstate the number of

jobs they anticipate creating because job creation is a large part of the evaluation

criteria. The Administration hopes to temper this incentive by offering a 10 percent

bonus award for projects that exceed their job performance targets. This funding for

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the 10 percent bonus would come from the elimination of the 10 percent bonus for

projects that flow out of the economic development districts, as described below.

The House was very supportive of the concept, but altered the delivery mechanism of this incentive. The House creates a performance based incentive program

that would reward high performance with a straight bonus, rather than EDA’s proposed credit, of up to 10 percent of the project cost that can be used on other eligible

activities.

For example, if the city of Stillwater, Oklahoma received a $1 million grant from EDA that promised to create 200 jobs and attract $35 million in private sector investment and the project created 450 jobs and attracted $60 million in private sector

investment, it would be eligible for an EDA performance award of $100,000. This

$100,000 could be used by the city of Stillwater for improving the project, for another EDA project, or it could be used as non Federal matching funds for other Federal grants the city may be seeking.

This House provision retains the pro-results intent of the Administration while rewarding local recipients with additional flexibility to make this reward a useful

goal. We believe that by recognizing high performance recipients with a significant

and tangible incentive-based reward, this provision will raise the performance bar

across the board for all EDA recipients. It will also help EDA evaluate projects at

the front end of the process as it will encourage applicants to focus on achievable

goals for the projects in submitting their applications.

The House also made an additional performance incentive change. The Administration’s proposal calls for the elimination of the current 10 percent bonus for

projects that flow out of economic development districts under section 403 of the

statute (42 U.S.C. 3173) because participation in the economic development districts

is high. The Administration believes the current 10 percent bonus could be better

spent to incentivize performance, as outlined above. The House bill similarly deletes

the current 10 percent bonus for economic development district projects, but also

has added a 5 percent planning performance bonus similar to the 10 percent performance award. This 5 percent planning bonus would go to recipients who utilized

an economic development district to process and support an economic development

project. Projects in a region not covered by an EDA approved Economic Development

District would not be eligible for this award.

REVOLVING LOAN FUNDS

One component of results is being a good steward of the taxpayer’s money. At

EDA, no where is this more important than our revolving loan fund (RLF) program.

Twenty-seven years ago EDA created the first economic development RLFs.

Today, with a portfolio of over 600 RLFs, worth approximately $1 billion, EDA believes that it is both necessary and appropriate to implement much needed management reforms to ensure the continued effectiveness and accountability of these

funds. In its reauthorization proposal, EDA seeks new authority to correct technical

issues to ensure the efficient operation and financial integrity of our Revolving Loan

Fund Program.

FINANCIAL INTEGRITY AND ACCOUNTABILITY OF THE REVOLVING LOAN FUND PROGRAM

Over the past 31⁄2 years, the Department Of Commerce’s Office of Inspector General has conducted 46 audits of EDA Revolving Loan Funds. The seriousness of financial integrity problems in the revolving loan fund program is demonstrated by

the several file cabinets full of documents we have had to review to resolve significant problems. All but a handful of these audits revealed serious instances of noncompliance or failure to safeguard RLF assets, including:

(1) Unused RLF assets due to startup delays or insufficient demand for loans;

(2) Ineligible loans or borrowers, and failure to properly document loan decisions;

and,

(3) Poor accounting and financial management practices, including failure to safeguard and protect RLF assets.

The Inspector General reported significant problems for Revolving Loan Funds operated in every region of the Nation, by many different local, state and regional development organizations. These 46 audits cover a significant portion of EDA’s overall portfolio and I believe are indicative of problems with the program. We must act

now to avoid much larger problems in the future to make sure this economic development tool remains a viable option.

The Administration’s proposed legislation provided EDA with the authority to

write specific regulations addressing basic financial accountability standards that

every EDA RLF must meet. These uniform standards will then be incorporated into

the Single Audit Act compliance requirements. This will allow certified public acVerDate 11-MAY-2000 15:24 May 01, 2006 Jkt 094601 PO 00000 Frm 00047 Fmt 6633 Sfmt 6621 G:\DOCS\94605.TXT SENENV2 PsN: SENENV2
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countants conducting RLF audits to verify the financial integrity of EDA RLFs on

a regular basis.

These changes in our RLF program will produce positive effects on our partners

around the country. With a more robust audit, EDA need only require an annual

report from our RLF’s instead of the semiannual reports currently required.

Additionally, over sixty EDA RLF operators manage from two to four EDA RLFs,

capitalized at different times from different EDA appropriations, such as a Long

Term Economic Deterioration (LTED) RLF, a defense adjustment RLF, or created

following a natural disaster. The proposed technical corrections will enable EDA to

merge multiple RLFs into a single, efficient fund per operator, thereby greatly simplifying the administrative and reporting burden for both the grantees and EDA.

In many instances RLFs will decrease from four reports to one more comprehensive

report, annually, and numerous RLF operators will decrease from eight reports to

one report, annually. These changes will reduce bureaucracy, improve accountability, and save valuable staff time and resources for both our RLF operators and

EDA.

The House has accepted these changes with one clarification. The House made

clear that the consolidation is an option of the RLF operator, not a mandate from

Washington. That is a helpful distinction that the Administration accepts.

TRANSFER OF RLFS TO THIRD PARTIES FOR LIQUIDATION

The legislation also seeks new authority to transfer RLF portfolio assets to third

parties for liquidation. Due to issues of non-compliance or simply for the convenience of the parties, EDA, in some cases, needs to terminate an RLF. To date, the

uncertainty of how to deal with, and pay for, the liquidation of an outstanding portfolio of loans has seriously impaired EDA’s ability to dispose of these assets in a

timely manner. By allowing EDA to arrange the transfer of the RLF portfolio to a

third party, the new law will enable EDA to arrange for the orderly or timely disposition of an RLF while paying for the necessary costs of liquidation activities from

the assets of the RLF being terminated.

The House accepted this provision in H.R. 2535.

RELEASE OF THE FEDERAL INTEREST IN EDA RLFS

Finally, at the request of the RLF community, the Administration seeks new authority to closeout existing RLFs by allowing the repayment of the initial grant used

to capitalize an RLF after a period of 20 years, similar to the release of EDA’s interest in public works grants after 20 years. Although EDA does not directly fund

RLFs, it does provide grants to local governments and non-profits that in turn set

up revolving loan funds. Unfortunately, the House did not accept this change to our

RLF program in H.R. 2535.

It is important to note that this provision is a very modest change to current law.

Current law provides that an RLF grant recipient can cut its strings with the Federal Government by compensating the Federal Government for the Federal share of

the value of the RLF property. As an incentive to encourage a gradual reduction

in the number of RLFs outstanding, our proposed provision would allow a RLF

grant recipient to cut their strings with the Federal Government by repaying the

amount of the initial grant only.

This provision would apply to RLFs that have demonstrated and sustained financial and program performance. I believe that after 20 years any high performing

RLF will have provided considerably more new jobs and increased leverage of private-sector investment than originally anticipated.

We anticipate that the proposed buy-out option will be particularly attractive for

the best performing RLFs and will become an important performance incentive for

all RLFs. The ability of an RLF to closeout their grant from EDA after 20 years

of successful management will provide EDA a powerful new management tool and

RLFs with a strong incentive to increase their efficiency.

Further, this new authority will help EDA to correct the historic and growing imbalance of finite EDA resources available to monitor and administer an ever-increasing number of RLFs. Without congressional action, RLFs will become less attractive

to economic development professionals as they are perpetual, federally regulated,

grants despite possible changed circumstances. The gradual reduction of EDA’s RLF

portfolio will enable EDA to effectively utilize its staff for higher quality administration of the remaining grant portfolio. It will allow us to recognize our economic development successes from the last 20 years and move on to future challenges.

COMMENTS ON ADDITIONAL HOUSE CHANGES

H.R. 2535 made several other changes to the Administration’s proposal.

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As part of the last minute negotiations on the bill, a section of the House bill

raised the Federal share of all planning grants to be a minimum of 65 percent. Currently this share is 50 percent-100 percent for Native American planning grants. I

would like to point out to the Senate that this change in Federal minimum percentage will have no real dollar impact for economic development districts. Since we

have more districts than funding, everyone will receive the same amount of money.

What this does do, however, is lower the local cost share and that may negatively

impact planning activities as EDA is ‘‘buying’’ less of a product.

Similarly, H.R. 2535 did not include the Administration’s flexible language relating to program funding. The Administration sought language to set the budget for

the current year at the President’s request with such sums as necessary for the next

4 years. The House has instead chosen to authorize program funding at $2.25 billion

over 5 years.

H.R. 2535 also places a rider that expands the boundaries of the Appalachian Regional Commission. The Administration opposed similar language in H.R. 3550, the

Transportation Legacy Act. Moreover, this provision is not related to EDA reauthorization and should be removed. I encourage the Senate to pass a clean bill.

BROWNFIELDS AND BRIGHTFIELDS

The House also added sections 218 and 219 related to Brownfields and

Brightfields. These provisions purport to allow EDA to engage in redevelopment of

projects utilizing brightfield technology or in brownfield areas.

I appreciate the interest that the Committee has shown in EDA’s brownfields activities, which have represented a significant part of EDA’s investment activities

over the past 5 years. From fiscal year 1999 through fiscal year 2003, EDA has

made 269 investments in brownfields totaling $266,579,653, or 15 percent of EDA’s

total program appropriations during that time period. That works out to an average

of 54 brownfields investments annually, with an average brownfields expenditure of

$53,315,931 per fiscal year.

We look forward to continuing our pro-active work in brownfields investments, especially given the anticipated BRAC round scheduled for fiscal year 2005. Our major

goal with the legislation is to be able to continue this work with maximum flexibility

in accord with EDA’s funding priorities and investment policy guidelines. The provisions that tie EDA to the Comprehensive Environmental Response, Compensation

and Liability Act (CERCLA) in the House bill and in legislation that passed this

committee in the 107th Congress cause us particular concern.

These provisions attempt to graft a set of definitions, obligations and limitations

from CERCLA onto EDA’s brownfields activities that are not consistent with EDA’s

brownfields work. The CERCLA provisions, as written, would radically alter and ultimately wither EDA’s current brownfields work.

CERCLA brownfields provisions are directed toward a clean-up program, because

that is the focus of CERCLA—to authorize the Federal Government to fund and perform, establishing liability for, and reimbursing the Superfund for—environmental

clean-up.

On the other hand, EDA’s investments in brownfields rarely involve even the

most residual clean-up activity. Our work is directed to a completely different end—

development of an existing project site to create jobs and get it back on the tax rolls.

The consequences of EDA being bound by the CERCLA provisions would be extreme. As the most obvious example, funding under this section could not be applied

to former military bases as CERCLA does not consider military bases to be

‘‘brownfields.’’ EDA does. What’s more, EDA recipients would be unable to claim reimbursement for the cost of any Federal compliance, as they are currently allowed

to do. This is of particular concern as it relates to our work with Indian Tribes. Currently, federally recognized tribes are eligible for 100 percent grants from EDA. This

provision would weaken our ability to fund brownfields development on Indian

lands. But the real overall effect would be to limit and steer EDA’s existing

brownfields activities toward those involving clean-up of polluted sites, and we believe that would ultimately end EDA’s program. Of course, EDA is not seeking to

in any way relieve a responsible party from liability under CERCLA nor provide

funds to a party to undertake clean-ups required under CERCLA, since to do so

would undercut the ‘‘Polluter Pays’’ principle on which CERCLA is founded.

I am confident that a mutually agreeable provision can be drafted that strengthens our work to redevelop brownfields sites. I stand ready to work with the Committee to craft a solution to this issue, with consultations, technical drafting assistance and other assistance you require.

I also urge the Committee to retain section 701 of H.R. 2535 which provides a

general authorization of appropriations for EDA’s programs without imposing speVerDate 11-MAY-2000 15:24 May 01, 2006 Jkt 094601 PO 00000 Frm 00049 Fmt 6633 Sfmt 6621 G:\DOCS\94605.TXT SENENV2 PsN: SENENV2
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cial limits for brownfields redevelopment or other programs which could limit EDA’s

flexibility to respond to a variety of economic situations.

Moreover, the section on Brightfields contains a demonstration program for economic redevelopment using solar sources. EDA is not opposed to pursing the right

Brightfields project provided it is consistent with our goals to create as many jobs

and attract as much private sector support as possible. Again, the goals of the

House’s Brightfields language can be furthered using existing EDA program authority.

SUMMARY

The Administration’s legislative proposals and H.R. 2535 contain valuable program enhancements, critical to EDA’s continued success. They will safeguard the financial integrity of EDA’s programs while ensuring a more flexible and forward

looking organization to meet the challenges of the 21st Century.

The testimony from my colleagues that you will hear from today demonstrates exciting new growth opportunities in the area of economic development. To take advantage of these opportunities the Administration’s legislation focuses on:

(1) Increasing flexibility to allow us to take advantage of these exciting opportunities;

(2) Enhancing coordination to work in a comprehensive fashion with other agencies to achieve results; and, most importantly,

(3) Rewarding the performance of our most successful partners.

I urge that the Senate act quickly to pass legislation to give EDA and our partners across the Nation serving regions in economic distress the economic development tools necessary achieve the President’s goal to leave ‘‘no demographic or geographic area behind in the pursuit of more fully participating in the American

Dream.’’

Thank you for the opportunity to testify before you today and I look forward to

answering your questions about this legislation.

RESPONSES BY DAVID SAMPSON TO ADDITIONAL QUESTIONS FROM SENATOR

JAMES M. JEFFORDS

Question 1. EDA would like to achieve leveraging ratios of 22:1 of other funds to

EDA dollars. As Mr. Saudade testified, this level of leveraging, while laudable, is

very difficult for a rural state like Vermont to achieve. How can you guarantee that

rural states will still receive a fair share of EDA dollars? Please provide a completing listing of EDA’s grants to Vermont over the last six years, the leveraging

ratio on each project, and the annual leveraging average broken down by state covered by the Philadelphia Regional Office during each of the last six years i.e. FY

1998–FY 2003—if data are available for FY 2004, please provide this as well.

Response. Since 2000, EDA has shown impressive results in attracting private

capital investment in distressed communities, especially rural communities. It increased the average ratio of private capital investment per every EDA dollar invested across its infrastructure projects portfolio by 405 percent from 8.7:1 to 43.9:1.

In rural areas in particular, EDA increased that ratio 115 percent from 10.5:1 to

22.6:1. And the percent of EDA’s investments in rural areas have not changed to

any statistically-significant degree (69 percent in 2000 versus 66 percent as of May

6, 2004). Therefore, while the percent of EDA’s funds invested in rural areas remain

substantially the same, the amount of private capital investment in rural areas has

dramatically increased. This dramatic increase is a leading indicator of future increased job creation. Reducing private capital investment is a dangerous proposition

that will lead to reduced job growth.

See attachments 1A, 1B and 1C. Please note that on chart 1B private sector investment is not calculated for grants other than infrastructure projects. As a result

there are missing data points and zeros in the private sector investment columns.

[The referenced documents follow on pages 51–54.]

Question 2. EDA has a number of investment criteria they consider when evaluating grants that appear to be subjective. How does EDA evaluate these criteria?

Response. All proposals for EDA investment assistance are reviewed by EDA’s regional office. Each regional office utilizes an Investment Review Committee (IRC)

comprised of career EDA staff professionals experienced in EDA’s programs and economic development work. Most of these career staff members have been with the

agency for many years, even decades. The IRC process includes the review of each

proposal in light of EDA’s investment criteria. Proposals are evaluated in compariVerDate 11-MAY-2000 15:24 May 01, 2006 Jkt 094601 PO 00000 Frm 00050 Fmt 6633 Sfmt 6621 G:\DOCS\94605.TXT SENENV2 PsN: SENENV2
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son to other proposals under consideration in that specific regional office and based

on previous proposal evaluated by the IRC.

EDA’s five investment policy guidelines are: (1) The investment must be marketbased and results oriented; (2) The investment must have strong organizational

leadership; (3) The investment must advance productivity, innovation and entrepreneurship; (4) The Investment must look beyond the immediate economic horizon, anticipate economic changes and diversify the local and regional economy; (5) The investment must demonstrate a high degree of commitment from other governmental

partners and the private sector.

Question 3. A number of EDA investment criteria appear to drive federal assistance to large companies versus small enterprises that exist in distressed communities. For example, the investments must be market-based, a high level matching

funds is required, and the investment must maximize return on taxpayer investment. While it is the private sector that must create the jobs, the public sector can

help ensure that communities have a chance to level the economic playing and support local small and medium enterprises.

It seems that these investment criteria might lead EDA to assist larger companies

rather than helping small and medium-sized companies generate economic opportunities in communities. EDA awarded a $1 million grant to support BMW’s manufacturing plant in Greer, South Carolina. Please explain the rationale for the grant to

this BMW plant? Please provide a yearly listing of the private and public companies

with over 500 employees in the United States that received EDA assistance between

FY 2001 and FY 2004, and the amount of such assistance.

Response. EDA does not provide grants or direct loans to any for-profit entities.

In fact, EDA has regulations (13 CFR 314.3(c)) to guard against the indirect ‘‘pass

through’’ of the benefits of EDA grants from EDA eligible entities (e.g. government

entities, non-profit organizations) to a for-profit entity. However, EDA investments

may—and in fact are geared toward—the benefit of the local economy, which naturally includes private, for-profit entities.

The $1 million grant that you referenced was made to the Greer Commission of

Public Works in 1994 and involved the construction of water lines, relocation of an

elevated water tank, and an emergency backup power system that would help serve

the new BMW facility located in Greer. This grant was made to support the longterm development of the regional economy and the automotive cluster in South

Carolina. The entire project resulted in over 4,500 direct-hire jobs at BMW and over

7,500 jobs with local area suppliers.

There is no data to match your request.

Question 4. In February, Secretary Evans announced that the Manufacturing Extension Partnership program (MEP) would be eligible to compete for up to $45.4

million in economic adjustment assistance provided by the EDA. How much funding

has EDA made available to the MEP Centers and how is EDA reaching out to these

Centers to make this funding available?

Response. EDA strives to be forward looking and to approaching its responsibilities in a pro-active manner. As a result, EDA’s regional offices have a good idea

of the investments they will approve several months in advance. This means that

once fiscal year funds become available to EDA, much of the ‘pipeline’ for EDA investments is already filled.

At Secretary Evans’ direction, EDA held in abeyance all non-committed EDA Economic Adjustment funds, totaling about $5 million. These funds will be focused on

communities experiencing job losses in the manufacturing sector and initiatives

geared to advancing America’s competitiveness in manufacturing, including MEP

Centers.

A joint EDA and Technology Administration (the parent entity for the Manufacturing Extension Partnership) committee has been formed and will be responsible

for identifying those MEP Centers in a position to successfully compete for EDA

funds. Once identified, a representative from EDA accompanied by a representative

from the MEP Program will work with the MEP Center to complete and process

their application for EDA funds.

Question 5. Please comment on any future plans to reorganize or reassign the regional economic development representatives?

Response. EDA has had flat funding for S&E since FY 2002, and anticipates this

level of funding for FY 2005. Through the Headquarters restructuring effort, EDA

was able to absorb inflationary increases to payroll and other cost categories such

as rent and utilities without a reduction in force. Because EDA is small and operates on an extremely frugal budget, the tangible impact of flat funding was an inability to transfer the savings from the headquarters reorganization to increase reVerDate 11-MAY-2000 15:24 May 01, 2006 Jkt 094601 PO 00000 Frm 00051 Fmt 6633 Sfmt 6621 G:\DOCS\94605.TXT SENENV2 PsN: SENENV2
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sources in the regions. In light of anticipated future flat funding, EDA is now analyzing its regional operations to look for opportunities for streamlining, process improvements and increased efficiency. EDA has not yet completed its analysis nor developed final recommendations at this time but will look forward to the opportunity

to work with your staff to ensure EDA can continue to provide the highest level of

service within available resources.

Question 6. Please provide an annual breakdown of RLF capitalizations and recapitalizations grants from FY 1998 through FY 2004. Please include grant

amounts, grantee name, and type of geographic location served i.e. urban or rural.

Response. [The referenced documents follow on pages 55–58.]

Question 7. Please provide a list of EDA grants over $1 million for FY 2002–FY

2004 that fit under the President’s faith-based initiative.

Response. It is important to note that all EDA investments in faith-based initiatives are subject to the same review process and investment criteria as all other

EDA proposals.

Response. [The referenced document follows on page 59.]

Question 8. Should planning funds be set aside to help create new economic development districts?

Response. Economic Development Districts (EDD) were a concept included in

EDA’s original legislation in the mid-1960s. Since that time, EDA and local development entities have been very successful in creating EDDs that cover most of the Nation, and a vast majority of populated areas.

Planning is a critical element of economic development and EDA will continue to

advocate sound, market-based and collaborative planning efforts by economic regions. However, with limited funds, EDA is unable to dedicate additional funds to

support local planning efforts without having a substantial, negative impact on our

programs that directly support the creation of higher-skill, higher-wage jobs.

EDA’s appropriation for planning has remained at $24,000,000 since FY1997.

Question 9. On April 22, 2004, Tom Friedman wrote in the New York Times that

the United States is currently engaged in a war for innovation. Clearly our manufacturing sector is under siege. EDA’s entire budget of about $315 million is tiny

compared with the overall Federal budget and this country’s GDP. Are we in danger

of losing our competitive edge, because we are not devoting enough resources to economic development?

Response. EDA’s modest budget makes it even more critically important that the

agency leverage federal dollars with private sector investment. EDA often provides

the critical final component allowing high-impact development projects to proceed.

While EDA’s budget may only be about $300 million, we anticipate EDA will be able

to leverage over $10 billion in private sector investment, a key indicator of future

job growth.

In addition, EDA is not the only federal agency with economic development responsibilities. A recent analysis by the Office of Management and Budget cites over

$20 billion annually in federal programs across nine federal departments and agencies with economic development responsibilities. In addition, the federal government

spends about $15 billion a year in workforce development programs. These federal

resources highlight the need to increase federal coordination of job producing efforts.

It is also important to keep in mind that in fiscal year 2004, the federal government will spend a record $126 billon on research and development (a 42 percent increase since 2000) and President Bush has proposed increasing this amount further

to $132 billion. The American private sector will spend an additional $193 billion

on research and development, a trend that can be enhanced by making permanent

the R&D tax credit.

Question 10. As part of an economic redevelopment project, recipients of EDA

grants on occasion engage in environmental remediation and other clean up related

activities at their sites. Does EDA currently fund projects that primarily involve environmental remediation or is such remediation typically incidental to the economic

redevelopment project?

Response. Environmental remediation activities undertaken as part of an EDA

funded economic redevelopment project are always incidental to the larger redevelopment activities. As a general rule, as an economic development entity, EDA believes that cleanup activities are most appropriately handled by state and federal

environmental regulatory agencies with the background and technical expertise to

address complex remediation issues. EDA is exclusively focused on the end use of

the parcel, and has a policy of not engaging in land banking, or cleanup for cleanup’s sake. Therefore, EDA would not fund a project that consists only of environVerDate 11-MAY-2000 15:24 May 01, 2006 Jkt 094601 PO 00000 Frm 00052 Fmt 6633 Sfmt 6621 G:\DOCS\94605.TXT SENENV2 PsN: SENENV2
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mental remediation simply to prepare a site for an unknown future use. EDA’s Hazardous Waste Cleanup Policy states that ‘‘EDA will . . . participate in cleanups as

a relatively minor part of an overall economic development-related project that directly results in beneficial economic activity in distressed communities.’’

Furthermore, cleanup activities exclusive of a market-based redevelopment plan

would not be competitive under EDA’s established investment policy guidelines.

EDA is not interested in funding projects that lack solid market fundamentals and

that have limited likelihood of supporting the future growth of the regional economy. This would include speculative projects with no clear plan for future development or very long development lead times. As a general rule, EDA is also not interested in funding projects that have a minimal impact on securing jobs and

leveraging private investment or have undefined purposes.

Finally, some institutional history may be instructive. In 1995, EDA became the

U.S. Environmental Protection Agency’s first federal partner in EPA’s then-newlyminted national Brownfields Redevelopment Initiative. At that time, and during the

ensuing years, EDA’s mission has been recognized not as that of a cleanup authority, but as an agency that can facilitate brownfields redevelopment. The brownfields

revitalization process has been characterized by both entities as a continuum, with

EPA focused on the front end with assessment and cleanup, and EDA focused on

the back end with the economic redevelopment of the sites.

Question 11. When EDA grant recipients engage in environmental remediation activities as part of an economic redevelopment project, what environmental cleanup

standards apply, and how does EDA oversee the projects to ensure that the work

performed is consistent with federal environmental standards?

Response. When EDA investment recipients engage in environmental remediation

activities as part of an economic redevelopment project, all applicable federal and

state cross-cutting statutory requirements apply. This could include the Comprehensive Environmental Response Compensation and Liability Act (CERCLA), the Resource Conservation and Recovery Act (RCRA), the National Environmental Policy

Act (NEPA), the Clean Water Act, the Safe Drinking Water Act, and the Clean Air

Act, among others. EDA is typically involved in a brownfield redevelopment project

after the site or facility has been certified ‘‘clean’’ to applicable standards by federal

and state environmental authorities. In instances where incidental cleanup is involved, that cleanup is always conducted pursuant to applicable state and federal

requirements and EDA works closely with applicable entities (i.e., federal and state

environmental regulatory authorities) to ensure that all applicable cleanup standards have been satisfied.

EDA has environmental compliance specialists in each of the bureau’s six regional

offices. These individuals, in coordination with EDA project engineers and attorneys,

work closely with representatives from other federal and state environmental regulatory authorities to confirm that when remediation work is performed, all applicable environmental standards have been satisfied. These same individuals are involved in ensuring environmental compliance in instances of EDA non-brownfields

related infrastructure development work as well.

Question 12. Federal facilities are required under CERCLA § 120(h) to ensure that

all remedial action necessary to protect human health and the environment are

taken prior to a transfer of the property to a non-federal owner. To the extent that

remediation activities are needed as part of an overall economic redevelopment plan

of a Department of Defense site, for example, DOD would be required to pay for

the cleanup. Is it accurate that EDA would not use its economic redevelopment

funds to perform remediation activities at federal facilities?

Response. Instances of EDA remediation activities at former federal facilities are

similar to those carried out at typical EDA brownfield project investments. As noted

previously, in the context of the bureau’s brownfields redevelopment work, in isolated instances EDA has been involved in cleanups where they are subordinate or

incidental to a much larger economic development project. In all of these cases

cleanup eligibility has hinged on the fact that the costs have been reasonable, related to a larger redevelopment project, and have not consumed a significant portion

of the investment award. Moreover, remedial work at former federal facilities being

redeveloped can go beyond the ‘‘hazardous substance’’ warranty under Section

120(h) of CERCLA. For example, EDA has addressed asbestos remediation as part

of the demolition and removal of structures on former federal facilities, and underground storage tank removal as part of the construction of new infrastructure (e.g.,

roads, utilities, etc.) to support site redevelopment. Nevertheless, in all instances,

EDA-funded remediation has represented a very small portion of the larger redevelopment effort. Like EDA’s other brownfields redevelopment work, in most cases the

hazardous substances at the site have already been fully cleaned by the federal

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landowner, e.g., the Department of Defense, prior to transfer or lease of the site to

the project sponsor. EDA carefully vets with all involved parties the documentation

certifying the environmental condition of the site to be transferred.

However, as you know, in rare instances additional remediation needs arise following transfer of the site during the redevelopment phase. This may occur because

of unknown circumstances, unforeseen future uses or a change in project scope. If

these additional remediation needs are substantial, EDA suspends funding of the

project and reverts the project to the appropriate federal authorities, including the

prior landowner. EDA does not have the technical, financial or program resources

to undertake such work. If, however, those needs are purely incidental to the project

(as with the examples cited above), EDA will fund the incidental remediation if

doing so will safely and legally ensure the efficient and expeditious reuse, redevelopment or expansion of the site. Reversion of the project to the prior landowner in

these circumstances would almost certainly substantially delay the project, which

could jeopardize its overall progress and success. EDA’s policy is to undertake such

remediation only in service of its economic development objectives. In doing so, EDA

ensures that this work is conducted pursuant to applicable state and federal requirements, and it works closely with applicable authorities to ensure that all applicable cleanup standards have been satisfied.

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RESPONSES BY DAVID SAMPSON TO ADDITIONAL QUESTIONS FROM SENATOR THOMAS

Question 1. What are your thoughts on including Census tract data to calculate

the eligibility for projects?

Response. EDA currently allows applicants to submit requests for EDA investment based on Census tract data. EDA allows Census tract data to identify pockets

of poverty for eligibility within jurisdictions that otherwise do not meet the distress

thresholds for eligibility. Of course, there must be a pocket identified with one or

more census tracts, and the proposed EDA investment must be directly and specifically linked to benefiting the residents of the pocket of poverty. Often this is the

most accurate data available to local communities.

The Bureau of Land Management has recently funded a program to provide economic profiles to western communities free of charge by using Census and other

data. This data can be found at www.sonoran.org under the link Economic Profile

System link.

Question 2. Do you know how many districts, nationwide, within the EDA are in

a similar situation? It seems unusual that we would create this program and go

through the process of creating these districts and treat them differently.

Response. Of a total of 358 recognized economic development districts, 320 were

funded with partnership planning funds in FY03, leaving 38 EDD’s without an annual funding commitment from EDA. 36 of 38 districts are not receiving funding

from EDA in any form for their planning activities. There are also three pending

designations that are not able to be funded under this year’s budget. However,

many districts receive assistance out of other Economic Development Assistance

Program funding such as short-term planning grants or technical assistance funding, in order to develop a Comprehensive Economic Development Strategy application to make a region eligible for additional EDA investment. For example, in FY03, EDA received $23,844,000 for it planning program. EDA

provided for 392 investments with this funding in this manner:

Partnership planning—districts ............................................... $17,328,345 (283 investments)

Partnership planning—Indian .................................................. $2,728,778 (56 investments)

Partnership planning—eligible areas ...................................... $230,000 (4 investments)

Short term planning—substate ............................................... $2,026,548 (30 investments—9 of these were to EDDs for

total of $579,343)

Short term planning—urban .................................................... $883,658 (12 investments—1 of these was to an EDD for

$35,000)

Short term planning—state ..................................................... $749,445 (7 investments)

Fourteen EDD grants for Kentucky and thirty-four EDD grants for the Austin region are not accounted for within the above funding breakdown. The 14 EDDs in

Kentucky receive their funding through a statewide grant that is then parceled out

to the 14 districts and the Austin regional office funds districts in 3 year intervals.

Some counties within economic development districts (EDDs) move in and out of

the distress designation as economic conditions change. (This is the case with Wyoming, where economic shifts have recently moved several EDDs out of eligibility.

Wyoming currently has only three counties that are distressed based upon Census

data—Goshen, Big Horn and Lincoln. In addition, Laramie, for example, meets distress criteria as a city.)

Question 3. What is the cost for getting all of the districts funded? Response. A funded district averages $56,000 in annual grant funds from EDA. EDA would need an additional $2,128,000 in partnership planning funds in order

to fund all unfunded districts (38) at this $56,000 level.

Question 4. Can you tell me about how the EDA recently moved to reduce the rate of $10,000 per job created to $5,000 per job with a $22 to $1 capital requirement? Response. The $5,000 per job measurement is an overall average goal set for all

the EDA regions and only applies to infrastructure and revolving loan funds grants.

It is not a requirement that all specific EDA investments must meet. The $5,000

per job measurement was recently added to the internal EDA balanced scorecard

that consists of 35 separate measurements to score the performance of the regional

offices. It is a cumulative measure that accounts for an entire fiscal year of activity.

As with the 22:1 ratio, EDA regularly discuss the $5,000 per job measurement as

a factor for evaluating investment proposals. Since demand for EDA support typiVerDate 11-MAY-2000 15:24 May 01, 2006 Jkt 094601 PO 00000 Frm 00064 Fmt 6633 Sfmt 6621 G:\DOCS\94605.TXT SENENV2 PsN: SENENV2
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cally exceeds the funding allocated to a region, these job and investment factors can

be important determinants assessing the relative merits of proposals under consideration. These factors are not the sole determinants but are part of five EDA investment priorities against which all proposals are evaluated.

RESPONSES BY DAVID SAMPSON TO ADDITIONAL QUESTIONS FROM SENATOR BAUCUS

Question 1. As you know, I have been concerned for some time about the effect

of the ongoing reorganization at EDA on the management structure of the Trade

Adjustment Assistance for Firms program. This program works well with a very

small central staff in Washington, supplemented by the activities of the regional

Trade Adjustment Assistance Centers. To my mind, the management structure of

the TAA for Firms program is not broken and it doesn’t need to be fixed.

In the past, you have told me that the overall reorganization is motivated by a

desire to: (1) reduce layers of government; and (2) bring EDA programs closer to

their intended beneficiaries. Unlike other EDA programs operated out of the Washington office, TAA for Firms already has close ties to its intended beneficiaries

through the TAACs. Making petitioners work through both the TAAC and the EDA

Regional office, with continued policy control from Washington, seems to add a layer

of government. And it certainly appears to require a much larger EDA staff in seven

different locations instead of one.

Please explain how moving the TAA for Firms program to EDA Regional offices

improves program management, reduces layers of government, and brings resources

closer to their beneficiaries.

Please also provide in writing EDA’s plans for staffing TAA for Firms in the regional offices and details of the timing and content for training regional staff in the

operation of this program. Will the current staff administering TAA for Firms be

retained, and if so in what capacities and locations? Will regional staff be fully

trained before Washington staff are released or reassigned?

Response. While the Trade Adjustment Assistance (TAA) for Firms program can

work better—and as stewards of taxpayer resources we should continually be looking to improve the efficiency and effectiveness of public programs. For example, during my tenure, we have identified numerous deficiencies in the management of this

program, for example: TAA Centers have sought approval for firms that do not meet

certification guidelines or have other irregularities that has led EDA to embark on

a complete review and update of policies, procedures and regulations to ensure compliance with all applicable statues. We anticipate this process to be completed later

this year.

One of the challenges the program has faced is the lack of resources to provide

sufficient oversight of the program. Currently, EDA has three staff dedicated to the

TAA for Firms programs, the senior most of these three also handles issues related

to EDA’s University Center and Economic Development District programs. This does

not provide the capacity to enable sufficient oversight for the program. The location

of these personnel in Washington, DC, is also a hindrance to adequate oversight.

The President’s Management Agenda calls for moving program delivery closer to

the people that the government programs are designed to serve. EDA’s current reorganization began in the Clinton Administration and moved all of EDA’s primary

programs to our six regional offices. I would note that contrary to your question,

there is only a very small national research and similarly small national technical

research program operated out of the Washington office. EDA’s continuing reorganization, which began in 1998, simply brings Headquarters structure and staffing

in line with its reduced role as per the 1998 EDA reauthorization and decentralizes

the one remaining mainline program that is still administered out of the Washington office, the Trade Adjustment Assistance for Firms program. One of the primary advantages, of course, of EDA’s proposed decentralization is that EDA can incorporate TAA for Firms into the operations of the regional offices, reaching more

potential firms and presenting to communities a more complete portfolio of programs to spur economic growth.

I would also note that EDA’s proposed decentralization would not, as you state,

require ‘‘petitioners work through both the TAA Centers and the EDA Regional office’’. As it is now, petitioners have no contact with EDA Headquarters. It is the

TAA Centers that deal with Headquarters—and would deal with the Regional Office

under the reorganization. There is no additional layer of management, just an administrative change of where the TAA Centers receive approval, and the movement

of decisionmaking authority to the regional level, closer to the people the program

serves.

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As you correctly note, the service delivery of the TAA for Firms program occurs

through the network of TAA Centers across the nation—these are the entities, funded by EDA, that work directly with eligible firms and serve as liaison with EDA.

EDA has no intention of changing this service delivery model.

EDA regional offices will incorporate TAA for Firms-related functions (primarily

petition certification, adjustment proposal approval and annual grant processing)

into their workload. With an average of only two or three TAA Centers per EDA

regional office, the impact on EDA regional staffing is minimal.

You also raised the critical issue of training and the timing of the transfer of TAA

for Firms responsibilities to our regional offices. We agree this is a critical issue and

we are addressing it in a methodical and serious manner. The training for the regional personnel cannot be completed until EDA completes its regulatory update

and develops new guidance, which will be geared toward EDA and TAA Center staff

alike. The current guidance was issued in the early 1990’s in draft form, was never

finalized and is outdated. Once the regulations have been updated, guidance developed and reviewed, we will embark on a systematic training program for regional

staff. After the training is complete, we will phase in the transition of the duties

from Headquarters to the regional offices over a period of time, keeping redundant

capability in Headquarters for a reasonable period of time. We anticipate this entire

process will not be completed until the end of this calendar year. We will include

TAA Center staff in our plans—especially when it comes to training our regional

staff and we will not transition the responsibilities until all the pieces are in place,

even if it means delaying the transition.

EDA remains in close communication with the TAA Centers. Senior EDA staff

will be meeting with Center directors in June and again in September to keep them

apprised.

RESPONSES BY DAVID SAMPSON TO ADDITIONAL QUESTIONS FROM

SENATOR MURKOWSKI

Question 1. You have been in office a few years now, and have had an opportunity

to look at how well EDA’s grants have worked in many different areas. What examples can you provide of the best result in terms of economic development?

Response. The best grants are ones that bring local government and business together to create higher-skill, higher-wage jobs and spur private sector investment.

When a community expresses interest in EDA funding with a united front of community support and private business need, results are invariably positive. This does

not necessarily meaning coming to EDA with a ‘‘bird in hand’’ prospective business,

rather it is a clear line of communication between local elected leaders and the business leaders on the forward looking, market-based decisions on what is needed to

move the regional economy forward.

There are two recent examples that illustrate the important role EDA can play

in supporting economic development efforts include. Recently EDA announced a

$1,800,000 investment in Kettering University in Flint, Michigan to construct a

Fuel Cell Systems and Powertrain Integration Center. This investment will help develop create a business incubator to create both individual business applications of

this critically important energy need and a trained workforce. This investment will

help create 704 new jobs and attract $158,000,000 in private sector financing. This

project ties in all aspects of the community: business, local and state leaders, universities, and high technology sectors. It highlights how EDA is on the leading edge

of new forms of economic development.

The second is a recent $2,000,000 investment in the town of Hayneville, Alabama.

This town is Lowdes County which was the birthplace of the civil rights movement

but has had tremendous economic distress. It is one of the 100 poorest counties in

the Nation. EDA was able to recently invest in basic infrastructure to support the

town’s first industrial park. This town has already attracted a tier one supplier of

the new Hyundai plant. The 200 higher-skill, higher-wage jobs created will significantly raise the standard of living for this community.

Question 2. Are there any grants you regret having made? If so, how do you plan

to avoid similar cases in the future?

Response. This is an interesting question. Rather than singling out a grantee perhaps I should mention a line of grant making that I believe EDA should not be involved in absent compelling job creation figures. Specifically, there are often requests for EDA assistance to make ‘‘downtown pretty again.’’ When EDA’s budget

was more robust it was able to participate in street beautification and other efforts

more closely related to ‘community’ development. However, the realities of our

smaller budget and more competitive grant process dictate that EDA concentrate on

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projects that have a direct impact on the creation or retention of higher-skill, higher-wage jobs.

Question 3. I understand EDA’s results have led to a good rating for effectiveness

from OMB. What factors do you feel influenced OMB’s opinion? Have these resulted

from changes to the agency during your tenure?

Response. OMB has recognized the focus this Administration has placed on improved management efficiencies and effectiveness. The efforts EDA has undertaken

during the past 3 years, resulting in significantly improved business management

and grant performance has been duly noted by OMB in the form of their good rating

of EDA’s management and effectiveness. This has also led to the President’s request—for a second year—for increased funding for EDA. In fiscal year 2000, EDA

commissioned a workforce analysis conducted by Booz-Allen and Hamilton and applied its findings by re-evaluating its workforce, mission, and overall strategy. As

a result of the study, EDA successfully undertook a major headquarters restructuring effort that reduced staff and streamlined operations without any involuntary

separations.

EDA adopted investment criteria that clarify the kind of projects EDA will fund

in order to achieve its mission and goals and focused on utilizing limited resources

on projects that have regional impact and support competitiveness. EDA has adopted a balanced scorecard framework that integrates management and performance

objectives into its strategy and EDA uses these performance measures to monitor

progress. The balanced scorecard is an innovative management tool that EDA has

successfully adapted to be one of the first public agencies to use in the government

sector. The EDA has adopted this leading edge tool to help manage its work and

drive improved performance for the taxpayer and grant recipients.

EDA’s increased performance is so remarkable that Dr. Robert S. Kaplan of Harvard Business School and Dr. David P. Norton of Balanced Scorecard Collaborative,

inventors of the Balanced Scorecard, included a case study on it in their latest book

as a best practice for the private sector as well as other government agencies.

The application of these efforts has resulted in a consistent level of funding to

rural and urban areas (approximately 2⁄3 rural and 1⁄3 urban), and significantly increased levels of private sector investment and job creation without disadvantaging

otherwise worthwhile projects with limited private investment or minimal job creation.

EDA also undertook a variety of other program improvements. EDA reviewed its

Government and Performance Results Act (GPRA) performance measures. Certain

processes were eliminated and replaced with outcome-oriented measures.

Verification and validation procedures were implemented to ensure the accuracy

and validity of all data reported. EDA has also incorporated performance as an element of the funding formula for Trade Adjustment Centers and is piloting a program to competitively award University Center grants on a 3-year cycle.

Question 4. EDA has been active in attempts to convert closed military bases to

productive civilian uses. We are likely to face a new round of base closings in the

relatively near future. Is EDA ready for that and what resources are needed to effectively redevelop these bases?

Response. EDA has learned a great deal from the last base closing round and is

prepared to apply these lessons in a positive manner for affected communities for

any future base closings.

Sections 202 and 209 of EDA’s legislation provide expansive legislative authority

to EDA to rapidly and effectively address the economic impact of a military base

closing. This legislative language is broad by design to allow EDA to accommodate

the wide range of economic development challenges posed by base closings.

EDA has a very close working relationship with the Office of Economic Assistance

(OEA) at the Department of Defense and expects smooth and efficient execution of

any projects it undertakes in partnership with OEA. With the existing EDA grant

processing and monitoring system, EDA’s operational infrastructure is fully

scaleable to accommodate an increased appropriation to fund a new round of base

closings just as EDA has increased the scale of its operations to fund economic recovery from natural disasters or industries affected by environmental regulations.

Although Congress is currently debating the future of base closing, EDA stands

ready to assist and will be developing a FY06 budget to accommodate a potential

BRAC. EDA will welcome your assistance in making sure EDA has the necessary

resources to get the job done correctly.

The EDA success with the reuse of Fitzsimmons Army Hospital is a great success

story. EDA has invested $15 million supporting the economic reuse of the former

Fitzsimmons Army Medical Center. EDA has awarded grants to the University of

Colorado, the Fitzsimmons Redevelopment Authority and the city of Aurora to assist

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with the redevelopment of the 577-acre site into a new campus for the University

of Colorado Health Sciences Center and the Colorado BioScience Park in Aurora.

The Bioscience Park is the major commercial component of the Fitzsimmons Redevelopment Plan and will contain research-oriented bioscience and biotechnology

companies seeking a planned business park, in close proximity to an academic medical campus. The park will be the first of its kind, west of the Mississippi. Total

EDA investments have amounted over $15 million. Private investment is expected

to be $1.2 billion and job creation is estimated at 12,000.

Moreover, EDA was so impressed with the work done at Fitzsimmons that it has

hired Robert Olson as the EDA Denver Regional Director (a career SES position).

Olson led the highly successful redevelopment of the Fitzsimmons Army Hospital

in Colorado and will be a tremendous asset to EDA during the next BRAC round.

Bob Olson’s in-house expertise will be invaluable as EDA prepares to address issues

surrounding making closed military bases more attractive to private industry.

Question 5. I am somewhat concerned about the possibility that funding may be

decreased for the Northwest Trade Adjustment Assistance Center, which provides

services to a number of Alaskan entities. It is my understanding that requests for

assistance already far outweigh available funds even without a change. What are

you doing to address this issue?

Response. President Bush’s proposed a 25 percent increase in funding for FY04

for Trade Adjustment Assistance (TAA). The Congress, however, provided a 16 percent increase. While less than the President’s request, this increase will enable the

TAA Centers which administer this program, to address the serious backlog of

projects. Upon our arrival at EDA, we discovered that the allocation between the

12 Trade Adjustment Assistance Centers was not based on any objective, consistent

formula. Rather, the distribution among the TAA Centers was modified yearly in

an ad hoc manner. In 2003, EDA worked closely with the 12 TAA Centers to remedy

this situation and jointly developed a standard funding methodology. All TAA Centers, including the Northwest Trade Adjustment Assistance Center participated in

is the process. Developing a funding methodology is a difficult process, and this

proved to be no exception. However, EDA was very pleased to achieve an exceptionally high level of consensus among the TAA Centers with the new methodology. We

believe that the increased funding and refinement of its allocation will greatly help

the administrative feasibility of this program.

Question 6. EDA is very focused on regional economic development these days.

While I understand the strong desire to redevelop depressed industrial areas, there

is also a great deal of need in more rural areas. What steps are you taking to ensure

your approach is balanced?

Response. The data shows that EDA has and continues to be a strong supporter

of investment in rural America. EDA staff takes great care to ensure a proper balance of rural and urban projects. Over the last 5 years, EDA has, on average, invested 66 percent of its annual infrastructure appropriations in projects in rural

communities. Additionally, EDA has significant outreach to rural communities

through regional summits and forums to expand EDA’s technical assistance and

reach communities that may have had very little exposure to EDA in the past. EDA

has also funded a major study with Harvard Business School professor Michael Porter to address the issue of competitiveness in rural U.S. regions and will use nearly

65 percent of its National Technical Assistance and Research budget to fund additional cutting-edge studies on rural economic development in 2004.

Economies are not hermetically sealed in artificial political boundaries. The dominant reality of economic development today is that all communities, cities, towns

and counties alike, must think regionally and pool their resources to build a strong

economic platform for growth. By pooling their resources regionally, communities

can attract the private sector investment necessary to spur job creation, because it

is the private sector that creates jobs and spurs economic growth.

Question 7. I understand you have strong feelings about technology development

as a driver for economic development. What is EDA’s role in this area?

Response. EDA’s mission statement is ‘‘to lead the Federal economic development

agenda by promoting innovation and competitiveness, preparing American regions

for growth and success in the worldwide economy.’’ It is clear that innovation and

investment create high-wage jobs and improve our standard of living. Innovation is

the key to prosperity. As a result, government must reinforce, rather than obstruct,

the process of bringing innovations to the marketplace. That is why EDA and the

Administration continues to fund investments, initiatives, and research that furthers innovative activity, such as unique capabilities of national labs and universities, including establishing cooperative research programs for the benefit of small

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and medium-sized businesses. In addition, the Bush administration is promoting

manufacturing technology transfer to ensure that the benefits of R&D are diffused

broadly throughout the manufacturing sector, particularly to small and medium enterprises.

The private sector and the Bush administration recognize the need for continuing

investment in research and development (R&D) of new products to remain ahead

of the competition. The U.S. leads the world in innovation. Investments in technology create new industries and careers in U.S. firms that introduce products, create jobs, and spur economic growth. America’s competitive edge flows directly from

innovation and rising productivity. Job creation is increasingly dependent on innovation. The U.S. private sector spends $193 billion on R&D, while the Federal Government is investing more than ever in research by spending a record $126 billion

this year and a proposed $132 billion in fiscal year 2005, a 42 percent increase of

2001. Today’s labs are generating the industries of tomorrow.

One of EDA’s key objectives is to enable communities to increase their standard

of living, thus becoming more prosperous. Technology-led economic development has

successfully shown that it raises a community’s standard of living by creating higher-skilled, higher-wage jobs. Communities prosper and grow and are successful

when they innovate, and innovation is often tied to technology. Although innovation

and technology development are not mutually exclusive, technology is an area of

competitive advantage for communities and the country when it is pursued, developed, and meets a market need. It is important to note, however, that EDA’s support for technology-led economic development does not limit EDA to new and emerging industries. Established, core industries must continue to adopt new technologies

and look for innovative solutions in order to remain competitive. EDA has a strong

commitment to working with those regions that are working to upgrade their core

industries in order to enhance their competitiveness.

Question 8. We have talked before about the need to find a way to support smallscale projects in remote rural areas as a way of generating business activity and

stimulating employment appropriate to the circumstances in those areas. Are you

taking specific steps to encourage such programs equally to the more traditional,

large-scale bricks and mortar projects?

Response. First of all I believe that bureaucracy should not get in the way of good

economic development projects. For that reason, I believe the Special Impact Areas

legislative language has been included in the Administration bill and the bill passed

by the House. This language will allow EDA, in unique circumstances to wave the

necessity for a Comprehensive Economic Development Strategy (CEDS) under compelling circumstances such as those faced by the extremely rural communities you

represent. This CEDS requirement can, in some instances, significantly delay EDA

funding for a given project in a small community—even when it is generally accepted by all parties as being the critical project for that local community. I urge the

Senate to approve this limited authority to get EDA dollars to support good small

projects in small Native American Communities. This language will allow EDA to

create more small scale projects in hard to reach communities.

STATEMENT OF GARY GORSHING, EXECUTIVE DIRECTOR, SOUTH WESTERN OKLAHOMA

DEVELOPMENT AUTHORITY AND PRESIDENT, NATIONAL ASSOCIATION OF DEVELOPMENT ORGANIZATIONS

EXECUTIVE SUMMARY

The Economic Development Administration (EDA) is a vital Federal resource for

distressed areas striving to improve their local economies through private sector job

growth. This applies to localities struggling to overcome both long-term economic

challenges and sudden and severe hardships caused by manufacturing plant closings, military base closures, natural disasters, declines in core industries and other

related events.

The Economic Development District planning program is a proven and essential

resource for our nation’s distressed communities, particularly in small metropolitan

and rural America. As stated in a 2002 program evaluation by Wayne State University, the national network of 320 planning and development districts has built a notable record of facilitating a comprehensive strategic planning process that ‘‘provides

the critical backbone for economic development planning at the local level.’’

The EDA public works program provides valuable financial assistance to build, rebuild or expand the basic public infrastructure needed to develop new businesses

or retain existing companies. The average EDA public works investment is typically

leveraged ten to one by the private sector, according to an in-depth study by Rutgers

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University. Long-term jobs have been created and retained historically at an average cost of $3,058 per job, among the lowest ratios in government.

The EDA Revolving Loan Fund (RLF) program is a powerful and essential economic development tool for addressing the credit gaps that exist in distressed communities, particularly in underserved rural areas. By using limited public funds to

leverage private capital, locally managed RLFs are providing business capital to

thousands of new and existing companies that have difficulty securing conventional

financing.

Thank you, Mr. Chairman and members of the committee, for the opportunity to

testify today on issues related to the reauthorization of the Economic Development

Administration (EDA).

My name is Gary Gorshing. I am the Executive Director of the South Western

Oklahoma Development Authority (SWODA), headquartered in Burns Flat, and I

also currently serve as the President of the National Association of Development Organizations (NADO).

In my testimony, Mr. Chairman, I plan to discuss the unique role EDA plays

within the portfolio of Federal economic development programs. I will highlight the

impact of EDA investments at the local level and demonstrate the overwhelming

value of the planning, public works, revolving loan fund and economic adjustment

assistance programs. While NADO strongly supports the compromise bill (H.R.

2535) adopted by the US House of Representatives in October 2003, I will also offer

some modest suggestions to improve and clarify the legislation from the regional

and local perspective.

ABOUT NADO AND SWODA

The National Association of Development Organizations (NADO) provides training, information and representation for regional development organizations serving

the 82 million residents of small metropolitan and rural America. The association,

founded in 1967 as a national public interest group, is a leading advocate for a regional approach to community and economic development. NADO is part of the

intergovernmental partnership among Federal, state, regional and local officials.

The association is also a member of the Coalition for Economic Development, a consortium of national organizations working to advance the goals and mission of the

Economic Development Administration. The coalition includes representatives of regional councils of government, city and county officials, economic development councils, EDA university centers and community-based nonprofits.

NADO members-known locally as councils of government, economic development

districts, local development districts, planning and development districts and regional planning commissions—provide administrative, professional and technical assistance to over 2,000 counties and 15,000 small cities and towns. These organizations administer and deliver a variety of Federal and state programs. Based on local

needs, programs may include aging, census, community and economic development,

emergency management planning, homeland security, housing, small business development finance, transportation and work force development. A policy board of

local elected officials, business leaders and citizen representatives typically governs

each regional organization. Associate members of NADO include state and local

agencies, educational and nonprofit organizations, businesses and individuals.

The South Western Oklahoma Development Authority (SWODA) serves eight

counties, 46 cities and towns, and ten conservation districts within the region. In

addition to providing planning and technical assistance to local communities,

SWODA delivers aging services as an Area Agency on Aging; administers four loan

programs including USDA Intermediary Relending Program (IRP), SBA 7A loan

Guaranty Program, SBA 504 loan program and a SWODA revolving loan fund; manages the 3,000-acre Clinton-Sherman Industrial Airpark, a former defense facility;

administers local Workforce Investment Act programs; and assists local communities with EDA, USDA and HUD Community Development Block Grant proposals,

capital improvement planning, rural fire defense initiatives, solid waste projects,

historic preservation efforts and other community development initiatives.

We believe, Mr. Chairman, there are four major reasons for the committee to support a multiyear reauthorization of the Economic Development Administration

(EDA).

1. EDA has a unique and clearly defined role within the broad portfolio of Federal

economic development programs.

2. The EDA planning program for multi-county economic development districts is

a proven, costeffective and essential resource for the nation’s distressed communities, particularly in small metropolitan and rural regions.

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3. The EDA public works program is a flexible and vital resource for helping distressed communities develop the most fundamental building block for economic development—public infrastructure.

4. The EDA Revolving Loan Fund (RLF) program is a powerful and indispensable

economic development tool for addressing the credit gaps that exist in many distressed communities, especially in underserved small metropolitan and rural areas.

First, Mr. Chairman, the Economic Development Administration (EDA) has a

unique and clearly defined role within the broad portfolio of Federal economic development programs. As the only Federal Agency focused solely on private sector job

growth and sustainability, EDA is a vital resource for distressed communities striving to improve their local economies. Whether it is through infrastructure grants,

strategic planning assistance, business development capital or technical assistance,

EDA investments are designed to promote economic opportunities in impoverished

communities. Most importantly, EDA investments are typically the seed funds or

gap financing that make locally identified projects a reality in the nation’s poorer

areas. Over the years, the Agency has developed a strong record in assisting communities who are struggling to overcome both long-term economic challenges and sudden and severe hardships. Through its full range of program tools, the Agency has

been uniquely positioned to help areas recover from military base closures, manufacturing plant closings and job losses, natural disasters and declines in natural resource-based industries like coal, fisheries and timber.

The Agency has also developed important partnerships at the state, regional and

local levels. These relationships with regional development organizations, local governments, Tribal governments, universities and others are an essential part of carrying out the Agency’s traditional ‘‘bottom-up’’ philosophy. As reinforced in various

academic studies and evaluations, EDA investments are among the most efficient

and cost-effective in government because they originate from a local planning process, require a substantial financial match from local grantees and focus on private

sector job creation.

At a time when Congress must make difficult choices on Agency budgets, EDA

is an Agency that merits the full support and commitment of the committee. Therefore, we respectfully urge the committee to develop and approve a multi-year reauthorization bill that maintains the Agency’s current mission and program focus of

helping bring economic opportunities to all of the nation’s distressed communities,

with a special emphasis on small metropolitan and rural America.

Second, Mr. Chairman, the economic development district-planning program is a

proven, cost-effective and essential resource for our nation’s distressed communities,

particularly in small metropolitan and rural regions. As reported in a 2002 program

evaluation by Wayne State University, the national network of 320 economic development districts has developed an impressive record of facilitating a comprehensive

strategic planning process that ‘‘provides the critical backbone for economic development planning at the local level.’’

By leveraging modest EDA planning funds with local dollars, these multi-county

development districts provide vital professional, administrative and technical assistance to local government officials, business leaders, nonprofits and communities.

This is particularly true in small metropolitan and rural regions where local governments often lack professional staff capacity. According to a 2001 study by the National Association of Counties, over 60 percent of metropolitan counties have fulltime economic development staff, compared to only 34 percent of rural counties.

Furthermore, nearly 85 percent of the nation’s 39,000 units of local government

serve populations below 5,000 and almost 30 percent have no professional staff. As

a result, most of the nation’s smaller communities rely heavily on EDA-funded planning and development districts for professional and technical support.

As part of the Comprehensive Economic Development Strategies (CEDS) process,

districts bring local elected officials, business leaders and community representatives together to prepare and implement strategies aimed at helping a multi-county

region become or remain full participants in the nation’s economic mainstream.

Whether a region is currently enjoying economic stability or coping with long-term

challenges such as declines in traditional industries, it must prepare for tomorrow

or risk falling behind in today’s competitive global and high-tech marketplace.

Districts are now engaged in comprehensive planning and implementation that

reflects the dramatically changing national and global economy. Today’s regional

plans may encompass strategies for using technology as an economic development

tool, building local work force capacity in distressed areas and enabling communities

to diversify economies. In addition to the planning functions, districts spend a significant amount of time and staff resources helping local communities administer

and package public and private sector financing for projects, navigate the reams of

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bureaucratic red-tape, and collect and analyze the data needed to make informed

and educated decisions.

With advanced technologies, such as Geographic Information Systems (GIS) and

Global Positioning Systems (GPS), many districts are now providing state-of-the-art

assistance to local constituents. While the possibilities for GIS are almost endless,

activities range from mapping areas with failing septic systems in order to identify

areas where alternative treatment systems are needed, to simulating the land use

and environmental impact of business locations in a specific area, to marketing and

showcasing business parks over the Internet. As noted in the 1998 House committee

report on EDA reauthorization, EDA should be encouraged to further enhance GISrelated activities of the districts.

The Southeast Tennessee Development District offers a good example of the power

of comprehensive planning. McMinn County, located in the southeast corner of the

state, was facing overcrowded jails, an overflowing landfill and growing debt. Over

a 10-year period, the district facilitated a strategic planning process with county

leaders to address these pressing needs. After implementing ideas developed during

the planning process, the county is now debt-free and follows a pay-as-you-go policy.

As a result, the county is now in a better position to pursue new economic opportunities, such as the expansion of NuMarkets, a consignment seller for e-Bay that

plans to expand from 21 workers today to at least 300 in the next 2 years.

The planning districts in Oklahoma, including SWODA, are using GIS and GPS

technologies to develop capital improvement plans for local governments, a process

that requires inventorying of all public assets. By cataloging and mapping every

road, bridge, water line, public building and other assets, the districts can create

visuals and data for local elected officials and business leaders who are developing

economic development strategies. The information can also be used for transportation planning, zoning decisions, land use management, disaster mitigation planning and an endless list of other activities. Without the expertise and capacity of

the districts, most local jurisdictions would never have the economies of scale, resources or skills required to engage in this important visioning activity.

In Missouri, the Boonslick Regional Planning Commission leveraged EDA planning resources to lead an effort to craft a Comprehensive Economic Development

Strategy for its region in the late 1990’s. The planning process resulted in several

new ambitious goals for the Agency and the region to pursue. Four of the top goals

involved establishing affordable housing opportunities for working families, securing

resources for infrastructure improvements, enhancing services for special populations within the region, and creating a financing tool to help local banks support

business growth and job creation. Since the creation of the CEDS, significant

progress has been made toward achieving these four goals.

The Boonslick Regional Planning Commission has worked with local communities

and developers to improve affordable housing opportunities. Thirty-six new homes

have been built for families working in the region. These homes are 1,200 square

feet and were sold for less than $80,000. Down payment assistance was provided

to help homebuyers secure conventional financing. Additionally, the region has completed renovations on more than 60 housing units, improving the housing quality

for working families in rural communities.

To assist special populations, the planning district helped with an innovative

project that provides public transportation services in Lincoln County. The system,

know as The Linc, provides public transportation Monday through Friday for any

resident of Lincoln County. Since its inception in 2002 The Linc has provided more

than 12,000 trips. Fifty-four percent of these trips are for employment. Individuals

that could not work because of transportation limitations are now able to hold fulltime positions because of the availability of public transportation.

The Boonslick RPC has been working diligently to secure financing to assist communities improve and expand their infrastructure to support economic growth in the

region. Since the CEDS was completed, more than $30 million has been invested

in local infrastructure projects. The organization also created a new revolving loan

fund (RLF) to assist local banks finance business startup and expansion. The district leveraged $200,000 in local money with $300,000 from EDA and $100,000 from

the State of Missouri. Since the fund was created 2 years ago, the RLF has loaned

$580,000, helped create or retain 170 new jobs, and leveraged private investments

of more than $3.5 million.

The Northeast Oregon Economic Development District has also worked to diversify the economy of its rural region. The group established Enterprise Facilitation

to increase community capacity by promoting local entrepreneurship and assisting

individual startups, business improvement and expansion planning. The program

draws on the expertise of a volunteer local board and facilitator to help each entrepreneur build a support team with the strengths to cover business development

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areas, such as marketing and financial management. The program has served 264

entrepreneurs, 15 startups and 11 business expansions with job creation. The organization has leveraged public and private sector funds, including EDA, to maintain

the initiative.

In central Pennsylvania, SEDA-COG established a resource center that helps organize partnerships for community success, achieve local development objectives

and shape community identity through town planning and urban design. The project

is the culmination of a regional effort to strengthen bonds between Lewistown and

the surrounding municipalities. By placing downtown development in the context of

a regional community, this initiative breaks new ground for small town conservation

and economic development. It has stimulated a constructive dialog, spawned new regional connections and improved intergovernmental cooperation. In addition, nonprofit capacity has been enhanced, private capital has been committed and leveraged, and businesses have benefited from the resulting downtown-based services

and training opportunities.

These examples offer only a small sample of the impact and achievements of the

nation’s 320 EDA designated economic development districts. These locally—controlled organizations have consistently demonstrated the indispensable value of

EDA planning grants. Although the average $54,000 grant for each district is small

by Washington standards, it means a world of difference to the thousands of rural

counties and small towns served by the program. Unfortunately, the true purchasing power of the district planning money has been eroded over the past 30 years

to less than 15 cents on the dollar. In addition, the limited pool of resources has

been stretched in recent years as the Agency tries to assist designated-but-unfunded

districts across the country.

As mentioned above, the comprehensive evaluation conducted by Wayne State

University’s Center for Urban Studies in 2002 found that districts are both effective

and essential to local development. The summary of the report frames the work of

the districts best by stating, ‘‘economic development districts have been effective instruments promoting cooperation, coordinating needs assessments, and through the

CEDS [Comprehensive Economic Development Strategies] process, generating the

kind of regional planning needed to effectively promote positive economic change.’’

To further enhance the performance of economic development districts, NADO

specifically urges the committee to increase financial resources for the national network of 320 economic development districts. While the districts have stretched and

leveraged their modest resources for years, nearly 30 years of inflation costs and

new program demands make a modest funding increase a top priority.

NADO urges the committee to maintain and strengthen the leadership and coordinating role of the economic development districts in the crafting of regional and

local Comprehensive Economic Development Strategies. This includes retaining the

revised planning performance bonus incentive established in the House bill (H.R.

2535). This modest bonus of 5 percent for public works and economic adjustment

projects is an important incentive at the local level to promote and facilitate regional cooperation of local communities. While it is often easy to preach and talk

about regional cooperation, the reality is frequently more difficult to achieve.

In addition, the association and its members remain concerned that there is a

misunderstanding of the value and role of the planning program at the regional and

local levels. Historically, EDA planning grants have been used to help regions develop comprehensive development strategies, which is an important and critical mission. But their more important outcome is the professional and technical capacity

developed at the local level within the economic development districts. Without the

flexibility and expertise of the districts, most local communities would severely lack

the ability to pursue new economic opportunities, have the skills to package complex

development deals and navigate the burdensome and intricate reams of Federal and

state paperwork. Therefore, we ask the committee to ensure that the district-planning program will remain a vibrant and flexible resource for local areas.

Third, Mr. Chairman, the EDA public works program is an essential, flexible and

cost-effective partner for helping distressed communities develop the most basic economic building block—public infrastructure.

Year after year, local elected officials and economic development professionals in

rural and small town America identify infrastructure development as their primary

concern for economic development. While there are other Federal programs, such as

the HUD Community Development Block Grant program, USDA rural development

and the EPA clean water and drinking water funds, the EDA public works program

is the only program focused solely on projects tied to private sector job growth and

sustainability. It is also different because it is a cost-sharing grant program targeted

directly at distressed local communities, unlike many of the other Federal programs

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that either are administered by the states or only offer loans and loan guarantees

to communities already financially strapped.

The value and success of the EDA public works program has been validated repeatedly over the years. Traditionally, the average EDA infrastructure investment

has been leveraged ten to one by the private sector, according to an in-depth study

by Rutgers University. More importantly, EDA projects help distressed communities

create quality long-term jobs at an average cost of $3,058 per job, which is among

the lowest and most efficient in government. The Rutgers report underscores that

the near perfect on-time completion of EDA public works projects is the direct result

of the planning phase that precedes the project selection.

Throughout its history, EDA has also been recognized as a national leader and

innovator in the economic development field. Many cutting-edge practices have

emerged from the public works program, such as business incubator buildings,

smart technology parks, eco-industrial parks, and the redevelopment of brownfields.

Without the financial and technical support of EDA and its local partners, most distressed communities in small metropolitan and rural America would never have the

opportunity to implement these essential infrastructure-related projects.

In my home region in Oklahoma, EDA has made several valuable investments.

In 1992, for example, the city of Clinton received assistance from EDA to help meet

an overwhelming need for expanded sewer treatment. Without this assistance, it is

most certain that BAR-S Company, a major local employer, would have been forced

to close its plant in Clinton. This would have resulted in the loss of approximately

400 quality jobs in our very rural region. In Tennessee, EDA invested $1.5 million in public works money to partially finance water system improvements at the North Etowah Industrial Park. The

project allowed a brake manufacturer for the automotive and truck industry to commence production operations of its second state-of-the-art facility in 2001. The EDA

project also helped locate a second automotive supplier in a spec building within the

industrial park.

Since the completion of the EDA financed infrastructure improvements, the city

of Etowah has realized an 18 percent increase in its local tax base. Moreover, given

the quality of the companies and the higher-than-average wages ($12 per hour or

better) the per capita income increased from $16,924 to $20,395. Recently, the two

businesses have announced expansion plans due to upcoming regulatory changes in

the automotive industry. The changes are expected to generate an additional 250

jobs coupled with a $115 million private sector investment. EDA invested nearly $3 million in infrastructure improvements to sustain a major local industry in Montana. A local company constructed a $550 million plant in Silver Bow, just west of Butte. The company converts metallurgical-grade silicon into

silane gas and polycrystalline silicon products including rods and chunks. These

products are sold to other companies that use the material to produce single crystal

wafers, which are later sold and used by companies, such as, Motorola, Micron, and

Intel to make semiconductor devices such as memory chips and microprocessors.

Currently, 220 people are employed at the plant and an additional 60 jobs will be

created in this small city. The average annual salary of the workers is $55,000.

In Florida, EDA is playing an instrumental role in helping the Town of Altha develop the basic infrastructure needed to support and sustain existing businesses.

EDA contributed about $320,000 of the total project cost of $823,000 to construct

a new water line, upgrade an existing water line and install a new well and pump.

As a result of the project, Oglesby Plants International, Inc. is committed to creating 15 new jobs and retaining 125 existing jobs.

EDA has also helped the city of Palatka in Florida, a traditionally distressed community, build the basic infrastructure needed to retain and attract light industrial

and manufacturing firms. The project involved making improvements to an industrial park, including the installation of water and sewer lines, a lift station and fire

suppression infrastructure. Among the immediate impacts, Sykes Enterprises, Inc.

will create 423 new jobs and make a private sector investment of $14 million when

they establish operations in the industrial park. Overall, the project will help the

city provide employment opportunities to unemployed and underemployed workers

who are seeking higher wage jobs.

As part of the EDA reauthorization package, we strongly encourage the committee

to maintain fair and flexible eligibility criteria for public works grants. This includes

retaining the Agency’s long-standing policy of helping the nation’s most impoverished communities, with a special emphasis on small metropolitan and rural communities. We strongly disagree with any ‘‘one-size-fits-all’’ approach that directs

EDA investments to only one type of industry or project, to any one type of community or to any one type of economic development philosophy. Over the years, the success of EDA has been rooted in its ‘‘bottom-up’’ approach. The EDA public works

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program is a proven program that serves as a key catalyst for economic development

in distressed areas. Without it, impoverished communities would struggle to develop

and sustain the infrastructure and facilities needed to develop new businesses and

retain existing companies.

My fourth and final point, Mr. Chairman, is that the EDA Revolving Loan Fund

(RLF) program is a successful and powerful economic development tool for addressing the credit gaps that exist in many distressed communities, particularly in underserved rural areas. By using limited public funds to leverage private capital, locally managed RLFs are providing business capital to thousands of new and existing

companies that have difficulty securing conventional financing.

Capitalized with an EDA grant, RLFs are managed by public and private nonprofit organizations (including economic development districts) and are designed to

further local economic development goals by lending their initial capital and then

re-loaning funds as payments are made on the initial loans. Loans are typically used

for fixed assets or working capital needs. Organizations are also required to demonstrate how the RLF fits their local needs, as defined in a comprehensive economic

development strategy.

The participation of RLF funds in a business deal usually encourages once-reluctant banks to also lend, since loan funds normally agree to let banks recoup their

losses first from the business’ collateral in the event of default. By providing such

gap financing, loan funds have been instrumental in the growth of companies that

otherwise would not have received funding.

The approximately 600 RLFs capitalized by EDA play a particularly critical role

in the economic development of distressed rural areas, where alternatives to conventional financing are limited. In inner cities, community development corporations

(CDCs) and municipal agencies often manage loan funds. In rural areas, where

there are few CDCs and limited municipal capacity, RLFs managed by regional development organizations are often the only source of alternative financing for entrepreneurs and existing businesses. A January 2002 NADO survey of regional development organizations with loan funds found that half are the sole lender in all or

part of their multi-county service area, underscoring the important role played by

public entities and RLFs in creating private sector jobs in rural America. (For more

details, see the NADO Research Foundation report, ‘‘EDA RLFs Make a Difference.’’)

In a rural region of Missouri, the Meramec Regional Planning Commission has

helped provide business capital to a local company that has grown into a worldwide

supplier of specialty chemicals, materials, and equipment to micro-electronics and

opto-electronics manufacturers. In 1995, the Meramec RPC supported the company’s

expansion by making a working capital loan of $150,000, which in turn leveraged

$1.3 million in private sector funds. Sixteen jobs paying an average of $23 per hour,

much higher than the regional average of $14, were created in the small town of

16,000. Since 1992, the Meramec RPC has made 37 loans that have created and

saved 758 jobs.

As noted earlier, the Boonslick RPC also established an RLF in 2002 based on

recommendations made during the region’s strategic planning process. The most

challenging project the RLF has been involved in, according to the organization’s executive director, is the construction and financing of a local food market, the Loutre

Market. The market was the only grocery store serving the southwest portion of the

region. It was wiped out after floods in 1993 and 1995, and the owners closed the

business. This meant that the southern portion of the county was left without any

grocery.

The community worked for years to attract a new store or owner. A potential

owner was finally located and the community worked with all possible agencies to

make the project work. They included local financing, Small Business Administration financing and community funds to try and finance the project. In the end, the

group needed $150,000 to complete the $2 million deal. The Boonslick RPC provided

the gap financing that made this project a reality. While this project example lacks

the glamour of many high-priced, large-scale deals, it was a vital endeavor for this

rural region. Without a local food market, it would be extremely difficult to retain

existing businesses let alone attract new employers.

The decline of southwest Oregon’s wood products and fishing sectors has contributed to the region’s unemployment rate of more than 8 percent in recent years. To

combat this trend, the CCD Business Development Corporation—which serves Coos,

Curry and Douglas Counties—has used its loan fund to create and retain over 3,200

jobs in an array of sectors. One of its borrowers is FCC Commercial Furniture in

Roseburg, now one of the nation’s leading manufacturers of restaurant furniture.

The company relocated from California in 1993 and occupied a vacant building

formerly owned by a defunct log loader manufacturing company. CCD coordinated

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a loan deal that included a $115,000 RLF loan to finance equipment and $395,000

from the organization’s other loan programs and a bank to finance other relocation

costs. They hired all local workers and currently have about 110 employees.

The Genesee-Finger Lakes Regional Planning Commission, based in Rochester,

has used its RLF to support high-wage, high-skills jobs in various sectors, including

the region’s struggling printing industry. The organization’s RLF has helped finance

the purchasing of software and high-end computers for high-quality printing. The

RLF has also made loans to growing businesses for working capital. In the past decade, the fund has made a total of 44 loans to 42 businesses and has created or saved

920 jobs in this transitioning region.

Despite the effectiveness of locally managed RLFs, the EDA program could be

dramatically improved by implementing several no-cost or low-cost recommendations:

• EDA should recapitalize and expand the lending capacity of existing RLFs that

have established a successful track record and demonstrated demand.

• A new technical assistance program should be added to complement the loan

fund program to better safeguard the investments made by RLFs. The Agency

should allow a limited amount of RLF grant funds to be used for professional development training and continued education of RLF managers.

• The EDA RLF program should emulate other Federal loan programs and

defederalize RLF moneys once they have been loaned out and repaid one time.

Defederalization will reduce paperwork and regulatory burdens, while still requiring

local accountability. It would also lessen the oversight responsibilities of EDA,

which are currently perpetual for the Agency.

• The Agency should lower or eliminate the requirement that 75 percent of funds

be loaned out at any one time. This mandate is particularly burdensome during slow

economic times and in rural and remote regions. At a minimum, the Agency should

have the flexibility to deal with hardship cases. By mandating the 75 percent requirement, the Agency runs the real risk of forcing local RLF policy committees and

managers to make investments in unsound and the riskiest of deals.

CONCLUSION

In closing, Mr. Chairman, I want to reinforce NADO’s support for a multi-year

reauthorization bill that maintains EDA’s current mission and program focus of

helping bring economic opportunities to our nation’s impoverished communities, particularly small town and rural America. Through its existing programs—including

the planning, public works and economic adjustment programs—the Agency serves

as a vital resource for localities striving to improve their economies through private

sector job growth. The Agency should retain the flexibility to help all of the nation’s

distressed areas, whether they are struggling to overcome long-term economic challenges or sudden and severe hardships. EDA is an Agency that merits the full support the committee.

I also want to state that NADO remains supportive of the Agency’s brownfields

redevelopment efforts. In March 2002, NADO member Mary Lou Bentley of the

Western Nevada Development District presented the association’s positions on the

issue. The association’s leadership also sent a letter to Ranking Member Jim Jeffords and Senator Carl Levin in general support of the Brownfield Site Redevelopment Assistance. In the current Congress, the bill is S. 645.

Most importantly, we strongly support retaining a leadership and coordinating

role for EDA-designated economic development districts both in the development of

regional and local Comprehensive Economic Development Strategies and the implementation and pursuit of new economic opportunities at the local level. In the end,

economic development is inherently a locally driven process that requires regional

coordination, collaboration and partnerships. The established network of economic

development districts has proven over time to be an effective, cost-efficient and professional group that should be further strengthened and maintained.

Thank you again, Mr. Chairman and members of the committee, for the opportunity to testify today on the views of NADO and its membership. I would welcome

any questions.

STATEMENT OF JAMES J. SAUDADE, DEPUTY COMMISSIONER, DEPARTMENT OF

HOUSING AND COMMUNITY AFFAIRS, STATE OF VERMONT

Good morning Mr. Chairman and members of the Committee, and thank you very

much for the honor and opportunity to provide testimony to you today regarding the

reauthorization of the Economic Development Administration (EDA).

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My name is James J. Saudade, and I am the Deputy Commissioner for the

Vermont Department of Housing and Community Affairs, Agency of Commerce and

Community Development.

This morning I would like to tell you how important the assistance available

through EDA is to a small, rural state like Vermont. I will share with you some

of our experience with the EDA in Vermont, and offer some suggestions for making

EDA even more effective in rural parts of our country.

As I am sure my Senator, Jim Jeffords, reminds folks around here once in awhile,

Vermont is a small state that is facing substantial economic challenges. The median

income for a family of four in Vermont grew only about $500 from 1989 to 1998,

our poverty level during that period actually increased from 8.1 percent to 9.6 percent, and our share of poverty level jobs increased in the 1990’s to fully 25.5 percent

of all jobs. While unemployment for much of the state remains below the national

average, Vermont hosts regions of high unemployment such as our Northeast Kingdom and substantial underemployment is pervasive throughout Vermont. These are

serious conditions that impair our economic health.

To address these disturbing trends, we have undertaken economic development

planning and projects to stimulate new business, train workers, and grow the businesses we have. In this effort we have enlisted the assistance of EDA as our partners to help underwrite the cost of new infrastructure, capitalize revolving loan

funds, and build small business facilities. In fact Mr. Chairman, as we are meeting

here this morning, the ribbon is being cut on a new business center in St.

Johnsbury, Vermont. A business center that offers new hope for quality jobs in our

most economically distressed region. This center, which is largely underwritten with

EDA funds, resides in an industrial park that was originally established and expanded with EDA assistance.

Although my personal experience with the EDA has been over many years, most

recently I was very involved with a new, EDA assisted, business incubator in Randolph, Vermont. This incubator will open in a few months and is in partnership

with Vermont Technical College. It will offer businesses a supportive environment

to become established and grow. These businesses will derive research and expertise

from the resources of the college and, in turn, provide students and faculty with a

laboratory for fostering technological achievements. And most importantly, this new

incubator will provide jobs in a community that had been devastated by a series of

fires and has suffered several recent plant closures. Already, several businesses are

lined up to occupy the incubator, including a very promising business working with

new, light emitting diode technology and a software developer.

Both the Randolph and St. Johnsbury projects were planned and executed in accordance with regional Comprehensive Economic Development Strategies (CEDS).

These CEDS are a requirement for participation in EDA activities and are a planning feature which I, and the Agency I represent today, strongly endorse. The process to complete these plans is arduous, time consuming, and not without cost, but

their value for smart development is indispensable. These plans provide a sobering

view of the current regional economy, a retrospective evaluation of previous development, an inventory of available resources, and most importantly, a solid plan for action. The process draws in the interests of planners, businesses, community interest

groups, and government and ensures that broad representation is a feature of the

planning process. While EDA has always provided helpful materials to regions in

support of these plans, I would like to commend EDA on its much-improved web

site that now provides a wealth of information, resources, and contacts.

As previously stated, the Vermont Agency of Commerce and Community Development endorses the development planning required by EDA. In fact, we now look to

those plans, where they exist in Vermont, to make investment decisions regarding

the deployment of state resources. When a project comes to the state for assistance

from a region where a comprehensive plan was completed, we ask where that

project is in the regional plan, how does it help fulfill the goals of the plan, and

what strategic opportunities identified in the plan are captured by this project? In

order to make this policy effective statewide, we have recently issued 2005 work

plans to regional agencies making the completion of regional economic development

plans a top priority where they currently do not exist.

The array of assistance products provided by EDA has helped to address many

of Vermont’s economic development requirements and, without them, there would

be no alternative. The public works assistance has been vital in underwriting infrastructure improvements. The Economic Development District program has helped

the Northeast Kingdom to plan projects in this very rural and distressed region of

Vermont. And the Revolving Loan Program has provided credit enhancement and

gap financing to hundreds of Vermont’s small businesses. But as effective as these

products have been to our work to regain economic vitality, we look forward to imVerDate 11-MAY-2000 15:24 May 01, 2006 Jkt 094601 PO 00000 Frm 00077 Fmt 6633 Sfmt 6621 G:\DOCS\94605.TXT SENENV2 PsN: SENENV2
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plementing the elements of our regional economic plans not yet accomplished and

to fulfilling the promise of the regional plans not yet completed.

This week, perhaps as I speak, adjustments to our state’s limited liability program for brownfields reclamation are being considered in our state legislature. I believe the improvements under consideration will result in a watershed of new interest in our existing brownfields sites. With over 2,000 known brownfields in

Vermont, we will need the help of the EPA and EDA to help us remediate and reuse

these areas. Returning these sites to productivity is crucial to our need for jobs, critical to the stability of our town and village centers, and protective of our yet unspoiled landscapes.

Vermont is a rural state and its character is very different than urbanized areas

of the country. As such, we sometimes find ourselves working within constructs of

the Federal Government that do not work as well as they might in more populated

states. This is true with EDA. We would recommend that EDA allow some discretion in the design and implementation of its programs to absorb inherent differences

that exist across the country, and particularly in small states. For example, EDA

and other agencies look to counties as important representations of regional boundaries. In many states where county governments conduct a wide range of governmental functions this makes sense. However, in Vermont, although counties exist

as representations on maps and for judicial and law enforcement purposes, there are

no ‘‘county governments.’’ EDA would be better served by a more flexible, working

definition of regional boundaries.

Similarly, small states cannot begin to garner the resources that larger states are

able to assemble in support of economic development activities. Again, flexibility in

the goals of EDA programs would allow for more realistic and scaled expectations

for smaller states. For instance, EDA would like to achieve leveraging ratios of 22:1

of ‘‘other funds’’ to EDA dollars. This level of leveraging, though laudable, is simply

unattainable in Vermont and threatens to make EDA an anachronism in our state.

Rural states also have a more difficult time fielding committees such as those required in developing economic plans. It is difficult to find enough people who are

able to commit the time and energy to serve on required boards and, in Vermont,

it is impossible to supply the diversity that might be attainable in other states. EDA

has with great difficulty, accepted some variation on its model for public participation but, while we understand the need to be accountable to all of our constituents,

additional flexibility is warranted.

Also characteristic of very rural states is the lack of professional staff for small

communities and the logistical obstacles to attending meetings, accessing program

representatives, and maintaining good contacts. The EDA relies heavily on regional

representatives. These EDR’s as they are known are responsible for large geographic

areas that prohibit frequent visits and limit accessibility. This dependence on very

few individuals to provide both technical expertise and firewall review of new proposals for a huge area does not do justice to the otherwise well thought out EDA

system of resource deployment.

We would also appreciate an improved EDA application process that did not place

project viability in the hands of one person initially, and also allowed for the capture

of time sensitive and unusual, but creative projects. The existing application process

is multi-tiered, and cumbersome. The process tends to delay if not defeat projects

that either require quick action, or offer new and innovative approaches to traditional problems. We recommend a ‘‘special review’’ process for applicants that can

demonstrate a need for an extraordinary procedure. We might also suggest a closer

partnership with EDA field representatives to state, community development departments. In Vermont, as is the case in most states, development department staff

have become proficient in the review and administration of CDBG small cities

projects and may offer EDA some assistance in extending field capacity and offering

support to EDA field staff.

In conclusion, we enthusiastically recommend reauthorization of EDA. While we

would recommend flexibility and discretion in applying program standards to small

states, EDA’s major program features are sound, its products are invaluable, and

Vermont’s economic distress would become further exacerbated without EDA support. EDA has and is providing resources that we could not otherwise replace, and

we look to a re-authorized and invigorated EDA to help shape Vermont’s economic

future.

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STATEMENT OF R. CHARLES GATSON, VICE PRESIDENT AND CHIEF OPERATING

OFFICER, SWOPE COMMUNITY BUILDERS

Chairman Inhofe, Senator Jeffords and Members of the Committee, thank you for

inviting me to testify in front of your committee on the Economic Development Administration reauthorization bill. I want to particularly recognize Senator Bond who

has been a friend and a champion of our efforts to improve the lives of thousands

of folks living in Kansas City, Missouri.

I am currently the Vice President/Chief Operating Officer of Swope Community

Builders, a position I have held for the past 13 years. Swope Community Builders

is one of the nation’s 3,600 community based development organizations represented

by the National Congress for Community Economic Development.

We are a nonprofit community development corporation with a $7.5 million annual budget. On December 31, 1991 our total assets were approximately $60,000.

On December 31, 2003 our total assets exceeded $61.4 million. We have completed

in excess of $120 million in development projects—single and multi-family housing,

as well as commercial and institutional—over the past 10 years. Every dollar the

Federal Government invests in our work leverages another $7. We manage more

than $100 million dollars of investment. We have over $100 million of new investments in our development pipeline.

In 1991, when I came to work at Swope Community Builders, many in our was

troubled with high poverty and unemployment rates, low housing values coupled

with many vacant and abandoned buildings. Many in our community did not have

adequate health care coverage or access to retail shopping. Community residents

were not engaged in planning activities nor were they beneficiaries from higher economic growth.

As I stated earlier, Swope Community Builders has completed in excess of $120

million in redevelopment projects during its 14 years of existence. One of our most

important projects, the H&R Block Technology Center, was completed in December

1999. This project, a corporate technology center built using cutting edge construction, cabling and computer technology, relocated 150 employees earning an average

of $45,000 per year from suburban Kansas to Kansas City’s urban core and created

400 full time equivalent jobs with starting salaries of $15.00 per hour. The total annual payroll at the H&R Block technology center exceeds $20 million. The building

generates annual real estate taxes of approximately $225,000 which, coupled with

economic activity taxes, generates enough income from a Tax Increment Finance

District to debt serve a $2 million tax exempt bond issue that has been used to spur

other job creating redevelopment projects. Across the country, the computer needs

of over 8,000 of H&R Block’s franchisees are serviced by this Center. This project

did more than provide jobs to area residents; it provided hope to the residents,

spurred further development and provided proof to other corporations and investors

that urban Kansas City locations are safe and can be the sites of sound investments.

The FirstGuard Office Building, a 72,000 square foot technologically advanced office building completed in 2002, is home to the FirstGuard HMO, Mazuma Credit

Union, the Dalmark Corporation, the Housing and Economic Development Financial

Corporation and Swope Community Builders. This $14 million facility is geared toward companies with a need for fast computer links, advanced telephone systems

and video capabilities and a trained labor force. This building is home to over 300

employees.

Swope Community Builders is in the development phase of the New Village at

Technology Center, a 480,000 square foot office/warehouse project, accompanied by

50,000 square feet in companion retail/service space and 175 units of work force and

market rate housing. The New Village at Technology Center will be designed to attract office/warehouse tenants whose businesses are based upon the uses of new

technologies, who have similar needs as the tenants in the H&R Block Technology

Center and the FirstGuard Office Building and who need easy access to rail and

surface transportation. This center will employ over 1,200 people at average wages

of $19.50 per hour which translates into an annual payroll of $48.6 million. It is

expected that a large percentage of the jobs created will be filled by residents from

Kansas City’s 3d Council District, statistically its most economically distressed location, located due east of the Central Industrial District. This project will have a lasting effect on at least 1,200 families while providing another example to the investment community that community development corporations are excellent partners

who understand how to make deals work in urban core America.

The revitalization of our community and the H&R Block project would not have

been possible without substantial federally funded and supported investments.

Again I want to recognize Senator Bond’s efforts in securing millions of Federal dollars for these initiatives. We regularly make great use of HUD funds through

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HOME and the Community Development Block Grant, Health and Human Services

through the Office of Community Services, the Department of Justice through COPS

and the Neighborhood Initiative and Economic Development Initiative programs.

We have also utilized local governmental funding techniques such as Tax Increment

Financing, Special Taxing Districts, Property Tax Abatement (home ownership

projects) and the city of Kansas City’s Capital Improvements programs. All these

funding mechanisms, coupled with private capital from conventional loans and equity investments, are crucial to bringing more technology based projects and investments to urban core locations where sites are available and easily trained labor

forces are available.

One Agency missing from that list is the Economic Development Administration.

Despite our best efforts, Swope Community Builders has never received any funding

from the Economic Development Administration. Indeed, none of the 14 Community

Development Corporations in Kansas City has received substantial funding from the

Economic Development Administration in the past 16 years.

The experience in Kansas City is not an isolated case. Our membership association, the National Congress for Community Economic Development (NCCED), surveyed some of the leading Community Development Corporations in the Nation in

2002 to learn of their experiences. Outside of the Western region, which includes

California and Washington, no Community Development Corporation could report

access to Economic Development Administration investments.

To his credit, Assistant Secretary David Sampson has taken this lack of access

of community based organizations to Economic Development Administration seriously. Dr. Sampson told NCCED members at our Policy Summit in March that, ‘‘I

have a great appreciation of what you do in local communities every single day.’’

Dr. Sampson has a personal commitment to community based organizations, including those that are faith-based because he knows Community Development Corporation’s create conditions so our communities have a growing standard of living. Over

the past 3 years, Dr. Sampson has made community based organizations and faithbased organizations a funding priority of the Economic Development Administration. Dr. Sampson clearly stated that the Economic Development Administration

should not discriminate against faith based or community groups in funding decisions. Economic Development Administration headquarters is looking at regional offices to see if they are working with new groups, expanding the deal flow, and expanding the group of partner agencies. ‘‘We do not want to work with the same

groups all the time’’, he said. ‘‘It is our goal that no geographic sector or community

is left behind in the economy geographically or demographically’’, he added. The

Economic Development Administration has added a community based partnership

category to its annual Awards for Excellence.

However, the intention has not translated into reality due to a combination of inadequate appropriations for the Economic Development Administration and an institutional culture that is closed to community-based nonprofits like mine.

In the previous Economic Development Administration reauthorization, Congress

expressly made community based organizations an eligible group for Economic Development Administration investments and relaxed the requirements that any

project have approval from the development department of the participating jurisdiction.

Making nonprofits eligible for poverty alleviation resources is a typical Federal

strategy including programs like the Temporary Assistance to Needy Families,

Workforce Investment Act, and the Economic Development Administration. However, in most of these programs, eligibility does not translate into partnerships that

build on the abilities of nonprofits.

While I support the reauthorization of the Economic Development Administration,

I hope that the Agency and Congress will more aggressively seek opportunities to

enable nonprofit community based organizations to better utilize Economic Development Administration funds. Some opportunities include providing a set-aside investment pool specifically for community development corporations that is available

through competitive applications to headquarters.

Swope Community Builders is preparing a pre application as described in the

Catalog of Federal Domestic Assistance, Grants for Public Works and Economic Development Facilities, for $2.5 million to assist in the predevelopment stage of the

New Village at Technology Center. One of the selection criteria states that the

project must ‘‘involve innovative partnerships and private investment leveraging’’.

Swope Community Builders’ projects are always based upon partnerships with local,

state and Federal partners, local and regional banks, national intermediaries, philanthropic foundations and, most importantly, local residents. While I am sure this

criterion is utilized, I would like to see some type of application scoring system that

would give higher priority to community development corporations that leveraged

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relationships as well dollars. Economic Development Administration assistance will,

allied with the type of financing tools that we have utilized on our completed

projects, be crucial to the speedy and efficient development of this most important

project.

It is my personal belief that the future of urban core neighborhoods is closely tied

to job creation and economic development that are tied directly to new and emerging

technologies from biomedicine to information dissemination and management to

light industry and manufacturing. The Economic Development Administration can

and must act as a catalyst, providing dollars that can be leveraged seven (7) times

by those who have the commitment to urban core communities and the experience

to produce job creating development projects.

Thank you for the opportunity to testify on how community development corporations are building strong vibrant communities with the Federal Government as our

investment ally. We look forward to being able to add the Economic Development

Administration’s programs to our arsenal as we continue to attack the problems

that plague some parts of our nation’s urban cores. I personally look forward to a

continued working relationship with Senator Bond, a true champion of urban revitalization.

STATEMENT OF PHILLIP A. SINGERMAN, PH.D., EXECUTIVE DIRECTOR, MARYLAND

TECHNOLOGY DEVELOPMENT CORPORATION, ON BEHALF OF THE INTERNATIONAL

ECONOMIC DEVELOPMENT COUNCIL

Mr. Chairman, distinguished members of the Committee, I am truly honored to

be invited to testify before you on the Reauthorization of the Public Works and Economic Development Act of 1965. My name is Phillip Singerman, Executive Director

of the Maryland Technology Development Corporation (TEDCO) and member of the

International Economic Development Council Board of Directors. I believe I have a

special perspective to bring to your deliberations: from 1995 to 1999 I served as Assistant Secretary of Commerce for Economic Development, and in that capacity was

responsible for the Economic Development Administration (EDA) when Congress reauthorized EDA in 1998—the first time the Agency had been reauthorized in nearly

20 years. That was a milestone achievement of the Congress, carried out in a bipartisan fashion, and I want to congratulate you for that visionary action.

I also want to commend Assistant Secretary David Sampson for his leadership of

the Agency and for helping push for an innovative bill to reauthorize EDA for the

next 5 years. He and members of his staff have made a special effort to reach out

my colleagues in the local economic development community and myself. I want to

thank him for these personal and professional courtesies.

Since 1999 I have directed a public instrumentality in the State of Maryland, established by the General Assembly to create and sustain businesses through the development, transfer, and deployment of innovative technology. In Maryland EDA

has played a crucial role in distressed urban areas such as Baltimore, rural communities on the Eastern Shore of the Chesapeake Bay, and depressed Appalachian

counties of Western Maryland. EDA has taken a leadership role in helping underserved areas connect to high-speed internet service, and in aiding small companies

through the development and support of business incubation.

I am also here today as a representative of the International Economic Development Council. IEDC is the leading association serving economic development professionals and those in allied fields. IEDC’s more than 4,000 members are committed

to building local and regional economies worldwide. The key to IEDC’s reputation

and steady growth is its access to a large and diverse pool of professionals and the

quality of the council’s staff. For more than 30 years, IEDC and its predecessor organizations have been producing quality services that help find solutions to the complex and varied issues of economic development. For the past year, IEDC has been

working with EDA and Congress to help contribute to the reauthorization of the

EDA On behalf of the thousands of economic development professionals that I represent today, I thank you for this opportunity to voice our support for this critical

Agency.

I have carefully reviewed both the House passed legislation (H.R. 2535) and the

Senate introduced Administration bill (S 1134), and have attached a set of policy

recommendations provided by IEDC. In my testimony I want to highlight the following points:

• The importance of prompt passage of EDA reauthorization

• The importance of providing adequate funding authorization levels

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• The importance of allowing more efficient management of EDA’s Revolving

Loan Fund Projects, specifically, removing Federal restrictions on these projects

after 20 years.

EDA: HELPING TO ENSURE THE FUTURE OF AMERICAN MANUFACTURING

EDA is generally viewed in Washington as an anti-poverty program, alleviating

low income, under-employment, and unemployment. Having worked and studied

this general issue for my entire professional career—nearly 30 years—I have come

to the conclusion that EDA is perhaps more importantly a capacity building program, which increases the productivity of the Nation. It does this by making investments that leverage under-utilized economic resources—human capital, financial

capital, and real estate—that are reflected in unemployment, inadequate business

financing, and low valued land. It does this by redeveloping physical infrastructure

that is threatened by abandonment due to such things as military base closures and

changes in international flows of capital. And it does this by broadening the participation of minorities and women in the work force.

Over the past 3 years, American manufacturing jobs have dramatically declined.

The cause of this decline can be traced to decisions made by domestic manufacturers

to relocate plants and factories in foreign countries offering a more lenient production environment and lower wage work force. In light of these global changes, the

Administration is actively seeking ways to address the critical loss of U.S. manufacturing jobs. Some of this attention is focused appropriately on job training, and

some will seek to support emerging industries, including high-tech manufacturing.

IEDC supports and encourages all of these steps, and believes the EDA, as the lead

Federal Agency working with economic development districts and related state and

local government agencies, should play a major role in these efforts to address the

decline in the American manufacturing industry.

The EDA provides a number of demonstrated tools that can be used to secure

manufacturing employment by creating new opportunities for job creation, technology advancement, skills and job training and infrastructure development. The

EDA works directly in the communities that are most devastated by the loss of

major manufacturers. The EDA’s Economic Adjustment grants provide the muchneeded support for communities dealing with the ‘‘sudden and severe’’ distress

caused by layoffs, downsizing and plant closings. This spring the Congress will be

reviewing the Administration’s budgetary requests for fiscal year 2005, and this

summer, agencies will be submitting their requests to the Administration for fiscal

year 2006 funding.

I can assure this committee that in the normal give and take of the budgetary

process, an Agency that is not reauthorized will suffer in the process; for those who

care about the ability of EDA to provide critically needed support to our most distressed communities and populations, delay is not an option.

Quick reauthorization of EDA will also be important for communities that suffer

the closure—or significant downsizing—of a local military base during the 2005

Base Realignment and Closure (BRAC) round. During the previous four base closure

rounds, the Agency provided almost $650 million in grants to 106 communities for

economic planning and redevelopment assistance. Up to approximately 100 installations could be closed through the 2005 round. EDA grants help communities achieve

productive civilian reuse of closed military bases and rapid economic development

through technical and financial assistance.

Although I believe there are one or two areas in which the House bill could be

improved, I respectfully urge the committee to promptly consider passage of legislation that reauthorizes the EDA.

PROVIDING THE APPROPRIATE AUTHORIZATION LEVELS (SECTION 701)

The House passed legislation proposes an authorization level of $2.25 billion for

EDA programs for 5 years: $400 million for fiscal year 2004, and an additional $25

million each year from fiscal year 2005-fiscal year 2008. The Administration requested $321 million for fiscal year 2005 and such sums as necessary in the remaining years. The House bill provides authorization levels for the EDA that will allow

Congress to respond to unanticipated economic difficulties.

The House passed version is a significant improvement over the current level of

the budget in a number of major ways.

First, the legislation provides Congress with the authorization flexibility it needs

to address unanticipated economic difficulties, such as those occasioned by international trade competition and homeland security. This is comparable to the flexibility previously utilized by the Congress to respond to natural disasters and defense conversion/base closures.

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During the latter part of my tenure we were faced with economic crises in the

steel and textile industry, yet the lack of sufficient authorization levels prevented

an appropriate addition to EDA’s funding to address these severe and sudden problems. The result was that funding to address these issues was taken away from

other communities that were suffering long-term economic deterioration, creating a

conflict among equally needy regions. This new language does not eliminate the ultimate responsibility of Congress to make judgments about budget priorities, but it

does remove an artificial constraint to your appropriate level of flexibility.

Second, IEDC and those in the economic development profession who rely on EDA

funding, are concerned about the steady decline in funding for EDA programs, and

particularly the disproportionate cuts imposed by the fiscal year 2004 Omnibus Appropriations Act. The fiscal year 2004 appropriation of $288 million is 15 percent

below the authorized level and 30 percent below the House recommended authorization level of $400 million. Based on EDA performance data, a $43 million investment could result in an additional $129–430 million in private sector investment

and the potential for 22,000 jobs. The House approved authorization levels give the

economic development community options for addressing future funding needs for

projects and initiatives the spur investment and help create jobs.

REVOLVING LOAN FUND (RLF) PROGRAM MODIFICATIONS (SECTION 207)

EDA’s revolving loan fund program (RLF) is a very important component of a

local communities’ overall economic development activity. In 2002 the Center for

Urban Policy Research, Rutgers University, released three reports totaling nearly

950 pages on EDA’s RLF program (Burchell, et al.) The study’s authors concluded

that (1) an RLF is one of the most effective tools available to economic development

agencies, (2) RLF loans enable businesses to prosper that would not have prospered

under convention lending guidelines, and (3) the RLF program was supported by effective regional economic planning and good program planning. I recall that during

my tenure the RLF program was particularly helpful in communities affected by

base closure and natural disasters; by contrast emergency loan programs administered by the SBA are limited in the time during which they are available and not

part of an overall local recovery strategy.

The House passed legislation does modify several regulations concerning the revolving loan fund (RLF) program of the EDA. The bill allows for more flexibility and

options in delivering this important program. The House bill specifically gives EDA

broad authority to issues new rules and regulations to ensure the ‘‘proper operation

and financial integrity’’ of Revolving Loan Funds (RLF). The bill also adds new language allowing EDA to permit grantees that are operating more than one RLF to

consolidate funds at the request of the local grantee. EDA is also given the authority

to transfer assets of RLF to 3d party for purpose of liquidation and adds new provision allowing EDA to authorize RLF operators to securitize or sell loans to secondary market.

One major provision was, however, left out of the House passed version that was

included in the Administration’s proposed legislation. As proposed in the Administrations legislation and included in S. 1134, modifications of section 209 to release

the Federal interest in a revolving loan fund grant is a long overdue correction to

the law, which currently creates an unnecessary—and frankly—unmanageable administrative burden on EDA and local communities. This will remove a significant

reporting requirement from local communities and monitoring responsibility from

EDA.

This is really a very modest step and other agencies—such as USDA—

‘‘defederalize’’ local loan programs once the funds have been fully recycled (loaned

out and then repaid). However, EDA’s revolving loan fund program is structured as

a grant to a local community, and therefore a more stringent standard than in a

loan program is appropriate. The requirement of 20 years of successful performance

ensures that only well run programs will be able to qualify for this step, and the

requirement of a reimbursement to the Federal treasury—not to EDA—ensures that

the Agency will have no financial incentive to defederalize non-qualifying programs.

Please understand that this process can only be undertaken pursuant to formal regulations promulgated by the Secretary of Commerce, and that the Department’s Inspector General will undoubtedly also be monitoring this process carefully.

One final comment: we tried to defederalize RLFs 6 years ago but did not pursue

it in the face of opposition by EDA’s friends in the Congress. The argument put forward at that time was that through defederalization, Davis-Bacon protection would

be weakened. At that time we did not have the data necessary to analyze that issue:

however, the Burchell report on RLFs previously cited clearly demonstrates that

these loans are not used in construction or public works but for working capital to

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small businesses for startup, retention or expansion purposes, and thus Davis-Bacon

does not apply.

CONCLUSION: ENDURING IMPORTANCE OF EDA

In these times of economic recovery, it is imperative that the EDA continue its

stated mission to ‘‘help our partners across the Nation (states, regions and communities) create wealth and minimize poverty by promoting a favorable business environment to attract private capital investment and higher-skill/higher-wage jobs

through world-class capacity building, planning, infrastructure, research grants and

other strategic initiatives.’’ By quickly and decisively acting on this important reauthorization, the Congress can send a lucid and convincing message that EDA and

its programs, that help create jobs and stabilize distressed economies, are a high

priority of the Federal Government.

RESPONES BY PHILLIP SINGERMAN TO ADDITIONAL QUESTIONS FROM

SENATOR JEFFORDS

Question 1. You have always been a supporter of the comprehensive economic development strategy; do you think that this process is still relevant in this technology

lead new economy environment?

Response. Over the past 8 years, Rutgers University Center for Urban Policy Research conducted a series of comprehensive studies of EDA’s programs, and found

that local planning was critical in the success of EDA’s programs, such as public

works. My personal experience as EDA Administrator is that when communities

had not engaged in a comprehensive planning process, but received funding (e.g.,

post flood disaster, base closures), the programs were not as well managed. EDA’s

planning programs are terribly under-funded - communities are receiving the same

level of funding that they received nearly forty years ago. EDA should devote a minimum of $50 million annually for planning, technical assistance, and research, and

any community- and State - that wishes to engaged in a comprehensive planning

process, should receive funding (although wealthier communities would be required

to provide a higher cost share).

Question 2. The House EDA reauthorization bill creates a new five percent planning performance award, but only for projects located in economic development districts. What is your opinion of this award and the overall incentive structure put

forward in the House bill?

Response. Communities should be encouraged to work with their local EDA-designated planning region; in this way local planning will be taken seriously. Accordingly, I support all incentives which encourage closer relationships and greater attention to comprehensive, inclusive planning.

REAUTHORIZATION OF THE ECONOMIC DEVELOPMENT ADMINISTRATION POLICY

RECOMMENDATIONS

PROVIDED BY THE INTERNATIONAL ECONOMIC DEVELOPMENT COUNCIL (IEDC)

EDA programs direct vital resources for infrastructure development, local capacity

building, and business development to alleviate conditions of unemployment and

underemployment in economically distressed areas and regions across the U.S. The

Federal law to authorize programs and funding for the Economic Development Administration (EDA), The Economic Development Administration Reform Act of 1998

(P.L. 105–393), expired on September 31, 2003. Renewal of our national commitment to the economic development priorities supported by this small, but highly effective Federal agency should be made a legislative priority for Congress in 2004.

The House of Representatives reauthorization proposal, H.R. 2535, was approved

on October 21, 2003, laying out a 5-year plan to continue EDA’s mission with some

modifications designed to improve performance and increase flexibility and funding

levels. The Senate introduced S. 1134 reflects the Administration’s proposal. No additional hearings or legislation action occurred in 2003. Pending reauthorization,

EDA continues to operate under the authority of the 1998 Act.

[‘‘This legislation was developed through an intense process of hearings and markups. It was an open process that allowed for the input of all Members and groups

with an interest in the legislation. This process has resulted in legislation that has

broad bipartisan support, the support of the administration, and the support of such

important partners as the National Association of Development Organizations,

International Economic Development Council, National League of Cities, National

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Association of Counties, and the United States Conference of Mayors.’’ Stated Chairman LaTourette in his opening House floor remarks for EDA reauthorization.]

In these times of economic recovery, it is imperative that the EDA continue its

stated mission to ‘‘help our partners across the Nation (states, regions and communities) create wealth and minimize poverty by promoting a favorable business environment to attract private capital investment and higher-skill/higher-wage jobs

through world-class capacity building, planning, infrastructure, research grants and

other strategic initiatives.’’ By quickly and decisively acting on this important reauthorization, the Congress can send a lucid and convincing message that EDA and

its’ programs, that help create jobs and stabilize distressed economies, are a high

priority of the Federal Government.

IEDC, as the nations’ largest organization representing economic development

professionals, urges the Congress to complete the EDA reauthorization this year.

IEDC supports passage of a comprehensive bill that will maximize funding, performance and accountability in EDA programs. This action will send a strong message

to economic development agencies and their private sector partners that Congress

is committed to the EDA mission of providing vital seed money to high performing

regional and local economic development projects.

The IEDC has prepared some policy guidelines for consideration in the formulation of an EDA reauthorization bill in the Senate. IEDC is committed to working

with the Congressional leadership to pass legislation widely supported by industry

and economic development practitioners committed to national priorities of job creation and economic growth.

EDA IMPORTANCE

• The EDA is the only agency within the Federal Government that works solely

to promote private sector job growth with programs and activities that directly relate to economic development.

• EDA maintains effective interagency partnerships with other Federal agencies,

including the Departments of Defense, Labor, Energy, Agriculture, HUD, the EPA,

ARC and FEMA/DHS, to promote economic development in distressed areas.

• EDA has a strong regional operation working side-by-side with state and local

economic development agencies to plan, prioritize and implement economic development projects emphasizing the creation of jobs and sustainable, comprehensive economic growth.

• EDA’s record of performance under the Government Performance Review process is one of best among Federal programs and agencies. EDA was also heralded

recently in a study released by Rutgers University to evaluate the public works program at EDA. Rutgers rated EDA’s work exemplary. They found a 100 percent return on investment for all projects (public and private) supported by EDA funding.

For every $1 million of Federal money spent, another $1 million was leveraged in

Federal, state, or local investment dollars. The study found, on average, this level

of investment also produced 325 direct permanent jobs in the impacted community.

EDA reporting shows an even more optimistic outcome. Looking at data collected

on investments since 1965, EDA shows public works investments have generated

$10 million in private sector dollars and $10 million in the local tax base for every

$1 million spent by EDA.

• Quick reauthorization of EDA will also be important for communities that suffer the closure—or significant downsizing—of a local military base during the 2005

Base Realignment and Closure (BRAC) round. During the previous four base closure

rounds, the agency provided almost $650 million in grants to 106 communities for

economic planning and redevelopment assistance. Up to approximately 100 installations could be closed through the 2005 round. EDA grants help communities achieve

productive civilian reuse of closed military bases and rapid economic development

through technical and financial assistance.

The mission of EDA is to address severe and persistent conditions of unemployment and underemployment in severely distressed communities, many struggling to

recover from the loss of a major employer or other economic dislocation. Through

infrastructure grants, strategic planning assistance, business development capital

and technical assistance, EDA provides a level of investment that acts as a catalyst

for economic development that would typically not progress if not for the EDA funds

to close financing gaps and spur capital investment. Moreover, EDA requirements

for state and regional collaboration in planning and implementation of economic development strategies works to build capacity and partnerships that are sustainable

and innovative.

• IEDC urges the Senate to draft EDA reauthorization legislation that builds

upon the existing successes and structure of the Administration,

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• Increases and commits to higher funding levels and performance standards, and • Encourages partnerships at the local level across numerous stakeholders and

service providers.

EDA: HELPING TO ENSURE THE FUTURE OF AMERICAN MANUFACTURING

EDA is also an important capacity building program, which increases the productivity of the nation. It does this by making investments that leverage under-utilized

economic resources—human capital, financial capital, and real estate—that are reflected in unemployment, inadequate business financing, and low valued land. It

does this by redeveloping physical infrastructure that is threatened by abandonment

due to such things as military base closures and changes in international flows of

capital. And it does this by broadening the participation of minorities and women

in the work force.

Over the past 3 years, American manufacturing jobs have dramatically declined.

The cause of this decline can be traced to decisions made by domestic manufacturers

to relocate plants and factories in foreign countries offering a more lenient production environment and lower wage work force. In light of these global changes, the

Administration is actively seeking ways to address the critical loss of U.S. manufacturing jobs. Some of this attention is focused appropriately on job training, and

some will seek to support emerging industries, including high-tech manufacturing.

IEDC supports and encourages all of these steps, and believes the EDA, as the lead

Federal agency working with economic development districts and related state and

local government agencies, should play a major role in these efforts to address the

decline in the American manufacturing industry.

The EDA provides a number of demonstrated tools that can be used to secure

manufacturing employment by creating new opportunities for job creation, technology advancement, skills and job training and infrastructure development. The

EDA works directly in the communities that are most devastated by the loss of

major manufacturers. The EDA’s Economic Adjustment grants provide the muchneeded support for communities dealing with the ‘‘sudden and severe’’ distress

caused by layoffs, downsizing and plant closings. We urge the Senate to support the

need to focus on manufacturing jobs, and to consider a new program or title in the

EDA reauthorization that will invest new dollars in this seriously impacted sector

of the economy.

This spring the Congress will be reviewing the Administration’s budgetary requests for fiscal year 2005, and this summer, agencies will be submitting their requests to the Administration for fiscal year 2006 funding. During the normal give

and take of the budgetary process, an agency that is not reauthorized will suffer

in the process; for those who care about the ability of EDA to provide critically needed support to our most distressed communities and populations, delay is not an option.

LEGISLATIVE OVERVIEW & POLICY STATEMENTS

As a general statement of support, the IEDC membership endorses the position

taken by the House legislation, H.R. 2535, almost entirely. IEDC’s support is consistent with our industry and association colleagues, including The National Association of Development Organizations, the National League of Cities, the U.S. Conference of Mayors and the National Association of Counties. The following summary

of key issues for the reauthorization highlights provisions in H.R. 2535 supported

by IEDC members and offers some recommendations for additional provisions or

modifications for consideration in a final package.

Support H.R. 2535:

New Performance Incentive Award.—Support incentive award under the Public

Works and Economic Adjustment Program(s) of up to 10 percent of the original

grant amount. The award could be used to fund up to 100 percent of any other EDAeligible project or activity, or to meet the non-Federal match requirement for another project funded by EDA or another Federal agency. The flexibility of use on

this award sends a strong signal of the high premium EDA will place on high standards of performance. The award will allow EDA and local grantees to leverage even

greater success from innovative challenges in struggling communities to invest in

new job creation and economic growth projects. The award program will provide a

strong incentive for grantees to complete projects on or ahead of schedule.

New District Bonus Award.—Support replacing the existing 10 percent district

bonus award with a tiered system that includes the original 10 percent bonus

award, as well as the potential for an additional 5 percent planning bonus award

to a project grantee who are part of an economic development district. The bonus

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opment district and for projects that are in accordance with the comprehensive economic development strategy of the district. The bonus award provides added incentive for cooperation and comprehensiveness in EDA project funding.

Ensuring Planning Coordination.—Support requirement that state and local governments and economic development districts continue to develop EDA-funded state

plans in a cooperative manner, ‘‘to the maximum extent practicable.’’ Currently,

states are required to certify that the state plan is consistent with local governments and economic development district plans. H.R. 2535 amends the law to require states, before receiving EDA planning funds, to outline the extent to which

they will consider local and district plans. [The Administration proposes to eliminate

the requirement that states work with local districts. S. 1134 would only require

states to take regional economic development strategies ‘‘into consideration’’ when

creating new plans.] It is critical to the success of economic development efforts that

all affected parties remain involved in the process of attracting new investment and

spurring job growth.

Matching Requirements.—Support replacing the current 75–25 Federal-local

matching requirement with a flexible system that allows EDA to adjust the Federal

share of infrastructure and economic development projects based on the specific circumstances of the grantee. As a general rule, the Federal share is capped at 80 percent, with exceptions made for Indian tribes, local governments, planning districts

and other groups who have exhausted their financial capacity. The Federal share

for planning grants is set at 65 percent with the potential for an 80–20 cost split.

The Administration request is reflected in the House approved language. EDA funding has contributed to thousands of successful projects and is often the catalyst for

moving a project forward. EDA should be allowed to utilize its extensive experience

in project planning and investment to adjust the Federal share for grant projects

to address special needs.

Cost Underrun Provisions.—Support changes that allow local grantees to use excess funds from EDA-funded projects, known as cost underruns, to increase the Federal share of the project costs. This would, in affect, lower the local match of the

project, as well as provide more flexibility at the local level. EDA would also be allowed to recapture and reprogram excess funds where the grantee is not undertaking a new project and cannot otherwise use the funds. Current law requires excess funds to be returned to the general fund. Project grantees should be rewarded

for completing projects under budget and should be given the flexibility to reduce

local matching funds, and/or reinvest excess funds from cost underruns. This provides more options and increased levels of funding for EDA supported activities.

Special Impact Areas.—The House bill allows the EDA to waive the CEDS requirement for certain project grantees. This provision is intended for remote areas

and requires that the EDA provide congressional committees with a justification for

any waiver. This provision is a modified version of the Administration’s proposal for

special impact areas.

Authorization of Appropriations.—Current Law authorized $1.71 billion over 5

years: $335 million for FY2001–2003, $368 million in FY2000 and $398 million in

FY99. H.R. 2535, as approved in the House, authorizes $2.25 billion for EDA programs for 5 years: $400 million for FY2004, and an additional $25 million each year

for FY2005-FY2008. The Administration requested $321 million for FY2005 and

such sums as necessary in the remaining years.

IEDC is concerned about the steady decline in funding for EDA programs, and

particularly the disproportionate cuts imposed by the FY2004 Omnibus Appropriations Act. The FY2004 appropriation of $288 million is 15 percent below the authorized level and 30 percent below the House recommended authorization level of $400

million. Based on EDA performance data, a $43 million investment could result in

an additional $129—430 million in private sector investment and the potential for

22,000 jobs.

IEDC strongly urges Congress to fund EDA programs in the budget and appropriations process at fully authorized levels, especially the public works program and

planning grants. EDA has one of highest performance ratings of any Federal agency

program. The Public Works program provides valuable infrastructure development

leverage for encouraging new investment and business growth. Economic planning

allows communities to weather short-term economic challenges and implement longterm economic recovery. This is particularly important during times of recession, industry decline and worker displacement events.

POLICY AND PROGRAM RECOMMENDATIONS

In general, IEDC supports the House passed version for EDA reauthorization. The

following are ideas that would help strengthen and improve upon the H.R. 2535.

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These recommendations are based on the needs that IEDC has recognized in the

field of economic development. These recommendations would dramatically impact

local economic development efforts and help to improve the services, programs and

benefits furnished by the Economic Development Administration.

Recommendation #1: Authorize EDA to implement new regulations to deFederalize

certain revolving loan funds.

H.R. 2535 is consistent with the Administration proposal by expanding EDA authority to revise regulations for the Revolving Loan Fund (RLF) program, as appropriate. H.R. 2535 specifically modifies RLF provisions, including a clarification that

only local grantees may request an amendment or consolidation of RLF agreements.

The RLF Program could be dramatically improved by:

1. Allowing EDA to recapitalize and expand the lending capacity of existing

RLFs that have established a successful track record and demonstrated demand.

2. Implementing a new technical assistance program to complement the RLF

program that will better safeguard investments made by the RLF, including authority to allow RLF grant funds to be used for professional development for

RLF managers.

3. Allow EDA to deFederalize RLF moneys once they have been loaned out

and repaid one time. This is consistent with other Federal loan programs, will

reduce paperwork and regulatory burden while continuing to require local accountability.

The EDA 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. By using limited public funds to leverage private capital, locally managed RLFs have provided business capital to

thousands of new and existing companies that have difficulty securing conventional

financing.

Capitalized with an EDA grant, RLFs are managed by public and private nonprofit organizations (including economic development districts) designed to further

local economic development goals by lending their initial capital and then reloaning

funds as payments are made on the initial loans. Loans are typically used for fixed

assets or working capital needs. Organizations are also required to demonstrate how

the RLF fits their local needs, as defined in a comprehensive economic development

strategy.

The participation of RLF funds in a business deal usually encourages once-reluctant banks to also lend, since loan funds normally agree to let banks recoup their

losses first from the business’ collateral in the event of default. By providing such

gap financing, loan funds have been instrumental in the growth of companies that

otherwise would not have received funding.

Recommendation #2: Broaden the scope and authority of current Brownfield funding

legislation by amending the 2003 Small Business Liability Relief and Brownfield

Revitalization Act.

H.R. 2535 provides language that specifically allows nonprofit organizations to be

eligible for brownfield redevelopment projects. This additional provision will expand

both the EDA and nonprofit sector’s ability to redevelop these sites. IEDC supports

these provisions and urges the Senate to include such language in their version of

EDA reauthorization.

However, other barriers need to be removed which prevent communities from tapping into Federal resources for brownfield redevelopment. IEDC recommends that

the Senate include language in the EDA reauthorization legislation that amends the

2003 Small Business Liability Relief and Brownfield Revitalization Act.

The amendment would remove the prohibition against the use of EPA grant funds

for clean up and redevelopment of sites acquired prior to the law’s January 11, 2002

enactment. This amendment should also include language to eliminate the prohibition on using EPA grant funds for reasonable administrative costs to carry out

brownfield projects. These prohibitions limit the range and scope of Federal

brownfield redevelopment efforts and changing these rules would qualify numerous

sites across the country for Federal funding to spur redevelopment and revitalization. Ultimately leading to increased investment in local project and the creation of

new jobs.

While this technical change does not apply directly to the EDA reauthorization

measure, it is an important technical problem facing brownfield redevelopment.

EDA is committed to the practice of redeveloping brownfields and these technical

changes would open up the range of projects that may apply for funding from both

the EPA and EDA.

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Recommendation #3: Stipulate that the newly created Brightfields Program under

H.R. 2535 is subject to specific appropriations over and above current funding

levels for existing EDA programs.

IEDC in general does not support special categories of funding such as this new

program because they tend to reduce the overall portion available for all EDA activities rather than adding to the total appropriations level. However, in case of the

newly proposed Brightfield Program, IEDC feels that this problem can be remedied

by authorizing a new program under the EDA that is funded at up to $5 million

annually from fiscal year 2004 through 2008, subject to appropriations, and under

the additional stipulation that no funds may be transferred from the EDA program

budget allocation for this new program unless Congress has appropriated the full

amount authorized for EDA programs under the Act. If appropriated at fully authorized levels, EDA may set aside up to $5 million into the budget for these purposes.

If less than fully authorized levels are appropriated, brightfields projects can compete for funding under existing EDA program authority.

Recommendation #4: Strengthen language to reinforce the partnership between business and industry sectors and Workforce Development planning and implementation.

Under local and economic development district plans. The Administration had

provided language that supports the coordination of economic development plans

with the Department of Labor’s work force investment plans. The House bill reinforces that plans developed with EDA funding need to be ‘‘consistent and coordinated with any existing comprehensive economic development strategy for the area.’’

Workforce development is becoming a critical factor in economic development considerations. The U.S. Department of Labor has appropriately concluded that ‘‘businesses in high-growth industries face increased difficulty in finding workers with

the skills they need as a result of globalization, the aging of America’s work force,

and the fact that technology and innovation are continuously changing the nature

of work. As a result, job training community colleges will be increasingly critical

providers for workers needing to retool, refine, and broaden their skills.’’ IEDC supports the goal of DOL that partnerships among industry and the public work force

system, including community colleges and universities, will be a critical economic

development tool in every labor market.

IEDC supports the inclusion of work force development activities as a factor in

developing plans and urges the Senate to support strong language that directly

links work force and economic development efforts, and seeks a formal partnership

between EDA and DOL in pursuing these objectives.

ABOUT IEDC

The International Economic Development Council (IEDC) is the leading association serving economic development professionals and those in allied fields. IEDC’s

more than 4,000 members are committed to building local and regional economies

worldwide. The key to IEDC’s reputation and steady growth is its access to a large

and diverse pool of professionals and the quality of the council’s staff. For more than

30 years, IEDC and its predecessor organizations have been producing quality services that help find solutions to the complex and varied issues of economic development.

To support these endeavors, IEDC cultivates an ever-increasing wealth of resources that includes:

• An active Advisory Services & Research department that fulfills private and

government contracts,

• A history of designing successful conferences and events for membership and

Federal agencies such as Economic Development Administration,

• An extensive in-house library and an information clearinghouse that incorporates member and staff expertise,

• Leading-edge case-study-oriented publications,

• Timely and expert legislative tracking services, and

• Management, design and operation of industry’s leading professional development program.

IEDC is the one source, one voice and one force in economic development.

IEDC is pleased to offer expertise and assistance to the U.S. Senate Environment

and Public Works Committee over the coming months in designing legislation that

reauthorizes the Economic Development Administration. Contact Toby Rittner, Director of Legislative Affairs; at 202–942–9489 or via email at trittner@iedconline.org

for more information on how IEDC can be of assistance.

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1The National Association of Regional Councils is a public interest group formed in 1965 by

the National Association of Counties and the National League of Cities to address the growing

interest in regional cooperation among local governments. The association became an independent organization in 1967, serving the interests of all regional councils (councils of government, planning commissions, development districts, metropolitan planning organizations and

rural transportation planning organizations) throughout the United States in both metropolitan

and rural areas. Twenty of its 24 board members are elected officials representing counties and

cities. NACo and NLC still appoint a representative each to the NARC board. NARC is active

in supporting regionalism and the utilization of the network of regional councils across the

United States to address issues involving transportation, economic development, housing, work

force development, senior citizens programs and numerous environmental issues including water

quality and quantity and air quality.

With headquarters on Capitol Hill, NACo is the only national organization that represents

county governments. More than 2,000 counties, representing 85 percent of the nation’s population, are members of NACo. The association acts as a liaison with other levels of government,

works to improve public understanding of counties, serves as a national advocate for counties

and provides them with resources to help them find innovative methods to meet the challenges

they face.

STATEMENT OF THE NATIONAL ASSOCIATION OF REGIONAL COUNCILS1 AND NATIONAL

ASSOCIATION OF COUNTIES

Chairman Inhofe, Ranking Member Jeffords, distinguished members of the panel,

the National Association of Regional Councils (NARC) and the National Association

of Counties (NACo) are pleased to present testimony for the record regarding reauthorization of the Economic Development Administration.

Since its inception in 1965, the Economic Development Administration (EDA) has

been a major factor in supporting economic development efforts in distressed cities

and counties throughout the country. It is one of the few agencies that supports

strategic planning efforts that allow cities and counties to develop a road map for

economic recovery over a broad, multi jurisdictional area. Working through their

designated Economic Development Districts, local communities have participated in

Their own recovery plans through development of a Certified Economic Development

Strategy (CEDS). The CEDS process is a bottoms-up approach to economic development.

This approach has helped thousands of distressed areas build infrastructure that

attracts business development.

EDA is an important component of local, regional economic development. EDA’s

role is to address longer-term economic problems that affect the national economy

and cyclical national patterns of need or distress, such as defense economic adjustment, post disaster economic recovery, resource or industry based downturns (coal,

plant closures, timber, textiles, fisheries, etc.). EDA is equipped with a strong portfolio of program tools that can be readily engaged to accomplish their mission—planning and technical assistance, public works, research and national technical assistance, trade adjustment assistance, and economic adjustment.

EDA remains as the only program with a specifically established national network

solely focused on the economic revitalization of localities and regions experiencing

longer-term or unanticipated distress. It is the only agency with a clear legislative

mandate to address national cyclical economic needs in America’s communities.

NARC and NACo, along with several other organizations, were actively involved

with the Administration and the House Transportation and Infrastructure Subcommittee on Economic Development, Public Buildings and Emergency Management

in working out agreements on the House-passed version of EDA reauthorization,

H.R. 2535.

We support the contents of that bill. A new and potentially innovative provision

will allow up to a 10 percent bonus to the grant recipient that meets or exceeds all

the objectives outlined in the original grant proposal. However, the proposal is untried and gives some concern about how requirements will be structured and how

management of provision will be accomplished.

For example, a grantee that is seeking funding to develop infrastructure for a

promised business or industry location can receive the bonus provided all objectives

as outlined in the original grant proposal are met or exceeded. Objectives in a grant

proposal are based on what a company has said it will invest financially in the

project, and on how many jobs the company says it will create or retain. There are

instances in which a company has decided at the eleventh hour to invest less money

for a variety of reasons and therefore hire fewer people. Local governments should

not be held responsible for such business decisions that can be based on a variety

of reasons. We believe there is a way to address this potential problem.

We urge the committee to allow up to 5 years for a grant recipient to receive its

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nal application. Any time during the 5-years, a community that reaches its stated

goals could receive its bonus and use it as non-Federal share for another EDA grant

or for an economic-development related grant from any other Federal Agency.

PLANNING AS AN ECONOMIC DEVELOPMENT TOOL

The Economic Development Administration has always recognized the value of regional planning. The CEDS is a document that is developed by local elected officials,

private citizens and business organizations as a blueprint for economic growth.

Planning funds, however, have been static. Economic development districts are receiving the same $52,000 per year that they received 25 years ago. In today’s economy, that $52,000 has the purchasing power of about $13,000 or 75 percent less

than in 1970. Obviously this makes it extremely difficult for a district to maintain

the skilled work force needed to develop economic strategies.

We urge the committee to support a substantial increase in planning funds from the current $24 million that will allow districts to receive additional planning funds

and provide funding for new district that have been unsuccessful in receiving EDA

designation. For example, several areas in Vermont are interested in securing designation as an economic development district because of economic conditions. However, the scarcity of planning funds has made this nearly impossible.

Another provision in the House legislation would allow flexibility in the planning

fund match requirements. There are years in which a district and its local government members are restricted in their abilities to meet the 50/50 match. We support

provisions in the House bill that would allow a 65 federal/35 local match, allowing

districts and their local government members the flexibility to add more to planning

funds when tey have such funding available and less during times of local budget

crunches.

NARC and NACo also supports an expanded timeframe for the CEDS. As one

small, rural Vermont region indicated, no other Federal program that the region

deals with requires review and update as frequently as EDA. This is a particularly

onerous burden on small and rural regional organizations with limited staff and resources, particularly given the current strain on planning funds.

Our organizations support an extended timeframe for reporting on CEDS of at

least 3 years and possibly as long as 5 years. This will reduce paperwork, thereby

relieving staff burden and the additional costs of annual updates. We do not believe

this expanded timeframe would in any way impact the quality of information EDA

receives. We are aware that EDA has been experimenting with the expanded timeframe in at least one of its regions.

STATE PLANNING

The House passed reauthorization of EDA allows state planning that may or may

not take into consideration locally and regionally developed economic recovery strategies. The argument in support of this provision is that it would be too expensive

for states to evaluate these local and regional plans and incorporate them into a

state-wide strategy.

We believe that it is important for states to consider at least regionally developed

plans that have been signed off on by local governments. This would greatly reduce

the number of plans that must be reviewed and it would provide locals with input

into state-wide planning. In Oklahoma, for example, 10 of the 12 regional councils

are designated economic development districts. A review of 10 regional plans that

have been adopted by local governments, citizens and the business community

should not constitute an onerous burden for states.

Currently, few states utilize EDA planning funds. The new provision may well encourage more states to participate. Since planning funds are already inadequate,

adding state planning funds to the mix could reduce the amount of funding that designated economic development districts receive and could prevent the establishment

of new districts. Our organizations have no objections to state planning utilizing

EDA money as long as additional funding resources are available.

REVOLVING LOAN FUNDS

We support EDA’s efforts to maintain proper operation and integrity of revolving

loan funds. However, we would urge EDA to address in any new regulations the

concerns of current revolving loan fund operators regarding requirements on percentage of funds that must be loaned out at all times and the maximum amount

of a loan.

The idea of a revolving loan fund is to keep a high percentage ‘‘on the streets’’

to benefit local business and industry owners. We support this concept, but during

economic slowdowns, loan fund operators have difficulty finding new businesses that

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are a good financial risk or existing businesses that are interested in expanding.

New regulations should consider the cyclical nature of economic development.

New regulations should also allow a higher percentage of a revolving loan fund

to be loaned out to a particularly good business prospect. It is not necessarily the

quantity of loans that should be considered, but rather the quality and impact of

loans that are made. We support the provision in the House legislation that would

allow the Secretary to consolidate different revolving loan funds at the request of

the grantee.

CONCLUSION

The Economic Development Administration has proved itself as an effective Federal program that addresses bottom-up economic development strategies. It deserves

the full support of Congress through reauthorization and through an increase in authorized funding levels.

We feel it is imperative that EDA not be allowed to languish as an unauthorized

agency. Our organizations are prepared to work with members of the committee to

support legislation that can pass Congress this year.

UNION COUNTY BOARD OF COMMISSIONERS,

La Grande, OR, February 20, 2004.

Senators Gordon SMITH and Ron WYDEN,

Representatives Greg WALDEN, David WU, Peter DEFAZIO, Darlene HOOLEY and

Earl BLUMENAUER,

Washington, DC.

Oregon Congressional Delegation:

We are writing to express deep concern regarding the new 2004 rule from the Economic Development regarding the 22:1 match for economic projects. Union County

enjoys a wonderful working relationship with our federal partners regarding our

economic efforts. As a very rural area, we have had to work double time to recover

our once prosperous region. We consider Anne Berblinger, our EDA representative,

a great ally, as she has always been there as a champion in our efforts to steer our

economic ship away from the rocks. We see this new rule to be a considerable barrier to our partnership. We find that increasingly we no longer have the resources

or capacity to be a player.

As the attached document will show, the residents of Union County have seen a

20 percent drop in their comparative wages over the past two decades. This dissolution of our economic base has been due, in most part, to federal regulations impacting our once. thriving natural resources industry.

To have the federal government be the architects of our collapse and then impose

rules to recovery that will virtually guarantee our inability to participate seems another federal government blow to rural America.

We ask your help in correcting this imbalance.

Sincerely,

JOHN LAMOREAU, Board Chairman.

COLLEEN MACLEOD, Commissioner.

STEVE MCCLURE, Commissioner.

STATE OF OREGON, EMPLOYMENT DEPARTMENT, LABOR MARKET INFORMATION

A BRIEF COMPARISON OF EARNINGS TRENDS SINCE 1979

As a general rule, rural areas of Oregon have consistently lagged the statewide

and national averages in earnings and income. While it may be widely acknowledged that such a difference exists, perhaps the most troubling aspect of rural Oregon’s experience over the past 20–25 years is that this gap in earnings has widened

significantly over time.

This brief analysis compares average annual earnings per job between Union

County, Oregon, and the United States, using Oregon Employment Department and

U.S. Bureau of Labor Statistics data.

As of 1979, average pay per job was:

• $13,155 in the United States • $13,198 in Oregon

89

• $11,922 in Union County

As of 2002 (the latest available annual data), average pay per job was:

• $36,764 in the United States

• $33,685 in Oregon

• $26,033 in Union County

Therefore, since 1979, average earnings per job have increased 179 percent nationally, 155 percent statewide, and only 118 percent in Union County.

Put another way, average earnings per job in Union County have shifted from

being 91 percent of the national average in 1979 to only 71 percent by 2002.

EDA Match.doc: February 20, 2004

Oregon Employment Department: Yohannan

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