U.S. GOVERNMENT PRINTING OFFICE

52–634 CC WASHINGTON : 1999

S. HRG. 105–914

ECONOMIC DEVELOPMENT PARTNERSHIP ACT

HEARING

BEFORE THE

SUBCOMMITTEE ON

TRANSPORTATION AND INFRASTRUCTURE

OF THE

COMMITTEE ON

ENVIRONMENT AND PUBLIC WORKS

UNITED STATES SENATE

ONE HUNDRED FIFTH CONGRESS

SECOND SESSION

ON

S. 1647

A BILL TO REAUTHORIZE AND MAKE REFORMS TO PROGRAMS AUTHORIZED BY THE PUBLIC WORKS AND ECONOMIC DEVELOPMENT ACT OF

1965

JULY 14, 1998

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

(

For sale by the U.S. Government Printing Office

Superintendent of Documents, Congressional Sales Office, Washington, DC 20402
(II)

COMMITTEE ON ENVIRONMENT AND PUBLIC WORKS

ONE HUNDRED FIFTH CONGRESS

JOHN H. CHAFEE, Rhode Island, Chairman

JOHN W. WARNER, Virginia

ROBERT SMITH, New Hampshire

DIRK KEMPTHORNE, Idaho

JAMES M. INHOFE, Oklahoma

CRAIG THOMAS, Wyoming

CHRISTOPHER S. BOND, Missouri

TIM HUTCHINSON, Arkansas

WAYNE ALLARD, Colorado

JEFF SESSIONS, Alabama

MAX BAUCUS, Montana

DANIEL PATRICK MOYNIHAN, New York

FRANK R. LAUTENBERG, New Jersey

HARRY REID, Nevada

BOB GRAHAM, Florida

JOSEPH I. LIEBERMAN, Connecticut

BARBARA BOXER, California

RON WYDEN, Oregon

JIMMIE POWELL, Staff Director

J. THOMAS SLITER, Minority Staff Director

(II)
(iii)

CONTENTS

Page

JULY 14, 1998

OPENING STATEMENTS

Baucus, Hon. Max, U.S. Senator from the State of Montana .............................. 3

Boxer, Hon. Barbara., U.S. Senator from the State of California ....................... 6

Chafee, Hon. John H., U.S. Senator from the State of Rhode Island ................. 2

Lieberman, Hon. Joseph I., U.S. Senator from the State of Connecticut ........... 4

Warner, Hon. John W., U.S. Senator from the Commonwealth of Virginia ....... 1

Wyden, Hon. Ron, U.S. Senator from the State of Oregon .................................. 16

WITNESSES

Burchell, Robert W., Center for Urban Policy Research, Rutgers University,

New Brunswick, NJ ............................................................................................. 20

Prepared statement .......................................................................................... 43

Daley, William, Secretary, Department of Commerce .......................................... 8

Prepared statement .......................................................................................... 34

Fosler, R. Scott, President, National Academy of Public Administration ........... 23

Letter, EDA activities, by Phillip Singerman ................................................ 29

Prepared statement .......................................................................................... 52

Report, National Academy of Public Administration .................................... 23

Singerman, Phillip, Assistant Secretary for Economic Development, Department of Commerce ............................................................................................... 14

Prepared statement .......................................................................................... 35

Responses to additional questions from:

Senator Boxer ............................................................................................ 41

Senator Warner ......................................................................................... 39

Senator Wyden .......................................................................................... 42

Thompson, Eric P., Executive Director, Lower Savannah Council of Governments and President, National Association of Development Organizations,

on behalf of the Coalition for Economic Development ...................................... 32

Prepared statement .......................................................................................... 71

Villines, Floyd G., Judge/Executive, Pulaski County, Arkansas, on behalf

of the Coalition for Economic Development, Little Rock, AR ........................... 18

Membership list, Coalition for Economic Development ................................. 71

Prepared statement .......................................................................................... 54

Report, EDA Success Story, North Little Rock, Arkansas ............................ 58

Tables, EDA Investment History by State ..................................................... 66

ADDITIONAL MATERIAL

Letter, Educational Association of University Centers ........................................ 77

Statement, National Association of Development Organizations ........................ 73

Text of S. 1647, Economic Development Partnership Act of 1998 ....................... 79
(1)

ECONOMIC DEVELOPMENT PARTNERSHIP

ACT, S. 1647

TUESDAY, JULY 14, 1998

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

The subcommittee met, pursuant to notice, at 9:35 a.m. in room

406, Senate Dirksen Building, Hon. John Warner [chairman of the

subcommittee] presiding. Present: Senators Warner, Baucus, Lieberman, Boxer, Wyden, and Chafee [ex officio].

OPENING STATEMENT OF HON. JOHN W. WARNER,

U.S. SENATOR FROM THE COMMONWEALTH OF VIRGINIA

Senator WARNER. The hearing will come to order. Good morning, everyone. This morning the subcommittee will focus on the reauthorization of the Economic Development Administration under the aegis of the Department of Commerce, and we

welcome a very celebrated and well-known Secretary at the moment and I think for the indefinite future.

The Economic Development Administration has made many valuable contributions to communities throughout the Nation. EDA is

a small but very, very important agency that contributes significantly to the economic growth and expansion all across our Nation.

The Economic Development Administration maintains the task of

saving and creating jobs in areas that are economically distressed.

To meet these objectives, EDA provides assistance to distressed

States and localities through grants for public infrastructure, economic adjustment, planning, and technical assistance, all of which

are intended to promote a transition to long-term employment and

growth.

Through these programs EDA fulfills a key function in providing

State and local Governments, nonprofit organizations, and public

institutions with vital economic grants and technical assistance.

These grants are given on a cost-shared basis, with the Federal/

non-Federal ratio varying according to the program. EDA grants

focus on a number of different programs administered by the Assistant Secretary, who will be testifying before us today as well as

the Secretary. Many States, the Commonwealth of Virginia included, have benefited greatly from these programs.

Grants provided under public works programs give seed moneys

for infrastructure projects intended to help these distressed com-
2

munities support private-sector investments. Grants allow communities to meet economic challenges in a variety of ways, making

public works improvements to attract new businesses, like industrial parks, providing technical assistance and planning grants that

allow a community to plan for its future.

Since 1982, the Economic Development Administration has been

functioning without authorization, rather through appropriations

under the Commerce/Justice/State Appropriations Subcommittee.

Our hearing today will focus on the need for a reauthorization of

EDA, the future mission of the EDA in helping communities help

themselves.

I thank the distinguished Chairman and Ranking Member for

supporting this subcommittee Chairman in recognizing we ought to

try hard this year to get a reauthorization. I thank you.

Mr. Chairman?

OPENING STATEMENT OF HON. JOHN H. CHAFEE,

U.S. SENATOR FROM THE STATE OF RHODE ISLAND

Senator CHAFEE. Thank you very much, Mr. Chairman. I want

to thank you as Chairman of this subcommittee for holding this

hearing today. I’m pleased to join in the welcome that you have extended to Secretary Daley and Assistant Secretary Singerman. Secretary Daley and I go back a ways. I’ll never forget when he was

good enough in the fall of 1993 to come up to Providence, Rhode

Island, where we conducted a rally for NAFTA in which he spoke

very persuasively in one of our major plants. It was a big success.

Again, Mr. Secretary, I want to thank you for having done that.

Also, I’m informed that the Secretary has not one but two children, one graduated and another one there now, at Providence College in my State. So, we look at him as——

Senator WARNER. Really? Is there a shortage of institutions in

Delaware?

[Laughter.]

Senator CHAFEE. He likes to have his children get around and

see different parts of the country, and we’re very grateful that he’s

chosen Providence College.

Your testimony will be very helpful to the full committee as we

consider, following the actions of this subcommittee, whether to

proceed with the reauthorization of the EDA. As you all know,

EDA, as the Chairman mentioned, has not been reauthorized since

1982. And although the Environment and Public Works Committee

did report a bill out in 1994, it didn’t clear the Senate and didn’t

end up becoming law.

I want to be up front with everyone here as regards my position

on EDA. I have historically not been a big fan of EDA. As a matter

of fact, in 1985, I’m admitting this now because somebody else will

discover it if I don’t, I sponsored an amendment to eliminate EDA.

But in recent years, I’ve taken notice of the changes in the agency,

under Mr. Singerman and the leadership of Secretary Daley, and

it’s efforts to streamline its operations, target its efforts toward

truly distressed communities. I’ve come to believe that we should

move forward with a reauthorization bill that locks in some of the

changes that have been undertaken.
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So over the past few weeks, I’ve been reviewing S. 1647, the legislation before us today, and have been working with the Chairman, and will continue to do that, with hopes that we can enact

an EDA reauthorization bill this year. I’m for that and I’ll do all

I can to see that it gets done.

I want to thank you, Mr. Chairman, for taking the leadership

here.

Senator WARNER. Thank you.

Would others care to make any opening remarks?

Senator BAUCUS. Mr. Chairman?

Senator WARNER. Senator Baucus.

OPENING STATEMENT OF HON. MAX BAUCUS,

U.S. SENATOR FROM THE STATE OF MONTANA

Senator BAUCUS. Thank you. Mr. Chairman, I want to thank you

very much for holding this hearing. I want to particularly thank

the full committee chairman for his very wise reevaluation of the

program.

Senator CHAFEE. Reformation.

Senator BAUCUS. It really is a hallmark of sort of the ability of

the Senator from Rhode Island to not be locked into something in

an unthinking way but to look at programs on the merits and look

at new evidence and new circumstances and do what’s right. I really appreciate your statement, Mr. Chairman. It means a lot to me,

as I know it does to many others on this committee.

I also want to thank you for you for holding this hearing.

Mr. Chairman, I think it’s particularly important that we reauthorize EDA because the program has done so well for so many

people in so many parts of the country, and because if we don’t the

program is no longer going to be in the jurisdiction of this committee. It’s going to be basically up to the vagaries of the Appropriations Committee, particularly in years when budgets are pretty

thin. For those reasons, I strongly urge this committee to report

out a bill reauthorizing the Economic Development Administration.

Since its inception in 1965, Mr. Chairman, I believe EDA has established a very impressive track record of helping communities

help themselves. That’s what it does—it helps communities help

themselves. EDA programs, whether they are grants or loans, help

communities bootstrap their own efforts to meet economic challenges in a variety of ways—making public works improvements,

attracting businesses, providing technical assistance, planning

grants, and tailoring a whole host of various programs to meet the

specific circumstances of a community.

In Montana, EDA has been a very powerful ally in responding

to changes in economic conditions. One example is in the restructuring of Malmstrom Air Force Base. Through EDA, particularly

with the Revolving Loan Fund grant, EDA has been helping that

community undertake a defense conversion project. It was the single military facility in our State. Hundreds of jobs were lost in

downsizing the Air Force Base, but the EDA Revolving Loan Grant

fund provided for the Great Falls community will enable three

firms to locate and employ over 750 people.

In this regard, I want to particularly thank Mr. Phil Singerman,

who was in Great Falls a couple of times to see first-hand the
4

needs of the community. Therefore, the community is in a much

better position to help provide assistance. I can tell you, Mr.

Singerman, people of Great Falls are very appreciative of EDA.

I might also say, Mr. Chairman, EDA has been extremely helpful

in supporting the development of a major new company in Butte,

Montana. When plant construction is completed it will make the

silicon used to make silicon wafers. EDA provided the seed money

from the Revolving Loan Fund and enabled the community of

Butte, Montana, to provide certain economic incentives. This firm

will make 25 percent of all the silicon used in silicon wafers in the

world. It’s a huge new plant. I must say that it’s not an American

plant, it’s a company setting up an American subsidiary. But this

plant, which is much larger of the two plants—the other one will

be in Idaho—will provide 25 percent of all the silicon used in silicon wafers in the world. That’s largely because of EDA. EDA didn’t

build the plant, but provided the seed money for a revolving loan,

which enabled the economic development organization in Butte to

find the company. Because of EDA’s help, no doubt about it, this

happened.

I could go on and list other areas in the country. For example,

when Hurricane Andrew devastated so much of Florida, EDA was

there. In the Midwest, EDA has been helping those areas affected

by disastrous floods. And one small community in Montana called

Libby——the Chairman of the subcommittee might have some idea

of where Libby is.

Senator WARNER. I do. Very good fishing.

Senator BAUCUS. I thought he did. Libby was a lumber town. A

huge mill there is almost gone. Libby was just really struggling.

EDA and the former Farmer’s Home Administration provided seed

money for a revolving loan fund. The community worked together

and they are attracting new business. But were it not for EDA,

those poor people in Libby would be facing very difficult plight.

Mr. Chairman, I thank you for holding this hearing. I strongly

urge this committee to report out a bill. We need some changes, obviously, to tailor it to the 1990’s and the next century, but it’s a

program that’s very, very worthwhile.

Senator WARNER. I thank you, Mr. Baucus. Your sincerity and

enthusiasm are conveyed in your remarks.

Are others wishing to speak for a minute?

OPENING STATEMENT OF HON. JOSEPH I. LIEBERMAN,

U.S. SENATOR FROM THE STATE OF CONNECTICUT

Senator LIEBERMAN. I do, Mr. Chairman. A minute? Thanks, Mr.

Chairman. Welcome to Secretary Daley and Secretary Singerman.

And thank Senator Chafee, too, for his statement. It struck me that

the message there is that not only is Senator Chafee is getting

older and wiser, which we all are familiar with from our service,

particularly wiser, but also that EDA has gotten better. That’s the

cause for his change of feeling about EDA. I do think this reauthorization puts into law the expression of growing bipartisan congressional satisfaction with what EDA is doing, but also formalizes and

institutionalizes some of the changes that have occurred that have

been the reason for the growing support.
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It is a particularly appropriate time for us to reauthorize EDA

after all these years without a reauthorization because of the remarkable state that our economy is in. It’s an extraordinary time

of growth and optimism. But there are still parts of our country

that are not sharing in that growth and they need some extra help.

I can tell you that in Connecticut we have the highest average

per capita income in the country, but we’ve got some of the poorest

cities in the country as well. I see even in those cities now the beginning of development and change and growth. And in just about

every case, EDA has been there with just that additional investment that has made some critical growth possible. Secretary

Singerman, I thought he only visited Connecticut that often. I’m

very impressed that you’ve been to Montana. His in-laws live in

Connecticut, so I understand why he comes there.

Senator BAUCUS. If the Senator will yield. He very wisely divides

his time between the State with the highest income per capita and

the State with the lowest income per capita. This way it averages

out a little bit.

[Laughter.]

Senator LIEBERMAN. Got it. He was in Hartford a while ago.

Here’s a project called Vita Root, an old abandoned industrial facility, just a big old factory lying there just dragging down a neighborhood, and there comes along one of the Lord’s true servants, Father Tom Berry, just a wonderful man, whose parents worked in

that factory and he has a dream that he’s going to revive it and

bring it back and make it a center of economic activity and help

revive the whole neighborhood. And a few weeks ago, Secretary

Singerman came in and announced an EDA grant which is going

to make that possible. So, thanks.

EDA happens to be, as I look across the Federal Government, the

only agency of the Federal Government that is focused on, charged

with stimulating industrial and commercial growth in economically

distressed areas. This agency is really focused on making that

great statement of President Kennedy’s true, which is that a rising

tide raises all boats. Well, some of those boats stuck at the bottom

need a little extra help, and I think that’s what EDA is all about.

So I appreciate the committee’s interest in moving this reauthorization. I look forward to supporting it. Thank you, Mr. Chairman.

[The prepared statement of Sen. Lieberman follows:]

STATEMENT OF HON. JOSEPH LIEBERMAN, U.S. SENATOR FROM THE STATE OF

CONNECTICUT

I would like to thank Senators Warner and Baucus for allowing me to speak for

a few minutes this morning. I’m an enthusiastic supporter of EDA and its work.

Phil Singerman and I were in Connecticut just 2 weeks ago at Veeder Root Place

in Hartford where, with the help of EDA grants, an old factory in a run down neighborhood is being revitalized.

Connecticut has the highest per capita income in the country, but has two of the

poorest cities in America. We all have face problems with urban decay in our States.

Manufacturing and industry, which used to be the centerpiece of economic activity

and employment in our inner cities, have largely disappeared. Hartford has seen 30

percent of its factory and business sites disappear since 1986. With the loss of manufacturing went good jobs, wholesale trade, retail businesses and a large source of

local tax revenues.

We all know of one-factory towns where the factory has closed down, destroying

the economic base of the town. When Windham Mills—mills built over 100 years

ago that produce thread—closed down in Windham, Connecticut, no other industry
6

moved in, leaving Windham with the highest unemployment rate in the State and

forcing workers to look for jobs in other locales. EDA is working with the town on

a $1 million grant to help revitalize the area.

EDA is the only agency of the Federal Government that is charged with stimulating industrial and commercial growth in economically distressed areas of the United

States. I have really appreciated their work in Connecticut. But most of all, I appreciate that they work with the community. They work with the community to help

them develop a plan that will bring back business activity, and with it, good jobs

for people in the community. They work with the local government to fill out those

endless applications. They help guide them through the process—something at

which the Federal Government does not always excel. With the proposed legislation,

EDA is making the application process even easier by making eligibility: uniform

for all programs and allowing for self-certification by applicants.

I wanted to commend Phil Singerman and the rest of the EDA staff for the job

they are doing. I think its time we passed reauthorization for EDA. Thank you.

Senator WARNER. Mr. Wyden?

OPENING STATEMENT OF HON. RON WYDEN,

U.S. SENATOR FROM THE STATE OF OREGON

Senator WYDEN. Thank you, Mr. Chairman. I’ll be very brief. I,

too, want to express my appreciation to you and Chairman Chafee

for holding this hearing. It is an especially important program because it deals with the Northwest economic initiative.

As you know, you recently got a letter from Senator Gorton, Senator Smith, Senator Murray, and myself expressing our concern

about the funding levels for this program. In our State, we’ve got

seven counties with unemployment at least twice the national average as a result of dislocations, particularly in timber and in salmon

fishing. The Governors of our region feel very strongly that after

they signed a Memorandum of Understanding indicating that there

would be $3 million in funding per year for this, there has been significantly less funding forthcoming.

In a lot of ways, this is a great compliment to all of you because

they think the program has been a huge success and they’ve been

able to use the money very well. We’re very hopeful, the four Senators from the Pacific Northwest, on a bipartisan basis, that we

will be able to work it out with you all to get the full funding for

this program.

Finally, let me say we’re especially glad to have Secretary Daley

here. He does so much good work on so many issues, be it the

internet or economic development, a variety of other issues, and we

want to welcome him here this morning. I’m going to have to also

be in an aviation subcommittee hearing this morning, Mr. Secretary, and I’ll be submitting some questions to you in writing. I

look forward to working with you. Thank you, Mr. Chairman.

Senator WARNER. Thank you.

Yes, indeed?

OPENING STATEMENT OF HON. BARBARA BOXER,

U.S. SENATOR FROM THE STATE OF CALIFORNIA

Senator BOXER. Mr. Chairman, I will speak for 1 minute, as I

rush off to an appropriations markup on transportation, and would

ask unanimous consent that my entire statement be placed in the

record.

Senator WARNER. Without objection.

Senator BOXER. I wanted just to join the praise that my colleagues have put out here since I arrived. This is an agency that
7

is working. Some 99 percent of EDA projects completed as planned,

91 percent completed on time, and 52 percent under budget. It’s

really a remarkable story to tell; every $1 million in EDA funding

increasing the local tax base by $10 million, and the number of jobs

doubled in the 6-years after project completion. And we have story

after story to tell. In my great State which has these pockets of prosperity and pockets of problems for many of the reasons, but one reason has

been the change in the Defense Department and the shut downs

of so many bases in California. Mr. Chairman, I’ll tell you, it has

been brutal. And so the one quick case I’ll put out is the case of

Castle Air Force Base, the biggest employer in Merced County with

more than 5,000 military personnel and 1,000 civilian workers. It

pumped $250 million into the area’s economy. When the base

closed in 1995 the unemployment rate skyrocketed to 17.6 percent.

At that time, California wasn’t doing that well anyway, but this

was just out of sight.

EDA did not wait until the base was shuttered. They came in

and they awarded Merced County $1 million for a revolving fund.

It may not seem like a lot, but we also pumped in $2.6 million for

sewer construction, and then another $4.3 million for the development of the US Aviation Discovery Exposition Center on the

grounds of the former base as a tourist attraction. And it is so exciting. Forty-four businesses have been lured to the base, Mr.

Chairman, creating 1,900 new jobs in 2 years and more than 90

percent of the existing buildings are leased, and the aviation complex is expected to draw 300,000 visitors by the year 2000.

In my statement, I have other examples. But I’m very, very

proud to have an opportunity to vote for this reauthorization.

Thank you.

Senator WARNER. I thank the Senator.

[The prepared statement of Senator Boxer follows:]

STATEMENT OF HON. BARBARA BOXER, U.S. SENATOR FROM THE STATE OF

CALIFORNIA

Mr. Chairman, thank you for the opportunity to comment on the reauthorization

of the Economic Development Administration, or EDA. First, allow me to give you

an example of how EDA has helped a community in California.

In 1991, DOD announced the closure of Castle Air Force Base, the biggest employer in Merced County, CA with more than 5000 military personnel and 1000 civilian workers. The base pumped nearly $250 million annually into the area’s economy. When the base closed in 1995, the county’s employment rate skyrocketed to

17.6 percent, double that of the State of CA.

EDA did not wait, however, until the base was shuttered to begin helping with

economic conversion of the facility. In 1993, EDA awarded Merced County $1 million for a revolving fund loan to assist in business development and awarded the

city of Atwater $2.6 million for sewer construction. In 1995 and 1998, EDA awarded

a total of $4.3 million for the development of the U.S. Aviation Discovery Exposition

Center on the grounds of the former base as tourist destination.

So far, 44 businesses have been lured to the base creating some 1,900 new jobs

in just 2 years. More than 90 percent of the existing buildings are leased. And, the

aviation complex is expected to draw up to 300,000 visitors by the year 2000.

Over the last 33 years, EDA has invested more than $1.6 billion in needy communities throughout California, representing over 2700 projects. EDA has been instrumental in California by helping communities rebound after a military base or manufacturing plant closing. EDA has helped communities in California recover from the

1990 and 1994 earthquakes, as well as the 1992 L.A. riots. I cannot even begin to

tell you how important economic recovery is to the emotional well-being of a community ravaged by natural disaster or a base closing.
8

What is even more compelling to me is the efficiency by which the Agency has

carried out its mission:

• 99 percent of EDA projects were completed as planned;

• 91 percent were completed on time;

• 52 percent were completed under budget;

• 327 jobs were created or retained for every $1 million in EDA investment;

• Every $1 million in EDA funding leveraged $10.08 million in private-sector investment;

• Every $1 million in EDA funding increased the local tax base by $10.13 million;

and the number of jobs doubled in the 6-years after project completion;

• All government agencies should be as efficient as EDA.

It is important to note that EDA does not bail out a community. It gives the community tools by which they can create their own recovery and security.

EDA has given real help to the poorest communities of California. Mr. Chairman,

I strongly support the reauthorization of the Economic Development Administration

and urge everyone on the Subcommittee to support the passage of S. 1647 as well.

Thank you Mr. Chairman.

Senator WARNER. Mr. Secretary, we finally come to you. I would

want to once again acknowledge how memorable my experiences

were working with your father in 1975–76. He left a profound influence on this very young aspiring political figure in those days.

And I think you’ve carried the mantle with great humility and dignity.

Secretary DALEY. Thank you very much, Mr. Chairman, I appreciate those kind words.

STATEMENT OF HON. WILLIAM DALEY, SECRETARY,

DEPARTMENT OF COMMERCE

Secretary DALEY. Thank you, Mr. Chairman, Chairman Chafee,

and Ranking Minority member Baucus, Senator Lieberman, and

the other members of the committee who were here. I thank you

all for scheduling this hearing.

Joining me, as you know, is Assistant Secretary of Commerce for

Economic Development Administration, Phil Singerman, who I

must say at this early stage in my brief remarks has done a remarkable job for the EDA and for the Department of Commerce.

He represents our entire department well and we are extremely

proud of him and the team that he’s put together.

I’m pleased to testify on behalf of the Economic Development

Partnership Act of 1998, which does reauthorize for 5 years the

Economic Development Administration. My message is clear and

short. This legislation is critical to our ability to efficiently help our

Nation’s distressed communities.

It is my goal as Secretary to run a department that is efficient,

cost-effective, and productive for the American people. And EDA

clearly achieves all of these goals. Ninety-nine percent of its public

works projects, as has been stated, have been completed as

planned. Since President Clinton took office, the agency has cut the

number of political positions from 14 to 5, and has cut the number

of regulations by 60 percent. This is a leaner EDA that has learned

how to do more with less. But most importantly, it knows how to

expand opportunities for the American citizens who need it most.

Let’s be frank, there has been criticism that this program is

pork. That with an economy as strong as ours, communities do not

need help developing their infrastructure or attracting new businesses. The fact is that these funds are predominantly invested in

areas where the unemployment rate is 40 percent higher than the
9

national average and per capita incomes are 40 percent below average.

The fact is that a thriving community 1 day can be a distressed

one the next. All it takes is a military base closure, a defense industry downsizing, Department of Energy reduction, or a natural

disaster. As Chairman Chafee knows first-hand, that happened in

Narragansett overnight when suddenly an oil spill hurt the fishing

and tourism industry. But within 30 days we gave a $1 million

grant to get the community back on its feet and therefore develop

recovery plans.

I’ve also heard criticism that some of these are make-work

projects; all they do is create short-term construction jobs. This is

not so. These programs create permanent jobs. The fact is that 6

years after the projects are completed, on average, the number of

local jobs have doubled. As Senator Boxer stated, for every $1 million Congress authorizes to fund an EDA project, that leverages

$10 million in private-sector investment.

EDA’s programs do work. Take Grand Forks, North Dakota.

After those terrible floods in 1997 that devastated North Dakota,

South Dakota, and Minnesota, we came in with a $3 million grant

to construct two professional buildings in downtown Grand Forks.

Community leaders and political leaders have come in and told me

that if it hadn’t been for this investment businesses would have left

downtown and the people of Grand Forks, who had already lost so

much and suffered so much, would have lost their central business

district and, therefore, a central part of their lives.

Or take the Center for Employment Training in Santa Clara,

California. EDA grants totaling $4 million over the last few years

were used to convert an abandoned high school in a highly distressed Hispanic neighborhood into one of the most successful vocational training facilities in California. The Center has now expanded its programs to include a culinary school, medical assistant

training, and every student graduates into a job.

Another example is our $2 million grant to help Portland State

University build a distance learning center. It will link the University’s educational programs with rural and remote areas of Oregon

so underemployed and unemployed people there can have access to

academic, business, and vocational training.

I believe that in the future what we do at EDA will be even more

important. In this new economy, the pace of globalization and technology development will accelerate. We will see constant restructuring of firms and industries and all this will require our Nation’s

communities to be more flexible, innovative in creating jobs and attracting private-sector investment. And a new EDA will be there to

help.

This agency has reformed for the better, and this legislation will

allow it to reform even more. It will reduce our paperwork, it encourages State and local cooperation as has never been done, it

simplifies the application procedures, it provides maximum flexibility to grant recipients, and this legislation will allow us to change

the eligibility requirements for EDA assistance. Gone will be the

days that once you are a designated area you remain one for life.

Replacing it will be a fairer process that says simply an applicant

is eligible based on the needs at the time he applies.
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So, Mr. Chairman, I believe that we have addressed the concerns

that Congress and others have expressed over many years. As has

been also stated, EDA has not been reauthorized since 1982. The

time has come to do this, and I look forward to working with you,

Mr. Chairman, and the entire committee to move this bill forward.

Thank you.

Senator WARNER. Thank you, Mr. Secretary.

S. 1647 declares that new employment opportunities should be

created by developing expanding new and existing public works

and other facilities and resources rather than by merely transferring jobs from one area of the United States to another. S. 1647

further declares that the way to do this is by supporting firms and

industries which add to the growth of the Nation’s economy

through improved technology, increased exports, and the supply of

goods and services to satisfy the unmet demand.

These are worthy goals. How do we ensure that these goals are

met? That is, as a practical matter, how can we be sure that EDA

funds aren’t simply used to entice businesses to locate in a given

area or to prevent businesses from leaving, possibly enriching their

business without adding to the growth of the Nation’s economy?

For example, section 606 of the bill identified the certification required for businesses receiving financial assistance but makes no

mention of job relocation. Do you feel that the bill includes the authority you need to ensure the creation of jobs rather than the

movement of existing jobs?

Secretary DALEY. Mr. Chairman, if I could ask Mr. Singerman to

respond.

Senator WARNER. Certainly.

Mr. SINGERMAN. Thank you, Mr. Secretary. Thank you, Mr.

Chairman. The question you raise is a very important question and

it’s one that EDA takes very seriously. Currently, our legislation

prohibits using EDA financial assistance to assist businesses in relocating from one area to another. Although this applies to a narrow band of EDA’s programs, we have applied this non-relocation

requirement to all of our assistance programs. In our regulations,

we further clarify the purpose and implementation of this criteria.

Every applicant has the affirmative duty to inform EDA of any

employer who will benefit from such assistance, who will transfer

jobs in connection with the EDA grant. EDA then determines compliance prior to award of the grant based upon the information provided by the applicant.

I’d like to put this in context. The research over the last 20 years

from the economic development field demonstrates I think pretty

conclusively that most job growth and loss in a community is a

function of the creation of new companies, the death of companies,

the expansion of companies, the contraction of companies. A very

small percentage of employment growth in any community is related to the in-migration and the out-migration of firms.

I think you know from your experience that your communities in

your States really are no longer competing with one another, but

the regions within our country are competing with regions around

the world. It’s not firms moving from Rhode Island to Virginia, or

from Connecticut to Montana, it’s firms moving overseas or moving,

as in the case of Montana, from foreign countries to locate in the
11

United States. So much of what we see is this normal fluctuation

of the economy.

We have undertaken an independent study by the National Association of State Development Agencies to determine the effect of

the incentives that States provide on firms that are moving into

their areas. EDA doesn’t allow it, but, as you know, many States

compete with one another and we’re taking a very serious look at

this.

I think that the procedures that we have in place, the legislative

prohibition against this, and the care with which the local partners

that we work with look at these issues provides a high level of assurance that we’re not using Federal money to move jobs from one

jurisdiction to another.

Senator WARNER. Given that we’re about to have a vote, I’ll

make my question period very short, Mr. Chairman and others,

and we can just follow along here till the vote.

Mr. Chairman?

Senator CHAFEE. Mr. Secretary, I think we all agree that EDA

alone can’t turn around a community economically. It can be helpful but to have it really succeed you’ve got to have the community

assume the primary role. Do you think that your legislation——and

either you or Mr. Singerman can answer this, however you want

to do it——do you think your legislation recognizes enough that the

real burden is on the local community? Yes, you can help, you can

put in $2 million for a building or $3 million, but in the long run

it’s going to be determined by what the community does, I believe.

Do you think your legislation reflects that?

Secretary DALEY. I feel strongly, and I’ll ask Phil to also comment, I feel strongly that it does. We start with the same belief,

Mr. Chairman, that it is the local community that has to make this

succeed. And taking the example as I used in my statement, Grand

Forks, we came up with $3 million to build the building but it was

really the local community economic development group, the political structure, the community groups that came up with the tenants

for the buildings and for all the development that’s gone around it.

That building alone would not have made a difference had it not

been for the support of the local community. So there’s no question.

I think the legislation does, and Phil may want to jump in with

particulars.

Mr. SINGERMAN. Secretary Daley is quite right. The underlying

premise behind the way EDA works and what makes it unique

among Federal programs is that we have a close working partnership with local economic development districts, local governments,

local universities, and out of this partnership comes a strategic

planning process which we support through our planning funds, a

process that builds consensus within the community and identifies

priorities that are necessary for the community’s economic development growth and diversification.

Every project that EDA supports is a project that also receives

financial support from State and local Governments and other organizations in the community. These are not grants that we kind

of give to people because we think it’s good for them, but these are

investments that are co-invested with local communities in projects
12

that they determine are of the most importance to their communities.

Senator CHAFEE. OK. Thank you very much. Thank you, Mr.

Chairman.

Senator WARNER. Senator?

Senator BAUCUS. Thanks, Mr. Chairman. First, I just want to tell

you, Mr. Secretary, that you’re doing a great job, you and Mr.

Singerman.

Mr. SINGERMAN. Thank you, Senator.

Senator BAUCUS. You’re doing a great job in a lot of ways, but

I know particularly in this program, the EDA, you’re doing a terrific job. I don’t know anybody who works harder, particularly Mr.

Singerman, in working in the right way to make sure EDA works

and works in the right way. I’ve seen it many times and I’m very

impressed, and I know that people in my State are very impressed,

too. I wish that all public servants would work as hard as both of

you do because it would make a huge difference.

My question really is this. There are some critics who think, gee,

there are an awful lot of economic development programs, why do

we need another one? Why is this so unique? Why is this so special? Why do we need it? Aren’t there enough other economic development programs that could take care of our needs? I know that

you do a lot of coordination in the communities first, but essentially

I thought I’d just let you sound off and give you the opportunity

to answer those critics, because, as you well know, there are some

who do have that point of view.

Secretary DALEY. Let me just ask Phil to do it, because Phil ran

a local economic development organization and I think it would be

good if he put it in the perspective of having run that and now

doing the Federal EDA.

Mr. SINGERMAN. Well, I think there are too many, and we were

there first.

[Laughter.]

Mr. SINGERMAN. EDA has been around since 1965. It is the only

Federal agency that has as its unique and sole mission working in

a collaborative partnership with local communities to promote their

economic development. There’s no other Federal program that I’m

aware of that has that as its sole and unique mission.

We work collaboratively with sister agencies within the Federal

Government and State and local Governments to bring together the

resources that are necessary for a community’s economic development activity. For example, in the area of defense adjustment, we

work very closely with the Office of Economic Adjustment in the

Department of Defense and with the Department of Labor. In the

area of disaster recovery, we work very closely with FEMA, they

have the overall responsibility, and within that we collaborate

closely both here in Washington and on the ground with HUD,

with SBA, with the Army Corps of Engineers to help communities,

such as Grand Forks, recover promptly and effectively from their

disasters.

Senator BAUCUS. So you’re first and you’re also the only ones

who really coordinates and works with all the other economic development agencies as well as with the other departments. Is that

basically it?
13

Mr. SINGERMAN. Yes.

Senator WARNER. Senator, allow me to intervene. I think that’s

very important, Senator Baucus. I’ve observed that not only in my

own State but elsewhere. I’m quite familiar with the base closure

proceedings, I have responsibilities elsewhere in the Senate, and it

has a superb track record of working with those agencies. I’m glad

you brought it out.

Senator BAUCUS. Thank you, Mr. Chairman.

Senator WARNER. Thank you.

Senator Lieberman, if you have a question, then we can get to

Mr. Singerman’s testimony. Our vote has been delayed, so I believe

we can wrap them up.

Senator LIEBERMAN. Great. Thanks, Mr. Chairman. Gentlemen,

in the second panel we’re going to hear from the National Academy

of Public Administration. I want to mention two comments/criticisms I suppose I’d say, at least comments, and ask you to respond

to them.

First is that, in their report, ‘‘The present multiplicity of programs imposes unnecessarily high transaction costs on States and

localities.’’ I wanted to ask you what efforts are underway, if any,

to reduce the fragmentation of the Federal economic development

effort.

And then the second is the comment in that same report, this is

not directly, the meager Federal investment in an information

sharing and technology severely constrains our Nation’s economic

development efforts. If you want to give a brief response to both of

those.

Mr. SINGERMAN. Sure. These are very important issues. We work

very closely with NAPA and found their report to be very helpful.

We’ve tried to overcome this fragmentation in a number of ways,

including some of the legislative recommendations that we’ve made

in our proposed bill. In terms of the transaction costs, we’ve tried

to simplify the process of working directly with EDA on the part

of local communities. So we’ve created a single application form,

and, as Secretary Daley said, we have reduced regulations by 62

percent. Our legislation allows us to accept the plans that a local

community develops for another agency, such as the Department of

Transportation, for EDA’s economic development planning purposes. There also is in the legislation recognition of the importance

and the need for the Commerce Department, through the person of

the Secretary, to work closely with other Federal agencies and to

encourage other Federal agencies to work with the Commerce Department in the area of economic development.

In terms of information sharing, one of the results of the NAPA

study, one of the influences on us was to completely revamp our

research in national technical assistance programs to focus on identifying best practices at the State and local level in economic development, and then disseminating that information widely through

publications, through national organizations and associations, and

through our own regional meetings and individual contacts.

So, both of those issues are important issues and we’ve attempted over the last 3 years to address them head-on.

Senator LIEBERMAN. Thanks for that very responsive answer.

Thanks, The CHAIRMAN.
14

Senator WARNER. Thank you, Senator.

Mr. Secretary, you’re free to go. Thank you very, very much.

Mr. Singerman, do you have some additional remarks?

Mr. SINGERMAN. Yes, sir.

Senator WARNER. I did not go to you immediately knowing of the

Secretary’s schedule. I wanted the opportunity for members to

question. We have two options: One, I can stay for about another

6 minutes to listen to you and in time you can depart, or I can depart now and resume the hearing in a few minutes when I get back

from the vote, and then go on to the second panel. Which would

you prefer?

Mr. SINGERMAN. Whatever is more convenient to you, Mr. Chairman.

Senator WARNER. Whatever your preference.

Mr. SINGERMAN. OK. I will speak for 5 minutes and summarize

my prepared written statement.

Senator WARNER. This is very important so I don’t want to rush

you. Do you believe you can do it in 5 minutes?

Mr. SINGERMAN. I can, I timed it. You’re very gracious. Thank

you, sir.

Senator WARNER. I think you made a very profound impact so

far.

Mr. SINGERMAN. Well, everyone has left, is that why?

Senator WARNER. I’ve been around here 20 years. They don’t

leave if they’ve still got a problem.

[Laughter.]

STATEMENT OF HON. PHILLIP SINGERMAN, ASSISTANT SECRETARY FOR ECONOMIC DEVELOPMENT, DEPARTMENT OF

COMMERCE

Mr. SINGERMAN. Mr. Chairman, I appreciate the opportunity to

testify before this subcommittee. I would request that my statement be made a part of the record.

Senator WARNER. Without objection.

Mr. SINGERMAN. I particularly want to thank you and the other

members and your staff for your many courtesies toward me and

my staff at EDA.

Senator WARNER. Well, they’re well earned. I think you can determine from the remarks this morning that we’re going to put a

head of steam behind this piece of legislation to see if we can get

that authorization.

Mr. SINGERMAN. That would be so wonderful.

Senator WARNER. And to the degree we’re going to have success,

it is largely dependent on the record which you and others have

put together. That’s a strong record.

Mr. SINGERMAN. Thank you, sir.

I’d like to thank, Senator Baucus left, but I’d like to particularly

thank him and Senator Snow for introducing our legislation upon

request.

Senator WARNER. Some 38 cosponsors of that.

Mr. SINGERMAN. We’re up to 40 now. And I want to thank Secretary Daley for coming here this morning to testify before your

subcommittee.
15

Behind me are the EDA senior executive management team.

Their names and titles are included in my prepared statement.

Senator WARNER. I think we could just take a minute to introduce them.

Mr. SINGERMAN. Thank you, sir. Ella Rusinko is our Deputy Assistant Secretary for Program Research and Evaluation; directly

behind me is Chester Straub, our Deputy Assistant Secretary for

Program Operations; next to him is Ed Levin, our Chief Counsel;

and seated there is Mitch Laine, our new Chief Financial Officer.

So this is the senior management of the agency.

Mr. Chairman, I first appeared before you and other members of

the committee in late 1996 when you honored me by confirming me

to this position. I’m very proud and pleased to report to you today

that we’ve accomplished a lot at EDA since then. We have aggressively focused on improving the management and operations of the

agency, including implementing a strategic planning process, developing program performance measures, and strengthening our partnerships with local organizations in economic development.

As a result of our work, EDA is administratively reformed, reinvented, and transformed, which has in place a system for ongoing

program evaluation. We have, and you’ll hear about this later, validation of program performance, as evidenced by numerous independent studies by objective evaluators. The management reforms

that EDA has implemented are yielding more efficiency and effectiveness. And we are, I’m sure you’ll be pleased to know, focused

on financial operations and are working closely with the Inspector

General in the Department of Commerce.

Secretary Daley mentioned the reduction in regulations by 62

percent. We have reduced our staff by 30 percent over the last 4

years, a figure that is unmatched by almost any other Federal

agency, and our noncareer appointees by 60 percent. We have simplified our grants application process, and implemented an agencywide reorganization approved by the Administration and this Congress.

We have implemented modern management and administrative

practices. For example, we have completed the delegation of decisionmaking authority to the career professionals in the regional offices, the people who are closest to the communities and know their

problems best. To provide seamless interaction with local communities, we have instituted a team-based approach in our field offices.

And as I mentioned, we have hired the first chief financial officer

for the agency to oversee the agency’s vast management responsibilities. For example, in addition to the funding that we award

each year, we are responsible for well over $1 billion of prior

awards, construction awards on military bases which take between

2 and 5 years to come to fruition, and during that time we’re responsible for the fiduciary management of those activities. So

there’s a major responsibility.

Senator WARNER. I’ve hit my zero mark of time to get over and

get that vote. We’ll just pick up when I return after this vote.

Mr. SINGERMAN. Very good.

[Recess.]
16

Senator WARNER. My apologies. We do our best around here. But

now we have an open-ended and adequate time to receive the benefit of your further testimony and to receive the benefit of an equally important and distinguished group who will be in Panel II. We

won’t be rushed.

Would you kindly continue.

Mr. SINGERMAN. Thank you very much. The Economic Development Partnership Act of 1997 constitutes a reform of existing EDA

authorizing legislation. The Partnership Act streamlines EDA authorities, establishes consistency among programs, and preserves

the most effective tools. For example, the proposed legislation implements long needed improvements by allowing program flexibility

to the Nation’s distressed communities, facilitates program management and oversight, recognizes the EDA role in long-standing

activities such as defense adjustment and post-disaster economic

recovery, and formalizes EDA existing policy that focuses investment in areas of high distress by eliminating the outmoded designation system and replacing it with eligibility at the time of application based upon clearly defined specified economic distress criteria——targeting our resources to communities most in need.

EDA has established a record of expertise and experience in economic development, and has been an innovator in helping distressed communities create the best economic development practices, such as revolving loan funds and small business incubators.

EDA’s unique approach to economic development has proven itself

over time.

However, the next century will host a different set of economic

challenges for American communities as they strive to maintain

global competitiveness in an increasingly technologically dominated

society. EDA needs to be there, modernized and prepared now, to

help America’s distressed communities implement their own strategies and programs for economic recovery and growth.

To provide this opportunity to these deserving communities, the

agency and its customers require long overdue stability of programs, flexibility of operations, and to continue to institutionalize

the administrative reforms we have enacted, we request this committee’s formal legislative reauthorization of EDA.

Mr. Chairman, I appreciate the opportunity to testify before you

this morning, and want to express my willingness to work with you

and members of the committee and your staff on behalf of America’s distressed communities. I’d be glad to answer any further

questions that you might have.

Senator WARNER. Thank you. I do have one or two. I want to say

that Mr. Baucus, of course, introduced the Administration’s bill and

we have, as you say, 40 cosponsors. But by tradition, the Chairman

will work on an amended type of bill in which I will join him as

well as Mr. Baucus. So we will require that type of cooperation

which you just proffered here in your last concluding remarks to

put it together.

I just think there’s a growing convergence of viewpoints here so

that a bill very close I think to the Administration’s approach can

be crafted and expeditiously moved through this committee and be

reported to the floor.

Mr. SINGERMAN. Thank you.
17

Senator WARNER. For that, the Secretary and yourself are deserving of a great deal of credit.

But one or two thoughts here. Realizing that one of EDA’s missions is to help communities suffering due to base realignment and

closure proceedings, would EDA be prepared for additional Base

Realignment and Closure (BRAC) rounds? In other words, I happen

to be one of those who believe that we’ve got to continue with the

base closure process. That next round could be fairly significant.

Would that require extra staff, and I would try and get it for you,

particularly if it would require you to subtract some of your effort

to other areas? I think, in my own judgment, that next round of

BRAC will probably be in 2000, so it’s in the future.

Mr. SINGERMAN. First, we need to complete, and I’m sure you’re

aware of this——

Senator WARNER. The past BRAC round.

Mr. SINGERMAN. That’s correct. To date, only about three-quarters of the approximately 120 bases that were closed or downsized

significantly have a closure date. So there is still about one-quarter

that are yet to be closed and some will not close until after 2000.

Second, even after a base is closed, it takes the community 2 to

3 years to develop its reuse plans. So only now are those bases that

were closed in 1995——

Senator WARNER. I just want to make this part of the record. I

would suggest the following. We’re finishing up this year’s authorization bill for the armed forces in which there is no BRAC and

there will not be one. So next year, God willing, I’ll still be around

to work on the next bill and we may lay the foundation, I say may,

for the year 2000, 2001. At which time I would hope that you

would be in your position and you could follow it and, if necessary,

we would put something in the legislation establishing the next

BRAC which would adequately protect your area of responsibility.

You have a willing partner that would take it into consideration.

Mr. SINGERMAN. Thank you.

Senator WARNER. I think we’ll conclude with that, Mr.

Singerman. I have some other questions which I’ll submit for the

record. But the next panel has very patiently waited, and I hope

that one or more of your staff can remain so they can have the benefit of this important testimony.

Mr. SINGERMAN. I will remain as well, sir.

Senator WARNER. That’s fine. We may recall you to the witness

table.

Senator WARNER. Now let’s proceed with Panel II. We have Mr.

Robert W. Burchell, Center for Urban Policy Research, Rutgers

University, New Brunswick, New Jersey; R. Scott Fosler, president,

National Academy of Public Administration, here in the Nation’s

Capital; Eric P. Thompson, National Association of Development

Organizations, Aiken, South Carolina; and the Honorable Floyd

Villines, on behalf of the Coalition for Economic Development, Little Rock, Arkansas. He, I take special note, is a public servant,

having been elected by the people of the great State of Arkansas.

Judge VILLINES. Thank you, sir.

Senator WARNER. Why don’t you lead off, Judge Villines.
18

STATEMENT OF HON. FLOYD G. VILLINES, JUDGE/EXECUTIVE,

PULASKI COUNTY, ARKANSAS, ON BEHALF OF THE COALITION FOR ECONOMIC DEVELOPMENT, LITTLE ROCK, ARKANSAS

Judge VILLINES. Mr. Chairman, thank you for holding this im- portant hearing and for inviting us here today to discuss the long

overdue reauthorization of an agency that is very important to the

revitalization efforts in our economically distressed rural and

urban areas.

Senator WARNER. Excuse me. Let me interrupt.

Judge VILLINES. Yes, sir.

Senator WARNER. By unanimous consent, each of your state- ments in their entirety will be made a part of the record. Therefore,

you can summarize those portions you think are important to this

hearing. Judge VILLINES. Thank you, sir. I will do that. I represent 15 national organizations committed to supporting the Economic Development Administration. Our coalition includes

national organizations representing rural and urban economic development practitioners, professionals and academics, and local

elected officials. These organizations include the American Economic Development Council, the Association of University Centers,

the Council for Urban Economic Development, the National Association of Counties, and National Association of Business Incubators, the National Association of Development Organizations, the

National Association of Installation Developers, the National Association of Management and Technology Assistance Centers, the National Association of Regional Councils, the National Association of

State Development Agencies, the National Association of Towns

and Townships, the National Congress for Community Economic

Development, the National League of Cities, the Public Works and

Economic Development Association, and the U.S. Conference of

Mayors.

There are two reasons that we think it is very important that

this be done. The first is, this agency is moving into the 21st century with authorizing legislation that goes back to the early 1980’s.

The agency needs reinforcement with new language that allows it

to help our rural and urban communities meet the continuing and

ever-changing challenges of economic revitalization. Among those

challenges will be access to and expertise in information age technology. Our businesses in small cities and rural areas will simply

be unable to compete in the global economy without access to these

information and marketing tools.

Second, reauthorization will allow the agency to focus on its core

mission and to develop multiyear plans for its programs rather

than draining off its energy in an annual battle for survival.

The Coalition’s support for EDA is based on a very simple concept——EDA works. It is the Federal agency that does what it was

designed to do. It serves the Federal role of levelling the playing

field for these communities that need to become productive parts

of the national economy rather than a drain on it. It is a lean,

streamlined agency with a clearly defined mission. It supports and

help revitalizes our economically distressed communities. And as a

local government official, it is important to me that EDA is there
19

to provide the seed money necessary for the infrastructure improvements we need to attract new businesses and to help existing

businesses expand and grow.

I want to really emphasize the point of seed money. Without

EDA and EDA’s support, many of the things that we try to do, we

just couldn’t do them. An example in our testimony that will be

filed is our community of North Little Rock. There were two census

tracts in 1990 that had unemployment rates of 33 and nearly 34

percent respectively, with no industrial or other potential prospects. Working with EDA, we were able to get a grant that was

matched 50–50 by the local community that put in water, sewer,

streets, and out of that we ultimately got a $9 million private investment, creating some 360 jobs. Over the years, we believe that

that has helped raise the average income in our county by nearly

$10,000 a year. And that project would not have happened had it

not been for EDA.

There are several other points I’ll make, and then I’ll let you

move on to the other witnesses. First, EDA network is important

to us. It provides the assistance with the economic development

representatives that help watch over the project, help us put it together, and then continue with us from the very beginning. The

planning process is also important. The whole issue of bottoms-up

planning, of allowing people in a community to identify what their

needs are and to coordinate that with other local and Federal agencies has given us impetus to do what ought to be done. Too often

in the past, as anyone in local government knows, you sometimes

get in a position where local communities are arguing and fighting

with each other. The planning process requiring that joint planning

really is an asset to us.

There are other points that are in my testimony that I could go

through. But since it will be part of the record, Mr. Chairman, I

will leave that to any questions that you may have.

In conclusion, Mr. Chairman and members of the committee, the

Economic Development Administration has earned the respect of

all of us who have worked with it. It is time the agency was recognized through reauthorization, and probably that’s one of the best

reforms you could do. We at the local level really need to know that

there is going to be an agency there because economic development

planning is more than a 1-year process. We really need the assurance that we will have a partner in the Federal Government that

will assist us.

Again, thank you for the opportunity to appear before you. I also

pledge our support on the part of the Coalition to work with you

in the drafting of the bill, as you mentioned earlier. And if you

have any questions, I’ll be happy to try to answer them.

Senator WARNER. Thank you. And may I say to you and the

other witnesses, it is our hope here on the committee that you will

bring your expertise to bear on the Chafee revision of the Administration’s bill and that you will give us your best advice. And others

in the room may have some interest. We want to do a good bill,

one that will go through quickly.

With that in mind, in the course of your testimony, if any of you

feel there are provisions in the Administration bill which you
20

would like to see revised, amended, or so forth, please let us hear

from you.

Now, Mr. Burchell. We thank you for traveling down from New

Jersey.

STATEMENT OF ROBERT W. BURCHELL, CENTER FOR URBAN

POLICY RESEARCH, RUTGERS UNIVERSITY, NEW BRUNSWICK, NEW JERSEY

Mr. BURCHELL. Thank you, Mr. Chairman. I’ll be brief. My testimony and the charts which you’ll see are to be made part of the

record.

Senator WARNER. Do you have copies of those charts?

Mr. BURCHELL. They’re appended to the testimony, yes.

Basically, what I would like to do is to report to you the numbers, some of which you’ve heard already, of a series of studies that

Rutgers and others have undertaken on various programs of the

Economic Development Administration.

We produced three 300-page reports that looked at these programs, and we spent 2 years in an in-depth look at both defense

adjustment and public works programs. Each of the principals was

in the field a month looking at the programs. We went across the

United States. We visited 100 of the 400 programs to make sure

the information was coming back to us and coming back to us correctly. We held seminars to make sure that those who were reporting information understood the concepts that we were about to ask

them, the difference between a permanent job and a temporary job,

between a direct job and an indirect job, between a construction job

and a permanent job.

In addition to that, we went into regional offices and a variety

of other places to do, we feel, a comprehensive study. The study

was undertaken by Rutgers, the New Jersey Institute of Technology, Princeton University, Columbia, the National Association of

Regional Councils, and the University of Cincinnati. We looked at

203 public works projects and 187 defense adjustment projects. No

one got away. It’s not a sample. Again, we looked at every single

one of the projects. We visited—physically visited—25 percent of

those 400 projects.

One of the things that we found out very quickly was that these

projects are done in very economically impacted environments. The

public works projects, again the figure was used here, 25 to 40 percent above the average unemployment rate of the area. These

projects take place in communities where the unemployment rate

is 25 to 40 percent above State and national averages. With regard

to both the defense adjustment program and the public works program, per capita income is 25 to 40 percent below State and national averages. So these are really economically impacted areas.

Let me just go through very briefly the public works program

first and just take a look at these performance figures with regard

to the public works projects.

Senator WARNER. Let me interrupt. This is a very impressive

amount of private-sector work that has been done. It will be a valuable asset to the committee. Could you refer to us any other groups

that have done similar studies? We want to make sure that we

have before us all the available information.
21

Mr. BURCHELL. We did a literature search and that’s part of the

information presented. In addition, there was another study, the

Mount Auburn Study done in 1992, which reached similar conclusions as the kind of conclusions that I will report to you.

Senator WARNER. That was Mount——

Mr. BURCHELL. Mount Auburn. They’re a research firm in Massachusetts.

Senator WARNER. Who authorized that firm to do the work? Who

authorized you or funded you?

Mr. BURCHELL. We bid with a consortium of research institutions

on an RFP that was put out by the Economic Development Administration.

Senator WARNER. I see. So EDA put it out, is that it?

Mr. BURCHELL. Right. And we competitively bid that process,

yes.

Senator WARNER. How about the other study that you cited?

Mr. BURCHELL. I think that that was the same.

Senator WARNER. But yours then is more recent?

Mr. BURCHELL. More recent and actually we believe more encompassing in terms of the number of projects looked at.

With regard to the findings for the public works program, 99 percent of the projects completed as planned, 91 percent completed on

time, 52 percent completed under budget. I would add that when

a project is completed under budget, neither EDA nor the grantee

keeps that money. Rather it goes back to the Treasury. So those

are very, very significant figures given that particular situation.

With regard to job production—327 permanent jobs for every $1

million of EDA money invested, about $3,000 per job—one of the

lowest costs in job creation that we have seen in all of our analysis

of other programs, and $4,800 in total cost per job, including the

matching share. In addition to that, 15 construction jobs per $1

million of EDA funding. So not only do they produce permanent

jobs but also construction jobs.

Another figure that you’ve heard before but that has been duly

documented in these reports, for every $1 million of EDA funding,

$10 million in private-sector investment and $10 million in terms

of local tax base added to the community.

With regard to defense construction projects, and they’re different in that if you were to view a hospital, the EDA public works

program would be the normal portion of the hospital, the EDA defense adjustment program is the emergency room. The EDA public

works program operates in typically long-term distress areas, both

urban and rural, the defense adjustment in sudden shock areas.

And these are newer projects, funded only from 1992 to 1995, and

not expected to have the kinds of results of the public works

projects. But, again, their performance is admirable.

In terms of projects moving to completion—97 to 100 percent.

Projects that are on time—60 to 80 percent. Projects that are at or

under budget—90 to 100 percent. Jobs produced—124 for defense

construction per million of EDA investment. For revolving loan

funds, moneys given out to create businesses—304 per million. Almost equivalent to the bread and butter public works projects. So

on both sides, the defense adjustment and the public works, about

a $3,000 figure per job created.
22

With regard to private-sector leverage, $2.2 million for every $1

million of EDA investment on the defense construction. And with

regard to the revolving loan funds, about $2.5 million.

We also asked the grantees to evaluate how EDA was doing its

job with regard to training and technical assistance. These are in

what they call the capacity-building efforts——the planning, the

training, technical transfer, technological transfer, product development, et cetera. We asked them to rate EDA on a scale of 1 to 10

in terms of the quality of the project that they helped deliver and

the impact of that project. And for the defense adjustment strategy,

EDA was given a rating of 8 out of 10. For technical assistance,

close to 9 out of 10. And for market analyses, feasibility studies,

and base reuse studies, also a rating of approximately 9 out of 10.

Our conclusions are very simple. EDA projects get done on time

and efficiently. EDA projects create permanent jobs in the locations

that they’re found. EDA projects create significant amounts of private-sector leverage. And EDA also creates a multiplier effect of

about 1.5. So all of the numbers that I have given you before, add

50 percent for its ripple effects to the economy type of impact. We

did that study with a very sophisticated input/output model. And

then finally, EDA has an independent effect. In other words, if

somebody were asked the question, ‘‘Would those jobs be created in

those locations without EDA presence?’’ The answer is, ‘‘no.’’

Through very, very heavy regression analysis, we determined that

EDA has an independent effect in terms of creating jobs in local

areas. Our overall conclusion is that EDA programs are having

their intended effect in the locations in which they’re operable.

Senator WARNER. In one sentence, it works.

Mr. BURCHELL. It works.

Senator WARNER. I suppose if it ain’t broke, don’t try and fix it.

But did you look at possible revision of some provisions of the

President’s bill?

Mr. BURCHELL. We didn’t, but we looked at EDA procedures.

There, again, what is going on is very commendable. We made

some recommendations, and one of the recommendations we had is

that there should be ongoing monitoring of the public works

projects. There is incredible monitoring of the revolving loan funds

because a loan is given out and they monitor almost forever. With

regards to the public works projects, there is informal monitoring

after the project is built out. But in order for them to keep track

of jobs created on a regular basis, and since those jobs increase

over time, they should monitor those on a regular basis.

Senator WARNER. But you will follow the work of the committee

as we move ahead with this?

Mr. BURCHELL. Absolutely.

Senator WARNER. We appreciate it, because you’ve got a remarkable corporate knowledge of this entire thing. Thank you very

much.

Next, Mr. Fosler, President, National Academy of Public Administration.
23

STATEMENT OF R. SCOTT FOSLER, PRESIDENT, NATIONAL

ACADEMY OF PUBLIC ADMINISTRATION

Mr. FOSLER. Thank you very much, Mr. Chairman. I’m here to

testify on behalf of the Academy’s panel on economic development.

This panel was chaired by former Governor Dick Thornburgh, a

Fellow of the Academy, and he had hoped to be here and was sorry

that he could not come. He is out of the country in South Korea

this week.

As you know, the Academy is an independent, nonpartisan, nonprofit organization chartered by Congress to identify emerging issues of governance and to provide practical assistance to Federal,

State, and local Government on how to improve their performance.

Two years ago, the Economic Development Administration asked

the Academy to take a fresh and independent look at the basic

question, What is the appropriate future role of the Federal Government in economic development activities?

The Academy convened a panel, chaired by Governor

Thornburgh, with a diverse group of experts from local, State, and

Federal Government and the private sector, and it reviewed the

economic development policies and programs of all Federal agencies, not just of the EDA. It did not specifically address the question before this committee, the reauthorization of EDA, nonetheless, it’s findings and recommendations may prove useful to the

committee in its deliberations.

I have a copy of the panel’s report, ‘‘A Path to Smarter Economic

Development: Reassessing the Federal Role,’’ and I would ask that

it be entered into the record.

Senator WARNER. Without objection.

[A copy of the executive summary of the referenced report follows:]

A DIALOGUE ON THE REPORT: A PATH TO SMARTER ECONOMIC DEVELOPMENT:

REASSESSING THE FEDERAL ROLE, NOVEMBER 22–23, 1996

On November 22–23, 1996, the National Academy of Public Administration convened a conference to review its recently released report on the Federal role in Economic Development. A Path To Smarter Economic Development: Reassessing the

Federal Role resulted from a 1-year study by an Academy panel chaired by former

Pennsylvania Governor Richard Thornburgh. The U.S. Economic Development Administration (EDA) and the Annie E. Casey Foundation funded the study.

The goal of the conference was to solicit feedback on the report and to stimulate

a national debate about the Academy panel’s recommendations. The conference

brought together more than 100 invited guests from across the country, representing

all facets of economic development: State, regional local and neighborhood-based

practitioners; Federal policy and program officials: private-sector leaders; and university researchers. Participants debated the panel’s findings about the appropriate

Federal role in economic development and its recommendations for improvements.

The discussion was organized around four topics, each of which was addressed

during a set of break-out sessions. The first topic was a broad review of the panel’s

findings and recommendations. The other three topics focused on the panel’s specific

findings and recommendations concerning reaming, leveraging and linking.

General Comments on the Report

Participants strongly endorsed the panel’s finding that the primary Federal role

in economic development should be to support State, regional, and local economic

development efforts. They further agreed that the current Federal system does not

fulfill that role well—little, if any, Federal leadership exists, and there is considerable fragmentation and duplication among Federal program activities.

There also was strong agreement on the panel’s recommendation to focus the Federal role on the concepts of reaming, leveraging and linking. There was, however,
24

considerable support for expanding these concepts to encompass the idea of leadership. Many believed that together all four concepts would provide a national vision

for economic development, especially by promoting a better understanding and application of effective economic development practices and fostering the use of new

technologies for communication and sharing of ideas among development practitioners. Many of the specific ideas for a stronger Federal leadership in economic development echoed the panel’s discussion on recommendations about reaming.

Considerable discussion centered on defining economic development. The panel’s

report defined the scope of its work around a specific set of Federal economic development programs—those that clearly bear the label of economic development and

are focused on specific places or businesses. The panel was not asked to review Federal policies that focus on the national economy in general (such as monetary, fiscal,

or trade policy). Nor was the panel asked to review the large number of policies or

programs which, while contributing to economic opportunity, are directed toward

goals that are separate national pursuits themselves (such as transportation, defense, and environmental protection).

The panel also noted that the diversity among local economies precluded any single definition of effective economic development. The panel did acknowledge the importance for the Federal Government to coordinate the very broad range of Federal

programs that impact directly or indirectly upon State and local economic conditions.

The focus of the panel on Federal economic development programs per se generated lively debate. Some participants believed this approach fostered an unfortunate separation between economic and community development, while others believed it did not go far enough in distinguishing between the two. Others argued

that without a broader Federal definition of effective economic development, it was

impossible to define the Federal role in reaming, leveraging, linking and leadership;

in essence, it was difficult to advance the practice of economic development without

knowing which direction to take. For example, many participants said the report

should have examined more closely the technology programs as well as the role of

universities in economic development.

The issue of the proper definition of economic development was not resolved during the conference, although all acknowledged that it must be more clearly addressed as steps are taken to implement the panel’s recommendations.

Reaction to Findings and Recommendations About Learning

The most strongly supported recommendations in the panel’s report were those

concerning the Federal role in advancing the knowledge base of economic development. Many argued that this should be the most important Federal role. An important element of the discussion was the belief of some that the Federal role in learning must be driven by a benchmark definition of economic development, which

should be used to change the habits or practices of economic development practitioners.

Regarding specific panel recommendations. there was:

• strong agreement with the need to advance the state-of-the-art by giving a higher priority to federally financed research, evaluation and demonstrations. As important, however, was the identified need to build reaming networks across the

country to convey information about economic development. Participants noted

that economic development practices are more often driven by anecdotes than by

data, and that learning networks are an effective tool for conveying the lessons

derived from such experiences, anecdotes, and information.

• lively debate regarding increasing attention to the costs and benefits of recruitment. Some believed the report did not go far enough in pointing out the negative

consequences of recruitment, such as overly generous subsidies, while others

thought the report unfairly singled out this strategy. The issue clearly provoked

strong feeling among participants and divergent views on how it should be addressed at the Federal level. Most agreed, however, that excessive expenditures

on recruitment deals is an embarrassment to economic development professionals

and that, in general, the public and elected of finials need better information.

• strong agreement with the panel’s recommendations about the need to improve

Federal data collection and analysis. Participants were particularly concerned

that Federal data be more useful for State and local practitioners. There was

some skepticism among the group, however, about consolidating Federal data organizations. Most participants did not believe this is politically feasible and did

not want to expend the political capital on a very uncertain outcome.
25

Reaction to Findings and Recommendations About Leveraging

Conference participants endorsed the panel’s idea that Federal economic development resources generally should be used to influence policy directions at the State

and local level. Considerable discussion. however, ensued around the panel’s critique

of short-term deals and its concern that projects rather than strategies drive the development process. Many participants supported the panel’s criticism of ‘‘projectitis,’’

and there was broad agreement that strategic analysis and planning are essential.

However. panel members and participants agreed that such criticism should not undermine the importance of projects per se, which can be a central element of many

economic development activities.

Although many participants believed that project decisions are best made at the

State and local level some felt that the Federal Government—both executive and

legislative branches—would continue to earmark funds for specific projects. Other

participants, however, supported the panel’s call for a reduced Federal role in making individual project.

Regarding specific panel recommendations, there was:

• agreement with the idea of using Federal resources to encourage State and local

development organizations to focus their development efforts on regional solutions. It also was suggested that the Federal Government should make a concerted effort to identify and remove Federal barriers to local cooperation.

• strong endorsement of targeting Federal resources to the development needs of

distressed places. both urban and rural. Participants also noted the need to ensure linkages between Federal policies that target distressed areas and those that

target distressed populations.

• firm support for Federal assistance for capacity building. They noted that Federal policy efforts depend on the implementation abilities of local development

professionals and public and private leaders. The group supported allowing institutional frameworks to evolve from the bottom up rather than being imposed from

the top down.

Reaction to Findings and Recommendations About Linking

As noted earlier, there was strong agreement among conference participants that

the current Federal approach to economic development did not support State and

local economic development well. Most participants agreed with the panel’s finding

that the duplication and fragmentation among Federal programs imposed high

transaction costs for State and local development efforts.

There was lively debate on how to address this issue. Some participants believed

State, regional and local efforts were solving the problem of fragmentation. Development officials have become proficient at coordinating efforts and packaging various

program resources. Other participants noted that although there were many positive

examples of effective local coordination and resource packaging, it was unfortunate

that practitioners spent so much time on grant and administrative entrepreneurship

rather than on innovative problem solving for their communities. These same participants further noted that although Federal administrative waivers had gained

great currency, the need for waivers represented a failure in policy and program design. Participants vigorously debated whether fragmentation could be addressed better at the Federal level or whether current coordination models, such as the State

Rural Development Councils and the new performance partnerships of the Metropolitan Planning Organizations under the Department of Transportation, were the

more appropriate solutions to the problem of fragmented Federal programs.

Regarding specific panel recommendations:

• many participants strongly disagreed with the panel’s recommendation for

wholesale consolidation of Federal economic development programs. Instead, they

suggested an incremental approach that would involve restructuring Federal program activities around a geographical focus—rural programs and urban programs—or around substantive development areas such as business development,

international trade, or infrastructure development. Others advocated focusing on

administrative consolidation, such as eliminating duplicative planning requirements, conflicting grant cycles, or repetitive reporting requirements. A key concern about consolidation was the perceived difficulty of overcoming the vested authorities and interests of congressional subcommittees and executive branch agencies. Most participants were wary of expending political capital for what they believed would be a futile effort.

• although most participants supported the panel’s recommendation for overall

Federal policy guidance, most did not see a viable mechanism for such effort or

the political feasibility of one group asserting authority over others in the Federal

system. Participants regretted that the National Performance Review’s rec-
26

ommendation for a Federal coordination council for economic development was

never implemented. Many participants believed that the most viable option for

policy coordination was at the State level through a mechanism similar to the

rural development councils.

• there was general agreement on the panel’s recommendations to foster interfirm

linkages by forming industry associations and reducing legal and regulatory barriers to collaborations among firms.

Although participants agreed with the panel’s findings that the current Federal

approach to economic development did not support State and local development efforts, there was no consensus on the best ways to improve the system. Many participants expressed concern that efforts to reform could open the door to cuts in funding

for Federal programs.

A Strategy for Implementing the Report

Conference participants were asked to consider next steps beyond the Academy

report. A key issue is whether the economic development community will seek to

influence the nature of that change or simply let it happen. Two levels of response

followed: EDAs reaction to the panel’s findings and recommendations, and the suggestions by conference participants for implementing the study results.

EDA’s Agenda

Philip Singerman, assistant secretary of commerce for economic development, addressed the conference at its end, presenting his personal reaction to the panel’s

study. Overall, he felt very positive about the panel’s findings and supports the spirit and intent of all the recommendations. He noted that he and other staff had the

opportunity to observe the panel’s deliberations over the past year and, as a result,

already had taken actions consistent with several key panel recommendations.

Of particular note is the agency’s commitment to focus its research and technical

assistance efforts on producing better information about economic development issues identified by the panel. Specifically, EDA is already focusing on:

• measurement and evaluation, by supporting a national study to develop a methodology for evaluating its economic development programs

• distressed areas, by supporting a study to examine the effectiveness of State

science and technology strategies on the needs of disadvantaged communities

• clusters, by examining the Federal role in cluster development

• recruitment, by sponsoring research to develop legitimate methodologies that will

enable local communities to assess better the costs and benefits of such economic

activities

• infrastructure finance, by cooperating with the Office of Economic Adjustment

and the Department of Defense, the agency is identifying innovative approaches

for financing the infrastructure critical for areas responding to a base closure or

defense industry downsizing.

Assistant Secretary Singerman concluded by encouraging the Academy to make

the results of this study known to national policymakers and noted that this is a

special opportunity to engage the administration as it defines policy agendas for the

next 4 years.

Suggestions for Next Steps by Conference Participants

Conference participants stressed the necessity of an aggressive campaign to have

the report taken seriously and its recommendations adopted. Noting the Academy’s

institutional prohibition against lobbying, participants identified steps that they,

State and local officials and other interested parties, could take including:

• distributing the report widely to leaders in Washington, DC, States, regions, and

communities convening associations of practitioners, policymakers and interest

groups to develop a coalition to pursue implementation

• identifying champions/groups to pursue specific recommendations

• bringing ‘‘bottom-up’’ pressure on legislators to implement the recommendations

• encouraging the National Economic Council, the Office of Management and

Budget, the National Performance Review, or a similar entity, to embrace the

panel’s recommendations

• educating business associations on the panel’s findings and encourage their active involvement in pursuing its recommendations asking EDA to take the lead

in building demand for better data

• encouraging agencies to work cooperatively to address the fragmentation and duplication of program planning and reporting requirements, as well as other administrative barriers to more efficient performance.
27

The Academy agreed to distribute its report broadly, as well as to make panel members available for presentations and testimony on the study findings and recommendations. A number of conference participants agreed to present the study to

their respective colleagues and to pursue efforts to implement the panel’s recommendations.

EXECUTIVE SUMMARY OF A PATH TO SMARTER ECONOMIC DEVELOPMENT: REASSESSING

THE FEDERAL ROLE

Over the past three decades, Federal agencies have invested hundreds of billions of dollars to help States and communities create jobs and economic opportunities.

In light of severe pressures on the Federal budget and new economic opportunities

and challenges, Members of Congress, citizens and economic development professionals are asking, ‘‘What is the appropriate future role of the Federal Government

in economic development activities?’’

The following report of a panel of experts recommends rethinking the basic prem- ises for Federal economic development activities at the State, local, and regional levels. It offers a coherent and experience-based conception of how our national government might organize and carry out genuinely effective development assistance to regions, States, and communities. Historically, Federal development efforts have tried to increase overall national productivity and to help economically distressed and poor communities gain a share

of the country’s general prosperity. Toward these ends, the Federal Government has

built and sustained a variety of organizations involved in economic development at

every level of society. They include development agencies at the State and local

level, multi-county development districts, and community based development corporations, not to mention various non-profit organizations, banks, industrial associations, and other private-sector partners.

The panel met over the course of a year, interviewed economic development ex- perts and Federal officials, and closely examined eight communities (both rural and

urban) for insights into what works and why. Among the panel’s findings:

• The fundamental economic influences of the private sector and market forces

must be incorporated into successful economic development plans. • Federal investments in development efforts are critical to many States and localities, but not all. • No single Federal program is appropriate in all communities; however, the

present multiplicity of programs imposes unnecessarily high transaction costs on

States and localities and exacerbates inherent weaknesses in their approaches. • The meager Federal investment in information sharing and technology severely

constrains our nation’s economic development efforts.

In response, the panel has proposed a new approach to meet economic development needs. It urges the Federal Government to help States and localities learn

through better information, leverage all available resources, and link multiple Federal initiatives to assist local communities.

The panel’s report concluded with 10 specific recommendations for improving eco- nomic development programs and practices in America. The Federal Government

should:

• Help States and communities learn about state-of-the-art economic development

practices; • Act to reduce the economic losses resulting from unrestrained bidding war among

States and localities to recruit or retain businesses; • Improve the quality of economic development decisionmaking and the assessment

of policies and programs at all levels by gathering and disseminating State, regional, and local economic statistics and by reducing the fragmentation of the nation’s statistical system;

• Give States and communities incentives to design and implement effective regional or inter-jurisdictional development strategies;

• Encourage investment in development strategies that offer opportunities to generate jobs and income over the longer term, rather than in high-visibility projects;

• Give special assistance to States and communities seeking to create economic opportunities in distressed communities;

• Substantially reduce the fragmentation of the Federal economic development effort;

• Establish a permanent mechanism to provide overall policy-level guidance to

other Federal activities such as work force training, environmental protection.

technology and research. and other endeavors that contribute to economic development outcomes;
28

• Reorient Federal programs. especially business finance programs, toward strategies that address the underlying obstacles to obtaining credit; and

• Encourage States and localities to stimulate links among businesses to enhance

overall economic performance.

The nation’s economic development programs will be a critical factor in two of the

most significant domestic policy challenges of the coming decades: America’s adjustment and response to an increasingly competitive global economy, and the recent

transformation of social policy from one based on dependency to one that stresses

opportunity and personal responsibility. A reformed Federal approach to economic

development will help States and communities make real and far greater contributions to addressing these issues.

Mr. FOSLER. Briefly, the report recommends a rethinking of the

basic premise of Federal economic development activities at the

State, local, and regional levels. The panel felt strongly that economic development programs should be grounded in the fundamental influence of the market, geared toward engaging the power of

the private sector, and tailored to specific conditions of regions and

communities. And to this end, it proposed a three-pronged approach by which the Federal Government could best support State

and local economic development efforts that were designed by the

States and localities themselves.

First, the Federal Government should help States and localities

learn about state-of-the-art economic development practices in

order to improve the quality of economic development decisionmaking and the effective implementation of policies and programs.

They could do this, in part, also by gathering and disseminating

State, regional, and local economic statistics and by reducing the

fragmentation of the Nation’s statistical system.

Second, the Federal Government should leverage resources committed to economic development by giving States and communities

incentives to design and implement effective regional or interjurisdictional development strategies, and by encouraging strategies

that emphasize long-term pay-off over high visibility projects.

And third, the panel felt that the Federal Government should

make it easier for States and localities to link Federal resources by

substantially reducing the fragmentation of Federal economic development efforts. For example, it might establish a mechanism to

provide overall policy level guidance to other Federal activities,

such as work force training, environmental protection, and technology and research that contribute to economic development outcomes.

EDA does not have authority to implement all of the panel’s recommendations. For example, it would take an action by the Congress and leadership by the President to substantially reduce the

fragmentation of Federal economic development programs. However, the Academy has been pleased at many of the steps EDA has

taken to implement the panel’s recommendations. Assistant Secretary Singerman recently sent us a letter detailing these steps,

and I would ask that a copy of his letter be entered into the record.

Senator WARNER. Without objection.

[A copy of the referenced letter follows:]
29

U.S. DEPARTMENT OF COMMERCE,

ECONOMIC DEVELOPMENT ADMINISTRATION,

Washington, DC 20230, July 7, 1998.

DEWITT JOHN,

National Academy of Public Administration,

1120 G Street, NW, Suite 850,

Washington, DC 20005.

DEAR DEWITT: I want to give you an update on EDA’s activities in regard to the

NAPA Report, ‘‘A Path to Smarter Economic Development: Reassessing the Federal

Role’’ (November, 1996). First, let me once again thank Panel Chair Dick

Thornburgh, the members of the panel, Scott Foster, and the NAPA staff for their

excellent work on this important subject. As you will see from the following, NAPA’s

report had a substantial influence on the development of EDA’s policy and reformulation of its programs.

Attachment I is the fiscal year 1998 Policy Guidance for the Economic Development Administration, issued in March 1998. The Guidance highlights NAPA’s findings, stating that ‘‘EDA recognizes that economic development is a local process and

understands the importance of sound local economic development planning.’’

EDA’s new mission statement stresses the importance of Federal assistance to

distressed communities through local partnerships: ‘‘EDA’s mission is to stimulate

employment and increased income in distressed communities. EDA’s role is to assist

local communities to develop and diversify their economies through effective partnerships and strategic investments of resources.’’

NAPA’s recommendations were organized in terms of learning, leverage and linkage.

A. Learning

Recommendation 1 was that the Federal Government should help States and communities learn about state-of-the-art economic development practices.

Perhaps the most significant result of the NAPA study was the revitalization of

EDA’s national technical assistance and research programs. Influenced by the

NAPA process, EDA reformed its process through focussed solicitations, competitive

reviews, careful management, and targeted efforts. Independent, recognized research institutions were selected for analytic evaluations. Emphasis was placed

upon evaluations of economic development programs and dissemination of results.

Major studies included:

• Public Works Program: Performance Evaluation—Rutgers University et al.

• Defense Adjustment Program: Performance Evaluation—Rutgers University et

al.

• The Impact of Incubator Investments—University of Michigan, et. al.

• Performance Measurement and Evaluation of Economic Development Initiatives:

An Annotated Bibliography—Nexus Associates

Dissemination efforts included presentations at EDA regional conferences and

support of information outreach through the Council for Urban Economic Development, National Association of Development Organizations, the National Association

of Regional Councils, Public Works and Economic Development Association, and

other national associations.

Recommendation 2 directed the Federal Government to address bidding wars by

States to recruit or retain businesses.

As a first step, EDA has commissioned an evaluation of State incentives, conducted by the National Association of State Development Agencies, to develop a

methodology to assess the costs/benefits of State incentives. The hope is to institutionalize this effort in a joint Federal-local effort.

Recommendation 3 addressed the need for useful economic statistics to support

local decisionmaking.

EDA has commissioned Andrew Reamer & Associates to review the socioeconomic

data needed for economic development practitioners, and to prepare a list of recommendations for the Federal statistical agencies, with the long-term goal of facilitating ongoing dialog between data users and the statistical agencies.

B. Leverage

Recommendation 4 was Federal encouragement of regional development strategies.

EDA has reaffirmed its commitment to its local partners for capacity building for

economic development. To support this commitment EDA has recommended additional funding to stabilize and enhance its local partnership network of planning

districts, university centers, trade adjustment assistance centers, State and local

planning organizations, and Native American tribes.
30

To ensure quality performance, EDA is undertaking the first comprehensive review of its local planning and technical assistance programs in years:

• Evaluation of the Overall Economic Development Program Planning Process—

Corporation for Enterprise

• Performance Measures for EDA’s Planning and Local TA Programs—Applied Development Economics

• Peer Review of EDA University Centers—National Association of Management

and Technical Assistance Centers

• Evaluation of Trade Adjustment Assistance Program—The Urban Institute

In addition, EDA has commissioned studies of ‘‘cluster-based’’ economic development by Information Design Associates as a vehicle for regional cooperation.

Finally, as part of EDA’s proposed reauthorization legislation, cooperative agreements between States are encouraged.

Recommendation 5 is to encourage investments in development strategies that offer

opportunities to generate jobs and income over the longer term.

The results from the evaluations already completed are being utilized by EDA in

development of program priorities. In addition to the studies already completed,

EDA is looking at the following programs:

• Microenterprise as an Economic Adjustment Tool—Rutgers University

• Impact of Revolving Loan Fund Investments—TBD

• Cutting-Edge and Innovative Techniques in Economic Development—TBD

• Technology Transfer and Commercialization Efforts—TBD

• Effective Indian Economic Development Projects and Practices—TBD

Recommendation 6 is to give special assistance to distressed communities.

EDA has explicitly reaffirmed its policy of focussing its resources on distressed

communities.

EDA’s Policy guidance states that ‘‘EDA programs will give priority to projects

that address the economic needs of highly distressed communities.’’ During fiscal

years 1996 and 1997 EDA Public Works Projects were concentrated in communities

with high unemployment and low per capita income.

In order to further refine its understanding of distress, EDA commissioned a

study of outmigration/population loss as an indicator of economic distress by the

University of North Carolina. in addition, EDA asked the State Science and Technology Institute to assess how State technology strategies were addressing the needs

of distressed communities, and to recommend how States and the Federal Government could leverage science and technology investments to benefit distressed areas.

In its proposed reauthorization legislation, EDA has prescribed specific quantitative measures of distress to determine eligibility of communities for Federal assistance, to be determined at the time of application.

C. Linkage

Recommendation 7 proposes substantial reduction of the fragmentation of the Federal economic development effort.

Within its area of responsibility, EDA has attempted to ensure collaboration

among Federal agencies. In 1997, EDA was asked to take a leading role in assisting

communities affected by international trade. Accordingly, EDA has convened meetings with the Departments of Labor and Treasury to ensure a coordinated response

in trade impacted areas. EDA has 17 Memoranda of Understanding with other Federal agencies to support joint efforts; in particular, EDA has been an active participant in overall Federal efforts to assist disaster affected localities and base closure

communities. On July 21, 1998, EDA will convene a meeting of representatives of

Federal agencies who have a direct interest in community economic development

planning, to discuss greater coordination of community planning requirements between Federal agencies.

In its proposed reauthorization, EDA includes specific language ensuring that the

agency actively coordinates its activities with other organizations, and restates the

importance of the National Public Advisory Committee on Regional Economic Development, to include representatives of other Federal agencies.

Recommendation 8 suggests a permanent mechanism to provide overall policy-level

guidance, linking work force training, technology, and research to economic development.

EDA has reached out to the Commerce Department’s Technology Administration

and National Institute of Standards and Technology to bring together economic development and technology deployment. A number of joint activities are currently

under consideration.

Recommendation 9 addressed the need to overcome obstacles to obtaining credit in

Federal business finance programs.
31

EDA is exploring a number of innovative financing techniques to ensure optimal

use of Federal funds for business finance. Commonwealth Development Associates

is studying ways to leverage capital for defense adjustment infrastructure. In addition, EDA is working closely with the Corporation for Enterprise Development in

their study of local revolving loan funds, and as mentioned above, is studying the

impact of EDA revolving loan fund investments. Finally, EDA is examining the use

of ‘‘securitization’’ techniques to bring private capital into loan funds for distressed

communities.

Recommendation 10 suggests the encouragement of States and localities to stimulate links among businesses.

This recommendation is not one that falls squarely within EDA’s traditional area

of responsibility.

Next Steps: Fulfilling the Promise

NAPA recommended that as a next step interested parties engage in a serious

and extended conversation about their recommendations. In response to this suggestion, in January 1997, EDA convened the first national economic development forum

at the Department of Commerce, where the concepts proposed by NAPA were discussed. EDA is currently organizing the second forum, scheduled for January 1999.

I cannot emphasize enough the positive influence and reinforcement that NAPA

has had on EDA’s perspectives regarding economic development. We thank you for

your efforts and look forward to continuing our productive relationship.

Sincerely,

PHILLIP A. SINGERMAN.

Mr. FOSLER. While we have not formally studied or assessed

EDA’s actions in this regard, it is clear that the agency has taken

the panel’s recommendations seriously and has taken very useful

steps, especially in the area of technical assistance and training.

For example, Mr. Singerman’s letter informs us that EDA is working to develop a methodology to assess the cost and benefits of

State incentive programs, they’ve engaged a contractor to assess

how Federal statistical agencies can better serve the needs of economic development practitioners, and, as you’ve heard here, they’ve

commissioned independent evaluations of the agency’s own programs.

Hopefully, this will be a step toward encouraging States, localities, and regions to do similar kinds of evaluations of their own efforts. Thoughtful, sound evaluations can be tremendously useful to

economic development efforts in sifting the wheat from the chaff,

sharing good ideas, and finding better ways that EDA and other

Federal agencies can support their work.

For many years EDA has been at risk of being terminated. When

we were doing the research for our study we were told repeatedly

about the chilling affect that this had on the moral and the capability of the agency. EDA is now working hard to revitalize itself.

We’re pleased that the Academy report has been of some use to the

agency in this process, and hope that the committee will also find

the report useful in its own deliberations.

Thank you, Mr. Chairman. I would be happy to answer any questions.

Senator WARNER. Thank you very much.

Last, now Mr. Thompson. We thank you for making the trip up

from South Carolina to provide us with your views.
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STATEMENT OF ERIC P. THOMPSON, EXECUTIVE DIRECTOR,

LOWER SAVANNAH COUNCIL OF GOVERNMENTS AND PRESIDENT, NATIONAL ASSOCIATION OF DEVELOPMENT ORGANIZATIONS, ON BEHALF OF THE COALITION FOR ECONOMIC

DEVELOPMENT

Mr. THOMPSON. Thank you, Mr. Chairman, and thank you for the opportunity to testify before the committee on the extremely

important subject of reauthorization of EDA. I am testifying on behalf of the Coalition for Economic Development. I am, as you mentioned, Eric Thompson, Executive Director of the Lower Savannah

Council of Governments, a economic development district

headquartered in Aiken, South Carolina. In other words, I’m out

there where the rubber hits the road when it comes to economic development and EDA. As President of the National Association of

Development Organizations, I’m pleased to join with other members of our coalition in offering strong support for EDA reauthorization.

Incidently, it’s good be among friends here this morning. We’ve heard some very good comments and very good support. My fellow

coalition member Judge Villines has given an excellent overview of

the importance of EDA programs to rural and urban communities.

I would like to focus on an issue of greater importance to my region, the State of South Carolina and other places throughout the

country affected by defense industry contract cuts and base closures.

Despite the small size of EDA, the agency has always provided flexible programs and funding needed in times of sudden economic

distress. EDA’s defense adjustment programs help communities impacted by base closures and/or defense contract reductions to rebuild and diversify their economies and move further away from

defense related dependency.

In the State of South Carolina there have been two major base

closings and significant cutbacks at the Department of Energy Savannah River Site, a DOE facility located in my region. In the

Lower Savannah region, the Savannah River Site produced material for nuclear weapons used in the U.S. defense program. It is the

largest single employer in the State of South Carolina. With the

end of the cold war, the Department of Energy downsized the facility, resulting in a loss of over 10,000 jobs in the last 5 years, increasing unemployment causing real estate values to stagnate and

essentially halting new home starts.

In 1997, a majority of the counties of the Lower Savannah region, which there are six, had unemployment rates above the State

average. Three of those were listed one, two, and three in the State

as far as having the highest unemployment rate.

In order to help the Lower Savannah region adjust to this drastic

cutback, the Department of Energy needed a Federal agency to administer DOE funds which are provided for community transition

projects. Using the existing EDA system and grant process, DOE

transferred funds to EDA to administer and now requires that

EDA approve all requests for community adjustment assistance

from DOE’s Office of Work and Community Transition. DOE is not

in the economic development business. It needed an agency who

was and EDA was that agency.
33

One of EDA’s greatest strengths is the ability to use the existing

networks of 320 economic development districts, such as the Lower

Savannah COG, for defense adjustment, disaster relief, and overall

economic development assistance. These regional development organizations provide local governments with professional and technical assistance. Districts, the core of EDA’s delivery systems, are

multi-county public-private partnerships whose boards are composed of local elected officials, private sector, and minority representatives. They are critically important in small metropolitan

and rural regions where professional and technical assistance is

limited or nonexistent.

Of the Nation’s 39,000 units of general local government, 33,000

have populations of less than 3,000 people, and 11,500 local governments have no employees. Larger cities and counties have professional staffs including engineers and planners to assist elected officials in the decisionmaking process. However, in most of the counties’ small and rural communities, economic development district

employees are the only professional staff who are able to navigate

the mountains of red tape, regulations, and application forms necessary to apply for Federal and State assistance.

It is through EDA’s planning grants to the districts that distressed communities gain access to professional capacity and technical expertise to plan for the future. Today, EDA’s small planning

grants to districts support an overall economic development program for the communities served. OEDPs are blueprints providing

a comprehensive plan for sustainable community growth and economic development.

I have with me today a map of our six county region. This map

indicates the location of EDA assisted projects which have resulted

in over 11,000 new jobs. That map has 6 counties and 45 incorporated areas, almost every one of which has been assisted by EDA

projects.

EDA is extremely effective both in helping communities cope

with long-term economic disasters and natural disasters. It is important to remember that not all of the base alignment and closure

of BRAC listed installations are yet closed. It takes several years

to actually shut down a facility, so the need for EDA’s defense adjustment programs will continue. We strongly urge EDA to once

again assume the leadership role in the transition. How can we

best help America’s poor and disadvantaged? By providing them a

job so that they can buy their own shelter, their own food, their

own clothing. It’s hard to pull yourself up by your bootstraps when

you have no boots. EDA has helped provide the bootstraps.

On behalf of the members of the Coalition for Economic Development, I urge the committee to work with EDA to update the authorizing legislation so that the Nation’s distressed communities

will continue to have this vital Federal partner as we move into the

next century. I can assure you that those of us who work in economic development at the local level will do everything we possibly

can to help make EDA more effective and more efficient.

In the South, Senator, as you said earlier, we have a saying, ‘‘If

it ain’t broke, don’t fix it.’’ Well, the only thing broke with EDA is

that it needs to be legitimized through authorization legislation. So
34

I urge you to fix EDA and reauthorize this very needed and very

much appreciated Federal agency. Thank you, sir.

Senator WARNER. That’s very helpful. All of the contributions by

this panel are very helpful.

I would just summarize my own views on this. And that is people

in communities like yours, Mr. Thompson, and elsewhere cannot

cope with the extraordinary weather changes we’ve had now and

disasters. I read this morning of I’ve forgotten now how many

inches of rain in Tennessee in 48 hours. The stories are extraordinary. I think the Government has a role coming through the Federal disaster programs to help victims as a consequence of our unusual weather patterns. I don’t recall, and I’ve lived on Planet

Earth I think a little longer than about everybody in this hearing

room, I just don’t remember hearing of El Ninos as a small person.

The second thing is that as we downsize Government and particularly downsize the U.S. military, therein again communities

that have loyally and faithfully supported their local military bases

are suddenly faced with extraordinary readjustment. On the whole,

I think most of those situations have worked out for the ultimate

benefit of the community.

I was one of the coauthors of the first BRAC bill, the second

BRAC bill, so I’ve been pretty close to this process. I know how

strongly Members of Congress defend their communities and hope

that the bases will stay open, but it just doesn’t happen in many

instances. Somebody has got to accept the fact that we don’t have

the need for the large base structure that’s currently in place to

support the level of men and women serving in the Armed Forces.

All of that to say that I think there’s a vital need for this EDA

to continue, and you have my support.

I once again thank this panel and those others in attendance

who have come to indicate their support for this program.

Thank you very much. The hearing is concluded.

[Whereupon, at 11:30 a.m., the subcommittee was adjourned, to

reconvene at the call of the Chair.]

[Additional statements and the text of S. 1647 follow:]

STATEMENT OF SECRETARY WILLIAM M. DALEY, U.S. DEPARTMENT OF COMMERCE

Chairman Chafee, Subcommittee Chair Warner, Ranking Minority Member Baucus, and distinguished members of the subcommittee: thank you for scheduling this

hearing.

Joining me today is the Assistant Secretary of Commerce for Economic Development Phillip Singerman. Following my brief testimony, Dr. Singerman will make a

statement and be available to answer any technical questions.

I am pleased to testify on S. 1647, the Economic Development Partnership Act of

1998, which would reauthorize, for 5 years, the Economic Development Administration. My message is clear: this legislation is critical to our ability to efficiently help

our nation’s distressed communities.

It is my goal as Secretary to run a department that is efficient, cost-effective, and

productive for the American people.

EDA clearly achieves all of these goals.

Ninety-nine percent of its public works projects have been completed as planned.

Since President Clinton took office, the agency cut the number of political positions

from 14 to 5, and reduced regulations by 60 percent.

This is a leaner EDA that has learned how to do more with less.

Most importantly, it knows how to expand opportunities for Americans who need

it most.
35

Let me be frank. I have heard the criticism that this is pork, that with an economy as strong as ours, communities do not need help developing their infrastructure

or attracting new business.

The fact is these funds are predominantly invested in areas where the unemployment rate is 40 percent higher than the national average and per capita incomes

are 40 percent below average.

The fact is a thriving community one day can be a distressed one the next. All

it takes is a military base closure, a defense industry downsizing, a Department of

Energy reduction, or a natural disaster. As Chairman Chafee knows first hand that

happened in Narragansett, overnight, when suddenly an oil spill hurt the fishing

industry. But within 30 days, we gave a $1 million grant to get the community back

on its feet and develop recovery plans.

I also have heard the criticism that some of these are make work projects: all they

do is create short-term construction jobs. That is not so. They create permanent

jobs.

The fact is 6 years after projects are completed, on average, the number of local

jobs have doubled. And for every $1 million Congress authorizes to fund an EDA

project, that leverages $10 million in private-sector investment.

EDA’s programs work.

Take Grand Forks, North Dakota, after those terrible floods in 1997 that devastated North Dakota, South Dakota, and Minnesota. We came in with a $3 million

grant to construct two professional buildings in downtown Grand Forks. Community

leaders have told me, if it hadn’t been for that investment, businesses would have

left downtown. And the people of Grand Forks, who had already lost too much,

would have lost their central business district.

Or take the Center for Employment Training in Santa Clara County, California.

EDA grants totaling $4 million over the past few years were used to convert an

abandoned high school in a highly distressed Hispanic neighborhood into one of the

most successful vocational training facilities in California. The Center has now expanded its programs to include a culinary school and medical assistant training—

and every student graduates into a job.

Another example is our $2 million grant to help Portland State University build

a distance learning center. It will link the university’s educational programs with

rural and remote areas of Oregon. So underemployed and unemployed people there

can have access to academic, business, and vocational training.

I believe that in the future, what we do at EDA will be even more important. In

this new economy, the pace of globalization and technology development will accelerate. We will see constant restructuring of firms and industries. All of this will require our nations communities to be more flexible and innovative in creating jobs

and attracting private-sector investment.

And a new EDA will be there to help. This agency has reformed for the better,

and this legislation will allow it to reform even more.

It lets us reduce paperwork. It encourages State and local cooperation. It simplifies the application procedures. It provides maximum flexibility to grant recipients.

And this legislation will allow us to change the eligibility requirements for EDA

assistance. Gone will be the days that once you are a designated area, you automatically remain one for life. Replacing it will be a fairer process that says simply: an

applicant is eligible based on needs at the time it applies.

So, Mr. Chairman, I believe we have addressed the concerns that Congress and

others have expressed over the years.

EDA has not be reauthorized since 1982. The time has come. And I look forward

to working with you, as the bill moves forward.

Thank you.

STATEMENT OF PHILLIP A. SINGERMAN, ASSISTANT SECRETARY FOR ECONOMIC

DEVELOPMENT, DEPARTMENT OF COMMERCE

Chairman Chafee, Senators Warner and Baucus, and distinguished Members of

the Subcommittee, thank you for convening this important hearing. I appreciate the

opportunity to testify before this subcommittee. Know of my sincere appreciation for

the many courtesies and considerations that you and Members and staff of the Committee have extended to me and my staff. In particular, we acknowledge Senators

Max Baucus and Olympia Snowe for introducing the Administration’s legislation by

request. We are grateful for the opportunity of working with you to reauthorize the

Economic Development Administration (EDA).
36

Allow me to next thank Secretary of Commerce William M. Daley for his testimony today on behalf of EDA reauthorization and for his exemplary leadership at

the Department of Commerce. Leadership that has resulted in a comprehensive

management review of the operations of the Department, implementation of improved communications throughout the Department, focus on a Department-wide

strategic planning effort, and guidance that set forth Departmental themes, goals

and objectives that integrate bureau missions.

The Secretary and I are accompanied today by the EDA Executive Management

Team and I take this opportunity to introduce them to you: Chester Straub, Jr.,

Deputy Assistant Secretary, Office of Program Operations; Ella M. Rusinko, Acting

Deputy Assistant Secretary for Program, Research and Evaluation and Director, Office of Communications and Congressional Liaison; Mitchell L. Laine, Chief Financial Officer, Edward M. Levin, Chief Counsel, and, Kimberly Cain, my Special Assistant.

A Case for EDA

Mr. Chairman, the first time I appeared before you and Members of the Committee was at a confirmation hearing in late 1996. Since then, I am proud and pleased

to report to you today that we have accomplished a great deal at EDA. We have

aggressively focused on:

• the management and operations of the agency,

• implementing a strategic planning process that complements the Department’s

plan,

• ensuring that our mission combines with Departmental themes, developing and

implementing program performance measures in compliance with the Government

Performance and Results Act of 1993 with validated results; and,

• partnerships in economic development.

Our outcomes are tangible and EDA is an administratively reformed and reinvented Federal agency.

Distressed communities across America face tremendous economic development

challenges as we approach the year 2000 and a new age of technology. As Secretary

of Commerce William M. Daley has stated, ‘‘We continue to make trade and the development of our economy the most important piece of the Department.’’ The EDA

mission fully supports that objective as EDA remains focused on assisting rural and

urban distressed communities in developing a sustainable economic base which will

be both competitive in tomorrow’s world marketplace and productive in the creation

of local jobs and in the leveraging of private-sector investment. EDA continues to

operate under the fundamental principle that economic development is a local process. EDA provides strategic assistance with which local communities in a public/private process build the capacity to understand their economic challenges, develop the

consensus strategies necessary to create positive economic change and implement

their plans with specific actions or milestones for economic growth. EDA cooperates

with and fosters partnerships with State and local governments, regional economic

development districts, public and private nonprofit organizations, and Indian tribes

to sustain and promote economic development across the country. EDA programs

continue to be needed to assist local, State and regional efforts to improve economic

conditions.

The Reform and Transformation of EDA

EDA is doing more with less and is a leaner, streamlined Agency having:

• to reduced regulations by over 60 percent;

• over a 2-year period reduced Agency staff by 30 percent and the number of noncareer positions from 14 to 5, or by 60 percent;

• reduced Washington staff by 25 percent in Fiscal year 1996;

• simplified the grants application process, including its pre-application and application forms to better serve EDA customers; and,

• implemented an agency reorganization approved by the Administration and the

Congress.

EDA has implemented sound management and administrative practices that include:

• continued delegation of authority to Regional Offices for the approval of grants;

• instituted a team-based approach to program delivery in the field with remaining

Economic Development Representatives in individual States receiving greater support from Regional offices;

• moved toward an automated on-line application process;

• focused Headquarters staff on policy direction and program evaluation;
37

• developed a Strategic Plan that reflects Administration Initiatives and Department of Commerce themes and sets forth goals and objectives for EDA’s economic

development program;

• implemented program performance measures to comply with the Government

Performance and Results Act of 1993 (GPRA);

• accelerated resolution of outstanding Inspector General audit issues;

• hired a Chief Financial Officer to oversee the agency’s financial management responsibilities; and,

• utilized resources in an optimum manner to reduce its contingent liability for

past program activity as well as to manage increasing workloads, many the result

of recent supplemental appropriations. The agency currently manages close to a

$1 billion portfolio of approved construction projects that require monitoring, servicing and accounting before closeout.

EDA Evaluations and Program Performance Measures

EDA has validated, robust results of the public works and defense economic adjustment programs. In the public works evaluation, researchers found that:

• 99 percent of the projects were completed as planned;

• 91 percent were completed on time;

• 52 percent were completed under budget;

• 327 jobs were created or retained for every $1 million in EDA investment (an

EDA job cost of $3,058);

• every $1 million in EDA funding leveraged $10.08 million in private-sector investment;

• every $1 million in EDA funding increased the local tax base by $10.13 million;

• the number of local jobs doubled in the 6-years after project completion; and, at

project locations the unemployment rate was 30 percent higher than the State average unemployment and 40 percent higher than the national average unemployment, per capita income was 40 percent less than the State and national averages, and 40 percent more were below the poverty level than in the State or nation.

We plan to continue evaluating the balance of our programs. Thus far, completed

studies include:

• Post-Disaster Assistance: Hurricane Andrew conducted by Aguirre International;

• The Impact of Incubator Investments conducted by the University of Michigan,

National Business Incubator Association, Ohio University and the Southern Technology Council;

• Public Works Program: Performance Evaluation conducted by Rutgers University, the New Jersey Institute of Technology, Columbia University, Princeton University, the National Association of Regional Councils and the University of Cincinnati;

• Defense Adjustment Program: Performance Evaluation conducted by the Rutgers

University-led consortia of research entities; and

• Public Works Program: Multiplier and Employment—Generating Effects conducted by the Rutgers University-led consortia of research entities.

Studies Underway or for which a Request for Proposal has been announced include:

• Evaluation of the Midwest Flood Program Implementation by Aguirre International;

• Evaluation of the Overall Economic Development Program by the Corporation for

Enterprise Development;

• Evaluation of the Trade Adjustment Assistance Program by the Urban Institute;

and, Evaluation of EDA Revolving Loan Fund Program.

• EDA plans to apply research information to our continued, evolving analyses of

program performance. We continue to focus on refining reporting requirements established under the Government Performance and Results Act of 1993 (GPRA).

The Department of Commerce Inspector General’s March 1998 Semiannual Report

to Congress states, ‘‘In examining the overview of EDA’s financial statements, we

found that it appropriately (1) links EDA’s programs with the Department’s strategic plan, (2) identifies management actions taken to address internal control deficiencies, and (3) reflects EDA’s progress in meeting GPRA requirements.’’

The report also cites areas where EDA can improve reporting results and presentation of performance data, and we are committed to implementing changes that

comply with the Inspector General’s observations.
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Why Reauthorize EDA

As EDA looks to the future, we continue to focus on our mission and how to better

serve the Nation’s distressed communities in an expanding global economy that is

more technology oriented. Many of America’s communities are leaders in global competitiveness, but for every community in this category, antitheses exist. Lagging

areas of the country may lack the technical prowess and expertise yet possess untapped, unique and marketable resources. American communities need to reap the

benefits that local resources offer, and to do so requires viable strategies for economic sustenance, growth and prosperity that creates jobs. Community strategies

for economically needy areas will require thoughtful investments in infrastructure

and technology capacity in order to effectively keep pace with the rapidly changing

environments of a world economy. And, EDA is facing the economic challenges of

today for a better tomorrow.

To maintain and continue the EDA momentum in helping the Nation’s distressed

communities, to complete the agency’s reform process, and for national public policy

purposes, the agency needs reauthorization. EDA has not been reauthorized since

1982 and the Public Works and Economic Development Act, as amended, needs to

be updated, streamlined and brought into the fast-approaching 21st Century.

The Economic Development Partnership Act

The Administration’s proposal (S. 1647), the Economic Development Partnership

Act (EDPA) of 1997 was transmitted to Congress on March 31, 1997 and seeks a

5-year reauthorization of EDA. The legislative proposal was drafted over the course

of more than a year and thoughtfully weighed and considered reauthorization legislation previously considered by the 103d and 104th Congresses. EDPA adheres to

the reform principles developed in legislation considered during the 104th Congress.

EDPA constitutes an entire rewrite of the agency’s current authorizing legislation,

the Public Works and Economic Development Act of 1965, as amended. It encourages cooperation among Federal agencies and complements EDA management initiatives focused on the efficiency and effectiveness of the EDA mission.

EDPA facilitates program management and oversight by allowing transfers of

funds from other Departments and Agencies; requiring grant recipients to maintain

records that adhere to sound financial record keeping practices that are available

for audit; adding the Inspector General for the Department of Commerce to the list

of authorized individuals with access to records for examination and audit; and, permitting self-certification by applicants, as appropriate. Also, the proposed legislation

eliminates duplication through the establishment of an overall economic development strategy for economic adjustment and public works projects.

EDPA provides for long-needed improvements that strengthen EDA economic development tools through changes that lessen burdens on applicants, facilitate program delivery and enhance program flexibility to address the needs of the Nation’s

most distressed communities. The proposed legislation eliminates the designation

system which under current law means once an area is designated as ‘‘distressed’’

it retains that designation regardless of improving economic conditions. S. 1647 replaces the process with one that requires eligibility for EDA assistance at time of

application based on clearly defined economic distress criteria that includes high unemployment riotously per capita income levels, or out-migration.

Other improvements include:

• updating the requirement for the preparation and adoption of a comprehensive

economic development strategy as a basis for EDA development assistance;

• allowing minor changes to the purpose and scope of projects which allow recipients to enhance the economic development area;

• permitting recipients of EDA approved grants to use project underrun funds for

same project enhancements as a recognition of grantees’ prudent management of

Federal dollars;

• enabling assistance for projects on military or energy installations without requiring that the recipient have title or a leasehold interest in the property for a

specified term which solves a current legal obstacle to the implementation of

projects in affected areas; and,

• affirmation of the EDA role in other long-standing activities or programs, such

as in defense conversion, post-disaster economic recovery and support of University Centers.

EDPA makes many Improvements, but it carefully preserves safeguards and protective provisions, such as prohibiting EDA assistance that would ( 1 ) promote or

extend unfair competition or tend to create excess capacity in a given industry or

(2) relocate firms from one part of the country to another.
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Conclusion

Mr. Chairman, in conclusion, EDA has transformed itself and instituted a system for on-going self-analyses. As such, EDA has a tremendous opportunity to actively

utilize public policies and public investments to promote American ingenuity that

culminates in economic growth and job creation. EDA has validation of program performance as evidenced by recent studies. The management reforms that EDA has

implemented are yielding more efficiency and effectiveness in program management

and delivery. EDA is focused on its financial management operations and is working

closely with the Inspector General for the Department of Commerce to achieve an

unqualified financial statement, which we were just shy of obtaining for 1998. EDA has an established record of expertise and experience in economic development and has been a pioneer helping distressed communities create economic development best practices, such as revolving loan funds and small business incubators.

EDA works. EDA programs work. The next millennium will host a different set of economic challenges for American communities: How to maintain and improve global competitiveness in an increasingly information-dominated, technology-oriented society where distance is becoming

obsolete. EDA needs to be there, helping America’s distressed communities implement their own targeted strategies and programs for economic recovery and growth.

In so doing, we continue to strengthen the Nation’s economy which is a product of

innovation rooted in American creativity and spirited by the American Dream. Mr. Chairman, I reiterate my appreciation for this hearing and take the oppor- tunity to express our willingness to work with you on behalf of America’s rural and

urban distressed communities. I would be glad to respond to any questions which

you and Members of the Subcommittee may have on EDA. Thank you.

RESPONSES BY PHILLIP SINGERMAN TO ADDITIONAL QUESTIONS FROM SENATOR

WARNER

Question 1: In an era of greater accountability and insistence on results, many

agencies are struggling with devising ways to meaningfully measure the outcome of

their programs. EDA is no exception. Indeed, G?4(9 has reported that no definitive

conclusions can be reached from the limited research that has been done to assess

the overall impact of EDA’s assistance on economic development.

More recently, the GAO noted that there are no measurable performance goals

for four of the seven strategic objectives listed for the EDA in its annual performance plan.

What can you tell the committee about recent analysis to measure the impact of

EDA’s programs on economic development?

With regard to performance goals, what is EDA doing to ensure that it has measurable performance goals for all of its strategic objectives? Could you describe how

you plan to measure performance for each? Can all of these be measured in the upcoming year? I understand that for several measures, the plan does not allow for

assessment for 6 to 10 years.

Response: In April, 1996, GAO issued a report entitled Limited Information Exists

on the Impact of Assistance Provided by Three Agencies that included the Economic

Development Administration, the Appalachian Regional Commission, and the Tennessee Valley Authority. Since the issuance of that report, EDA has undertaken systematic, rigorous evaluations of EDA program activities to develop, test and refine

performance measures and to establish benchmarks for program performance. In addition, EDA research and national technical assistance studies are focused on different types of activities supported by EDA programs. Recently completed evaluations and studies include:

• Public Works Program Performance Evaluation (Rutgers university, et al.)—1997

• Defense Adjustment Prog. Performance Eval. (Rutgers university, et al.)—1997

• Science and Technology Strategic Planning (State Science & Tech. Inst.)—1997

• Impact of Business Incubator Investments (University of Michigan, et al.)—1997

• Cluster-based Economic Development ( Information Design Associates)—1998

• Evaluation of the Midwest Flood Recovery (Aguirre International)—1998

• Public Works Program: Multiplier& Employment Effects (Rutgers, et al.) –1998

Studies underway and planned include:

• Overall Economic Development Prog. Eval. (Corp. for Enterprise Dev.)—1998

• Planning Performance Measures (Applied Development Associates)—1998

• Trade Adjustment Assistance Program (Urban Institute)—1998

• Microenterprise Development (Rutgers University)—1998

• Univ. Center Peer Review (Natl. Assoc. of Manuf. & Tech. Asst. Ctrs.)—1998

• State Incentive Programs (Natl. Assoc. of State Development Agencies)—1998
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• Revolving Loan Fund Program—Proposed for fiscal year 1998 • Technology Transfer & Commercialization—Proposed for fiscal year 1998 • Brownfields/Air Quality—Proposed for fiscal year 1998 • Native American Program—Proposed for fiscal year 1998 • State International Trade Programs—Proposed for fiscal year 1999 • Trade-Impacted Communities—Proposed for fiscal year 1999

Recently completed evaluations of the performance of EDA’s Public Works and Defense Adjustment programs were conducted by Rutgers University with the New

Jersey Institute of Technology, Columbia University, Princeton University, and the

National Association of Regional Councils and the University of Cincinnati. The

Public Works Program Performance Evaluation, completed in May, 1997 shows: For every $1 million invested by EDA: • 327 jobs created or retained • $10 million private-sector investment • $1 million in other public/non-profit investment • $10 million increase in local tax base $3,058 cost per job

EDA investments target distressed communities:

Unemployment of 9.6 percent (median 24-month average)

Per capita income of $7,666 (median) Residents 18 percent below poverty level (median)

Residents 11 percent minority

Quality Project Results • 99 percent of projects completed as planned • 91 percent of projects completed on time • 52 percent of projects completed under budget • Permanent private-sector jobs doubled within 6 years of completion.

In 1996, EDA developed core performance measures for all EDA programs (public works, economic adjustment, planning and technical assistance, and trade adjustment). These core performance measures, first applied to fiscal year 1997 grant

awards, focus on important program outcomes such as job creation, private-sector

investment, increased tax base, local planning and community participation, and

partnerships with State and regional economic development organizations. EDA established performance goals for EDA programs as part of the fiscal year 1999 Congressional Budget submission. Measurable goals were developed by analyzing research findings (e.g., Rutgers) and adjusting for variables that effect performance in different years, such as variations in the mix of project types and changes

in economic conditions. EDA will continue to use research and program evaluations—such as those now underway for planning, university centers, and trade adjustment assistance centers—to improve the way EDA measures performance and

manages programs. EDA will use recent research findings (see list above) to develop measurable goals

for all strategic objectives, including technology-based economic development, disaster assistance, conversion of military installations to civilian uses, and sustainable

development. EDA will solicit feedback from grantees, Agency stakeholders and

other development practitioners prior to implementing new performance goals and

measures in fiscal year 2000.

Consistent with guidance from GAO, EDA performance goals and measures focus

on program outcomes, rather than outputs. The Rutgers studies show that outcomes

for economic development projects increase over time and, typically, are not fully realized until 6 to 10 years following project completion for infrastructure projects.

Such projects may require 3 years to complete construction and, once completed,

continue to create jobs, attract investment, increase tax base, and diversify local

economies as businesses locate and expand in EDA funded industrial parks, incubators, and areas served by road, water and sewer, technology and training facilities.

For revolving loan funds, jobs are generated shortly after project approval, but

projects continue to generate jobs and investment as new loans are made from principal repayments in subsequent years. EDA tracks the cumulative results for revolving loan fund projects, including increases in the capital base.

EDA established requirements to report on performance (e.g., jobs created and

saved, private dollars invested, additional public and private dollars leveraged, increased tax base) starting with fiscal year 1997 grant awards. Public works grantees

will report at project completion and 3 and 6 years following completion. Revolving

loan fund grantees will report at 3, 6 and 9 years following project approval. Planning and technical assistance grantees will report annually or at project completion.

As stated above, some program activities will require from 6 to 10 years following

project completion to fully realize projected outcomes. To address this gap, EDA will

review the performance of construction and revolving loan projects that are at least

6 years old. During fiscal year 1999, EDA will review projects completed in 1993
41

(6 years ago) to validate findings from the Rutgers studies for public works and revolving loan fund projects. This process will be repeated to test benchmarks, validate performance goals and measures, and provide a more accurate and complete

understanding of the performance of EDA programs.

Question 2: Section 202 of the bill allows the amount of grants to be increased

to help cover increases in construction costs. This provision would not increase the

percentage offending EDA provided to a project. How would EDA implement his

provision?

Do you believe that the provision could result in applicants initially underestimating construction costs knowing that later EDA will cover increases in construction

costs?

How would EDA guard against such practices?

Response: EDA would implement the provisions of proposed section 202 in a manner consistent with its current practice of awarding funds for construction cost increases in public works projects, authorized by section 107 of the Public Works and

Economic Development Act of 1965, as amended (42 U.S.C. 3137), as implemented

by regulation in 13 CFR 305.10. EDA has averaged less than six such amendments

per year over the last 2 years.

Based on EDA’s experience, there appears to be little risk that applicants would

underestimate costs in anticipation of obtaining a cost increase award amendment

later. Such amendments are not automatic, they are in EDA’s discretion and would

assuredly be denied if it appeared an applicant had misstated its estimated costs

in its initial application. Applicants could never ‘‘know’’ that later EDA would cover

cost increases. EDA would guard against the risk that an applicant nevertheless

might attempt to obtain an increased award through such an exercise, by confirming

from documentation submitted by the applicant that the cost of the project has in

fact increased, and that an increase of the amount of the grant is in fact necessary

for the for the satisfactory completion and operation of the project.

Question 3: I understand that about 90 percent of the nation’s population resides

in EDA designated eligible areas. Once an area has been added to the EDA list, it

cannot be dropped from it even if it no longer meets the designation criteria.

However, EDA has the discretion to direct assistance to areas that need it most.

How does EDA determine which areas are most needy?

Are legislative changes needed in the eligibility criteria for EDA programs?

Response: EDA currently determines which areas will receive major EDA assistance according to the same criteria as appears in the proposed legislation—low per

capita income (80 percent or less of the national average), a high unemployment

rate (a rate for the previous 24 months 1 percent or more higher than the national

average), or severe sudden or long term economic dislocation (e.g., defense conversion, loss of a major employer, natural or other disaster). Areas that remain designated as redevelopment areas because they were once (but no longer are) economically distressed, and are therefore technically eligible for public works grant assistance, do not receive such assistance.

Legislative changes are not necessary to continue this EDA practice, but they

would confirm this policy, give it Congressional blessing, and preclude misunderstandings on the part of prospective applicants that might otherwise expect to receive assistance?

RESPONSES BY PHILLIP SINGERMAN TO ADDITIONAL QUESTIONS FROM SENATOR

BOXER

Question 1: As you know, California has been hard hit by military base closings.

EDA has funded over 90 defense conversion projects in California so far, but much

more is still to be done. Some military bases are not scheduled for closure until the

year 2001. Does EDA plan to increase the number and scope of these vital projects?

Response: Of the 115 base closures/realignments, EDA has actual closure dates

for 115. Of the 115 scheduled base closures 83 have already closed including 20

bases in California. Over the course of 1999 (9) bases will close, 2000 (10) bases will

close and 2001 (6) base will close. Of the I 15 bases scheduled to close, we have assisted 90 through 206 EDA grants (as of 9130/97).

Based on EDA experience, it takes communities an average of 2 years to put a

together an economic adjustment strategy, usually funded by DoD’s Office of Economic Adjustment. Many of the subsequent community strategy/reuse plans call for

as much as 3–5 year initial implementation phases, with total redevelopment in 10

or 20 years. Therefore, EDA expects many BRAC 95 bases to begin to implement

their conversion strategies in fiscal year 1998, along with the other BRAC bases
42

that will be coming to EDA for additional funds to complete their initial implementation strategies.

EDA expects that the bulk of its defense adjustment efforts will continue to be

associated with closing military bases and the vast majority of that activity such

as you are well familiar with in California will be concentrated on base reuse infrastructure projects. Such projects may range in size from several hundred thousand

dollars to several million dollars.

Question 2: How does EDA interact with other Federal agencies Such as the Department of Defense, the Department of Labor, and the Department of Housing and

Urban Development) that are working on base closure and what can be done to increase communication and cooperation smith these agencies to better help local communities?

Response: The Economic Development Administration (EDA) is the experienced

economic development agency of the Federal Government. EDA works in partnership with State and local governments, regional economic development districts,

public and private non-profit organizations, and Indian tribes. EDA has had an ongoing partnership with The Department of Defense Of rice of Economic Adjustment

(DoD) which operates as the lead agency for the formation of local reuse organizations and the funding of such plans. Similarly, EDA partners with the Department

of Energy in assisting communities affected by downsizing of Energy facilities, and

the FAA’s Military Airports Program with jointly funded projects at closing bases.

Question 3: California has, in recent history, been hard hit by several natural disasters including the earthquakes of 1990 and 1994, and El Nino storms of the past

year. What has EDA been doing to help communities to recover from natural disasters and how does EDA interact and coordinated with the Federal Emergency Management Agency (FEMA)?

Response: In the last 5 years, EDA’s Disaster assistance program has received

over $500 million in supplemental appropriations for long-term economic recovery

assistance in 30 States and 4 territories and commonwealths. Overall, over 80 percent of the EDA funds were used for infrastructure construction projects, about 15

percent were for revolving loan funds and less than 5 percent were used for economic recovery planning and technical assistance.

EDA has worked cooperatively with FEMA for some time in post-disaster program

operations at the field level with EDA often co-locating in FEMA disaster field offices. More recently, EDA has been involved more closely in partnership with FEMA

at the policy level in headquarters in updating the Federal Response Plan to incorporate a recovery component, serving on FEMA-lead Federal Recovery Task Force

groups in response to specific disasters, and supporting the economic components of

new FEMA mitigation initiatives such as ‘‘Project Impact’’ Building Resistance Communities’’ to encourage local actions to make communities safer and to reduce the

cost and impact of future disasters.

In support of this FEMA mitigation initiative, EDA has continued its economic

focus and is committing resources to safeguard jobs and insulate economic growth

from the impacts of future disasters in disaster-prone areas of the country to help

create ‘‘Disaster Resistant Jobs’’. On June 29, 1998 EDA and FEMA announced a

Memorandum of Agreement to cooperatively develop and deliver a ‘‘Disaster Resistant Jobs Training’’ to help communities safeguard existing jobs and accelerate postdisaster economic recovery. In addition, EDA and FEMA are finalizing a Memorandum of Understanding to formalize the Project Impact partnership which will help

outline the form and structure of cooperative activity for each agency in support of

the Project Impact Initiative and Project Impact communities.

EDA has been tasked by FEMA with a Mission Assignment for the Florida fires

to conduct analyses of the economic impact on the local communities, and an analysis of the insurance coverage in meeting the residents/businesses needs.

RESPONSES BY PHILLIP SINGERMAN TO ADDITIONAL QUESTIONS FROM SENATOR

WYDEN

Question 1: The Administration committed to provide $3 million for the Northwest

Economic Adjustment Initiative under a memo of understanding with the Northwest

Governors. Does the Administration plan to live up to that commitment?

Response: EDA has proposals in the fiscal year 1998 pipeline totaling approximately $5.8 million responding to timber impacted communities which are competing for funding this fiscal year. EDA’s forest initiative awards for FY 98 are expected to exceed $3.0 million. Between 1994 and 1997 EDA has funded timber related projects totaling approximately $42.0 million.
43

1Two projects aborted and were not constructed because of local financial or market reasons.

Question 2: Congress provided $2 million more for the Title IX program in FY 98

than the Administration requested. You can ’t say a shortage of funds is preventing

you from fully funding the NW Initiative. What ’s the holdup in providing the funding?

Response: EDA’s Seattle regional office has received $2.0 million in addition to its

regular formula base allocation for Title IX to assist the timber impacted communities—all of which is expected to be awarded in fiscal year 1998.

Question 3: Although this is supposed to be the fast year of the NW Initiative,

Oregon still has 7 counties in the State with unemployment at least twice the national average as a result of dislocations of workers in timber and salmon fishing

(Coos, Harney, Hood River, Jefferson, Lake, Morrow and Wallowa). What continuing

commitment does EDA plan to provide the Northwest to help these workers and

communities get back on their feet?

Response: EDA has been and will continue to be supportive in its efforts in assisting timber impacted communities. EDA’s intent is to continue normal levels of assistance to these communities to help guide them through the planning and adjustment process. EDA’s participation in the Memorandum of Understanding was intended to help offset immediate economic impacts and to begin a short-term development strategy. EDA maintains that the remaining long-term economic development needs related to the Forest Initiative, are best handled through its regular

programs.

STATEMENT OF ROBERT W. BURCHELL, PH.D., DISTINGUISHED PROFESSOR, PRINCIPAL

INVESTIGATOR, CENTER FOR URBAN POLICY RESEARCH, RUTGERS UNIVERSITY, NEW

BRUNSWICK, NEW JERSEY

SECTION I: PUBLIC WORKS PROGRAM PERFORMANCE EVALUATION

Study Overview

The purpose of the research described here was to evaluate all 205 Economic Development Administration (EDA) Public Works Program projects that received their

last payment in fiscal year 1990. This means that, as of that date, the projects were

completed and structures associated with them either occupied or soon to be occupied. Thus, at the time of this research—6 years later—these projects had been sufficiently established to make their evaluation possible.

Since 1965, EDA’s mission has been to promote the long-term recovery of economically depressed areas by assisting local governments via public works project grants

in generating and retaining jobs and in stimulating commercial and industrial

growth.

Study Procedures

The study was undertaken from November 1996 through March 1997 by research

teams from five universities and a major professional organization. All principals of

the research teams have extensive experience in both economic development and infrastructure studies. Each principal spent significant time in the field researching

individual projects and talking to grantees. Each principal and affiliated staff participated in some aspect of research analysis and in writing the final report. All concur with the findings presented below.

The research team contacted by mail and telephone 205 grantees of public works

projects. To help the grantees better understand the purpose and types of information necessary to undertake the evaluation, all grantees were invited to attend seminars conducted by the research team at 13 locations nationally. Sixty (60) project

sites were visited to conduct in-depth discussions with grantees to learn more about

their individual projects’ impacts and to validate the information that they were in

the process of providing.

The analysis uses performance measures developed by EDA specifically to evaluate public works projects. Performance measures relate primarily to numbers of various types of jobs created or retained and amounts of private- and public-sector

funds leveraged.

Project Type and Context

From a universe of 205 EDA public works projects receiving a closeout payment

in fiscal year 1990, all 205 were successfully contacted.

The composition of the 203 completed 1 public works projects is as follows:
44

Distribution of Projects

Number Percent

.

Buildings .................................................................................................................................................. 27 13.3

Industrial Parks ........................................................................................................................................ 59 29.1

Roads ....................................................................................................................................................... 17 8.4

Water/Sewer .............................................................................................................................................. 87 42.8

Marine/Tourism ......................................................................................................................................... 13 6.4

TOTAL ...................................................................................................................................... 203 100.0

In terms of the context of the above projects, EDA public works projects take place

in locations where levels of unemployment and percents of the population below the

poverty level are 40 percent higher than State and national averages. These are also

locations where per capita income is typically 40 percent lower than averages at the

State and national levels.

Project Completion

Of those public works projects contacted by the research team, 99 percent (203)

were completed as planned. Ninety-one percent (185) of the projects were completed

on time.

Fifty-two percent (105) were completed under budget.

Project Impacts

Project-Related Direct Impacts

Ninety-six percent (195) of the public works projects produced permanent jobs 6

years after completion. Eighty-four percent (171) leveraged private-sector investment over the period. On average, each public works project produced 327 direct

permanent jobs for every $1 million of EDA funding.

Based on average EDA funding of $660,557 per project, $3,058 in EDA funds was

spent per job created or retained. Total cost (all sources of funding, including EDA)

per job created or retained was $4,857.

Not including public projects, for every $1 million of EDA funding, $10.08 million

was leveraged in private-sector investment.

For all projects, for every $1 million of EDA funding, another $1 million was leveraged in Federal, State or local investment.

15.0 FTE (full-time-equivalent) construction jobs were created per $1 million of

EDA funding, carrying out solely the grant-supported component of capital infrastructure.

Nonproject-Related Direct and Indirect Impacts

Nonproject-related direct or indirect jobs (those that occur because of the project

or the project’s jobs) were found to be present in 30 and 35 percent, respectively,

of all public works projects.

Considering all projects’ ability to generate nonproject-related direct or indirect effects, for every $1 million of EDA funding, an additional 50 jobs and $1.18 million

in private-sector investment were generated in nonproject-related direct effects, and

an additional 64 jobs and $126,180 were generated in indirect effects.

Except in cases where the project was tax-exempt, public works projects increased

the local tax base at a level of $10.13 million per $1 million of EDA funding.

Project Impacts (General)

Public works projects’ economic impacts generally increase with time. Jobs resulting 6 years after completion were, on average, twice the number witnessed at

project completion.

EDA public-sector economic stimuli create private-sector jobs at high levels of success and low levels of cost.

Conclusions

Most of the public works projects achieved EDA’s objective of providing communities with the necessary infrastructure to expand their economic base.

Jobs and private investment have occurred in many areas that would not have

experienced these benefits without EDA assistance.

EDA offices as an instrument of government, and EDA field representatives who

interact with grantees, are well-regarded by their constituencies.
45

2Three projects were never funded due to grantee financial problems (2) or cross purposes between the grantee and the EDA regional office (1).

SECTION II

DEFENSE ADJUSTMENT PROGRAM PERFORMANCE EVALUATION

Study Overview

The purpose of the research described here is to evaluate all (190) Economic De- velopment Administration (EDA) Defense Adjustment Program grant projects approved during the period fiscal year 1992 through fiscal year 1995. The primary objective of this program and its projects is the restructuring of local economies to diversify away from dependence on former defense bases or defense contractors impacted by closure or cutback. Direct appropriated funding to EDA for the Defense Adjustment Program began in fiscal year 1994. From 1992 to 1994, EDA received transfers of funds for defense

projects from the Department of Defense’s Office of Economic Adjustment (OEA).

The program, therefore, is relatively young, and as of 1997, the defense construction, capacity building (planning and technical assistance), and revolving loan fund

(RLF) projects analyzed here were just taking hold. While their relative recentcy

does not allow for an evaluation of these projects at full maturity, their accomplishments at this early phase can certainly be quantified. As indicated above, the Defense Adjustment projects, even if completed, have had only a short time to mature. With time, the permanent jobs that they create will

increase and the cost per job created will decrease. The present evaluation provides

a snapshot view of the projects’ effects during an early phase of their existence. A

concurrent EDA study of the Public Works Program and other similar studies have

shown that the effects (both direct and indirect) of these projects will increase substantially over time.

Study Procedures

The study was undertaken from November 1996 through September 1997 by re- search teams from five universities and a major professional organization. All principals of the research teams have extensive experience in both economic development and infrastructure studies. Each principal spent significant time in the field

researching individual projects and talking to grantees. Each principal and affiliated

staff participated in some aspect of research analysis and in writing the final report.

All concur with the findings presented below. The research team contacted by mail

and telephone 190 grantees of defense adjustment projects. To help the grantees

better understand the purpose and types of information necessary to undertake the

evaluation, all grantees were invited to attend seminars conducted by the research

team at 13 locations nationally. Forty-two project sites were visited to conduct indepth discussions with grantees to learn more about their individual projects’ impacts and to validate the information that they were providing. The evaluation is undertaken using performance measures developed by EDA spe- cifically to assess the productivity of defense adjustment projects. Performance

measures for defense construction and revolving loan fund projects primarily involve

numbers and types of jobs created or retained and amounts of private-sector funds

leveraged. For capacity-building projects, the performance measure is a grantee selfrating of the quality and impact of the EDA capacity-building effort.

Project Type and Context

From a universe of 190 EDA defense adjustment projects that were approved from fiscal year 1992 through fiscal year 1995, all 190 were contacted. The 187 grant-funded projects analyzed in this study 2 include 162 single-element projects, 20 double-element projects, and 5 triple-element projects. These sum to 217

total project elements funded via the 187 EDA grants. Since 1987, approximately 2.5 million defense-dependent jobs have been lost due to defense downsizing. EDA’s Defense Adjustment Program is a direct response to

base closures, base downsizing, and/or reduced defense contracting. Cutbacks are

often sudden and severe for their host communities. In addition, projects are in locations where minority populations and percents of the population below the poverty

level are 20 percent higher than State and national averages. These are also locations where per capita income is 25 percent lower than averages at State and national levels.

Project Completion

Of those 190 defense adjustment projects contacted by the research team, 98.5

percent (187) were initiated as planned.
46

3 RLFs, by their nature, cannot come in over budget. They lend what they have.

4 As projects age and mature, project accomplishments will likely increase over time.

5Full-time-equivalent.

6Forty-three of 49 defense construction have private-sector investment. Six project are public

sector and have no private-sector investment. 7Direct job creation is an incidental benefit of capacity-building projects, which generally support subsequent projects having direct job creation.

Of those undertaken, about 97 and 98 percent of defense construction and capacity-building projects, respectively, moved to completion; 100 percent of the RLFs

moved to completion.

Context of Projects

At Time of Application (Medians)(187 Initiated Projects)

Median Ratio to State Ratio to Nation

Unemployment Rate (percent) ....................................................................... 7.0 0.98 1.02

Per Capita Income ($) ................................................................................... 13,034 0.72 0.73

Below Poverty Level (percent) ....................................................................... 15.5 15.5 1.18

Minority (percent) .......................................................................................... 27.3 1.21 1.39

Of those undertaken and completed, 80 and 81 percent of the defense construction

and RLFs, respectively, were completed on time. About 56 percent of the capacitybuilding projects were completed on time.

Of those undertaken and completed, about 90 percent of defense construction

projects came in at or under budget; the figures for capacity building and RLFs are

97 percent and 100 percent respectively 3.

Project Impacts 4

Project-Related Direct Impacts: Defense Construction On average, completed defense construction projects (49) have produced 30,870 permanent jobs to date, or 124

jobs per $1 million of EDA funding. These jobs were produced at an EDA cost of

$8,052 per job and a total cost (all sources of funding) of $12,045 per job.

Defense construction projects produced 18.0 FTE 5 construction jobs per $1 million

of EDA funding.

Completed defense construction projects (43)6 leveraged $722 million in privatesector investment, or $2.2 million per $1 million of EDA funding. 6 Forty-three of

49 defense construction projects have private-sector investment. Six projects are

public sector and have no private-sector investment.

Defense Construction and Capacity-Building Projects: Permanent Jobs: (Medians)

(49 Completed Defense Construction and 31 Completed TA* Capacity-Building Projects)

Defense Construction Capacity

Building (TA)

.

Jobs Per $1M EDA ............................................................................................................................ 124 63

EDA Cost Per Job ............................................................................................................................. $8,052 $13,633

Construction/Professional Jobs ........................................................................................................ 18.0 FTE 13.7 FTE

Private-Sector Investment Per $1M of EDA Funding ....................................................................... $2.2 M N/A

*Technical Assistance

Capacity Building

Capacity-building projects, by their definition and design, are not intended to create jobs directly, but to increase the planning, organizational, and technical skills

needed for local economic development. Nevertheless, some jobs result as an indirect

byproduct of those project goals. Completed capacity-building (technical assistance)

projects (31) have produced 63 permanent jobs per $1 million of EDA funding at an

EDA cost of $13,633 per job and a total cost of $19,393 per job 7.

Permanent jobs coming from capacity-building technical assistance projects reflect

developments such as stalled businesses being matched with new markets, workers

being more employable due to training, and businesses generating more money because they have been made more efficient.

Completed capacity-building (technical assistance) projects have produced 13.7

FTE professional consultant jobs for every $1 million of EDA funding.
47

8 In-process RLF projects can be analyzed in the same fashion as completed projects because

they behave similarly from the time of their first loan onward. 9 A 12–15 percent combined default and write-off rate is well within industry standards for

this type of loan.

Completed capacity-building projects have, in addition, produced adjustment

strategies, heightened community involvement and planning, created workable implementation strategies, and undertaken market/feasibility studies. EDA capacitybuilding efforts have been rated by grantees as seen in the following table:

Grantee Rating of Capacity—Building Projects (Means)

(70 Completed Capacity-Building Projects)*(Scale of 1–10; 10 = best)

Quality of Adjustment Strategy .......................................................................................................................................... 8.2

Extent of Community/Business/Government Participation ................................................................................................. 8.5

Consistency of Implementation Efforts and the Adjustment Strategy .............................................................................. 7.8

Quality of Technical Assistance Effort ............................................................................................................................... 8.8

Impact of Technical Assistance Effort ............................................................................................................................... 8.9

Quality of Feasibility/Market Study .................................................................................................................................... 9.1

Impact of Feasibility/Market Study .................................................................................................................................... 8.7

*These include all types of capacity-building projects, not just technical assistance.

Grantee Observations:

Across the board, grantees report that the products they are delivering with EDA

oversight are both well done and have a significant impact.

Capacity building empowers local areas to respond in a proactive and forwardmoving way to the adverse impacts on their economies.

Grantees further report the following:

Capacity-building projects are responsible for significant networking among various forms and levels of economic development agencies. This enables greater use

and leveraging of public and nonprofit funds.

Capacity-building projects comprise technology transfer efforts wherein sophisticated methods of enhanced productivity are used to measure business adjustment

to new technology.

Revolving Loan Funds

With regard to revolving loan funds (RLFs), 304 jobs have been created per $1

million of EDA funding for 16 completed projects (fully loaned); for

those projects in process (21), there are 247 8 jobs created. EDA cost per job is

$3,312 for completed RLF projects and $4,079 for projects that are in process.

Completed RLF projects have leveraged $115 million in private-sector investment,

or $2.5 million per $1 million of EDA funding. In-process RLF projects have leveraged $42 million in private-sector investment, or $2.8 million per $1 million of EDA

funding.

Other statistics for RLFs include combined default and write-off rates for completed projects of 13 percent and for RLF projects in process of 1.9 percent 9. For

both completed and in-process projects, jobs produced per business assisted are

about 22 and 24, respectively. In 50 percent of the cases the RLF involves a business expansion (as opposed to startup or retention), and in 67 percent of the cases

it involves the funding of manufacturing firms (as opposed to commercial or service

firms).

Project Impacts (General)

Due to the recentcy of defense adjustment projects, their results are just beginning to become evident. Most will likely contribute significant additional employment growth in the long term.

Defense construction, as well as RLF projects, are nonetheless producing permanent jobs at relatively low costs; capacity-building technical assistance projects are

producing smaller numbers of permanent jobs at somewhat higher costs. Capacitybuilding planning efforts and market/feasibility/reuse studies are perhaps more importantly laying the groundwork for both defense construction and RLF projects. Capacity-building projects could easily be given credit for jobs produced under these

two other types of implementation activities.
48

Revolving Loan Fund Projects (Medians)

(16 Completed and 21 In-Process RLFs)

Completed In Process

Jobs Per $1M EDA ............................................................................................................................ 304 247

EDA Cost Per Job ............................................................................................................................. $3,312 $4,079

Private-Sector Leverage Per $1M EDA ............................................................................................. $2.5 M $2.8 M

Default/Write-off Rates .................................................................................................................... 13 percent 1.9 percent

Jobs Created/Business ..................................................................................................................... 22 19

Conclusions

As reported by grantees, EDA defense adjustment projects are one of the few ave- nues of flexible assistance available to communities faced with base closures.

EDA funding is critical to most of these types of activities and is usually the pri- mary source of initial funding. The lower rate for in-process loans reflects almost no write-offs at this stage of

the loan.

SECTION III

MULTIPLIER AND EMPLOYMENT-GENERATING EFFECTS OF PUBLIC WORKS PROJECTS

Study Overview

The research described here evaluated the job-producing results of public works

investments. It employed nearly 200 input-output and regression analyses to document the effects of Economic Development Administration (EDA) public works

projects on the employment growth of their host counties. Comparisons were also

made to counties where EDA projects did not take place. Both the input-output and

regression analyses sought similar answers: Did public works projects produce attributable permanent jobs in counties where these projects took place? Did the resulting jobs, in turn, produce other jobs? The two analyses are different in that the

input-output analysis is constrained by current conditions, whereas the regression

analysis allows the current structure of economic activities to change. The first presents a static view of job-creation impacts; the second, a more dynamic view. Both

types of analyses are rigorous and standard econometric procedures for determining

relationships between public investment and permanent job growth.

Input-Output Analysis Findings

This research examined the role of EDA-funded direct permanent employment

and private-sector investment in producing total (direct, indirect, and induced) permanent employment and private-sector investment in counties throughout the United States. In other words, what are the direct employment and private-sector investment multiplier effects? The analysis was undertaken using the IMPLAN Model to

generate indirect and induced effects from direct effects, the latter obtained from a

national survey of public works grantees. Thus, the national survey generates direct

permanent employment and private-sector investment; the IMPLAN Model generates indirect and induced permanent employment and private-sector investment.

The sum of direct, indirect, and induced employment and private-sector investment

yields total employment and private-sector investment.

Total employment and private-sector investment divided by direct employment

and private-sector investment produce ‘‘multipliers’’ of the two direct effects.

Two sets of multipliers are shown in Table 1. These relate to two forms of direct

effects—project-related and nonproject-related. The set of lower multipliers expresses total permanent employment and private-sector investment as a function of

both forms of direct permanent employment and private-sector investment. The set

of higher multipliers expresses total permanent employment and private-sector investment as a function of the solely project-related form of direct permanent employment and private-sector investment. The lower multiplier for permanent employment and private-sector investment is the multiplier effect of permanent employment and private-sector investment at the site that the EDA grant specified, as well

as other direct employment that located nearby; the higher multiplier for permanent

employment and private-sector investment is the multiplier effect of permanent employment and private-sector investment solely at the site that the EDA grant specified.

The multipliers shown in Table 1 are medians for five categories of projects and

a weighted median for all projects. The overall median ratio for total permanent employment to both forms of direct permanent employment (project and nonproject re-
49

lated) is 1.50; the equivalent median for total private-sector investment is 1.44.

Thus, if an EDA public works project creates 200 direct permanent jobs and $6 million in direct private-sector investment, total permanent jobs (direct, indirect, and

induced) amounts to 300 and total private-sector investment to $8.64 million. For

employment, there is some minor variation by type of project: Industrial parks exhibit the highest multipliers; water/sewer projects exhibit the lowest. For privatesector investment, there is much more variation by type of project: Buildings have

by far the highest multipliers; tourism/marine projects, the lowest multipliers.

The multipliers for total permanent employment and private-sector investment

versus only project-related direct permanent employment and private-sector investment are 5 percent higher for employment and 10 percent higher for private-sector

investment. This finding indicates the relatively small amount of nonproject-related

direct permanent employment and investment compared to project-related direct

permanent employment and investment identified in the grantee survey.

Regression Analysis Findings

This research evaluated the role of EDA public works investments in the creation

of permanent private-sector employment and in enhancing employee compensation

in U.S. counties.

Current models of the effect of infrastructure investment on private-sector productivity have yet to establish a firm connection between the two. Studies using these

models often fail to control for the potentially important effect of variations in factor

prices, especially wages, in response to public investments. A comprehensive model

of county employment effects is provided in this study as a basis from which to view

impacts.

The analysis reported here was undertaken using information from the Public

Works Program—Performance Evaluation to specify the level of EDA investment in

a public works project in a county. The resulting jobs produced in a county reflect

the numbers of jobs counted annually as reported by County Business Patterns. Additional regression variables, taken from both County Business Patterns and the
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U.S. Census of Population and Housing, were used to help identify the independent

effect of EDA investment on county employment growth.

The analysis employed multiple regression as the primary econometric technique,

with separate equations constructed for both employment and compensation. Variables are expressed in their logarithmic form, reducing the influence of extreme values and enabling a closer fit of the regression planes and higher R2s in both equations. Regressions explain between 80 and 85 percent of the variation in county employment and about 70 percent of the variation in compensation levels.

Empirical results include the following:

EDA investments have a statistically significant and positive effect on county

total employment levels (see Table 2).

EDA investments have no statistically discernible effect on compensation per employee. Thus, the resulting EDA jobs are produced at the average wage of all jobs

locally.

The elasticity of total employment with respect to EDA investment is estimated

at approximately .0074: that is, a 10 percent increase in EDA investment in a typical county ($4,650) is estimated to be associated with an increase of 4.2 jobs. Thus,

a $10,000 EDA investment produces approximately 9 permanent jobs.

The cost per job for the EDA program is estimated at just over $1,100 (in 1997

dollars), counting all permanent jobs generated by the facility or the increase in productivity that the facility offers (direct, indirect, induced, and intangible). This estimate is comparable to the findings in both the Public Works Program—Performance

Evaluation and the input-output analysis, which found that the cost of a direct permanent job was about $3,000 and that the multiplier for total jobs was about 1.5.

But the input-output analysis considered only jobs created by the EDA facility.

There are also other jobs created by the new assets themselves, leading to changes

in the structure of county economies. Thus, the overall jobs multiplier might be even

higher, bringing the cost per job more in line with the regression analysis.

Conclusions

This study found that EDA’s Public Works Program does indeed produce permanent private-sector employment at a relatively low cost. The estimates clearly suggest that the program is having its intended effect. EDA appears to have converted

its resources into permanent jobs at prevailing wages in its target counties. These

counties are better off than similar counties where this type of effort is not taking

place.
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52

STATEMENT OF R. SCOTT FOSLER, PRESIDENT, NATIONAL ACADEMY OF PUBLIC

ADMINISTRATION

Mr. Chairman and Members of the Subcommittee: I am R. Scott Foster, President

of the National Academy of Public Administration. I am here to provide testimony

on behalf of the Academy’s panel on economic development. Former Governor Dick

Thornburgh, the chair of this panel and an Academy Fellow, wished to be here, but

he is on a trip to South Korea.

National Academy of Public Administration

The Academy is an independent, nonpartisan, nonprofit organization chartered by

Congress to identify emerging issues of governance and provide practical assistance

to Federal, State, and local government on how to improve their performance.

To carry out this mission, the Academy draws on the expertise of more than 400

Fellows, who include current and former Members of Congress, cabinet secretaries,
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senior Federal executives, State and local officials, business executives, scholars,

and journalists. Our congressional charter is one of two granted to research organizations. The other is held by the National Academy of Sciences which specializes

in scientific research. The Academy’s emphasis is on the design and management

of government operations and programs.

The Academy Report

Two years ago, the Economic Development Administration of the Department of

Commerce asked the Academy to address the question, ‘‘What is the appropriate future role of the Federal Government in economic development activities?’’ The Annie

E. Casey Foundation also provided support for the project.

The Academy convened a diverse panel of experts from the local, State and Federal levels and also from the private sector. Some members of this panel have had

distinguished careers specifically in economic development, and others have had experience in economic policy or related areas.

We reviewed the economic development policies and programs of all Federal agencies, not just the programs of the Economic Development Administration. Our staff

conducted field work in eight communities, including rural and urban areas. We

interviewed economic development experts and studied the extensive literature on

economic development including evaluations of Federal and State programs. The

panel then prepared its report, and convened a national meeting of economic development professionals from all parts of the country to discuss it.

I have brought copies of the report today, and ask for it to be entered into the

record.

The panel did not address the specific issue before this Committee—reauthorization of the Economic Development Administration. Nonetheless, its findings and recommendations may provide useful information for the Committee as it considers

such legislation.

Briefly, the report recommends a rethinking of the basic premises for Federal economic development activities at the State, local, and regional levels.

Historically, Federal development efforts have tried to increase overall national

productivity and to help economically distressed and poor communities gain a share

of the country’s general prosperity. Toward these ends, the Federal Government has

built and sustained a variety of organizations involved in economic development at

every level of society. They include development agencies at the State and local levels, multicounty development districts, and community-based development corporations, not to mention various nonprofit organizations and working relationships with

banks, industrial associations, and other private-sector partners.

Among the panel’s findings are the following:

The fundamental economic influences of the private sector and market forces

must be incorporated into successful economic development plans.

Federal investments in development efforts are critical to many States and localities, but not all.

No single Federal program is appropriate in all communities; however, the

present multiplicity of programs imposes unnecessarily high transaction costs on

States and localities and exacerbates inherent weaknesses in their approaches.

The meager Federal investment in information sharing and technology severely

constrains our nation’s economic development efforts.

The panel proposed a new approach to meet economic development needs. It urges

the Federal Government to help States and localities learn through better information, leverage all available resources, and link multiple Federal initiatives to assist

local communities.

In order to promote learning, the Federal Government should:

Help States and communities learn about state-of-art economic development practices.

Act to reduce the economic losses resulting from unrestrained bidding wars by

States and localities to recruit or retain businesses.

Improve the quality of economic development decisionmaking and the assessment

of policies and programs at all levels by gathering and disseminating State, regional, and local economic statistics and by reducing the fragmentation of the nation’s statistical system.

In order to leverage State and local efforts, the Federal Government should:

Give States and communities incentives to design and implement effective regional or interjurisdictional development strategies.

Encourage investment in development strategies that offer opportunities to generate jobs and income over the longer term, rather than in high-visibility projects.
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Give special assistance to States and communities seeking to create economic opportunities in distressed communities.

In order to make it easier for States and localities to link Federal resources, the

Federal Government should:

Substantially reduce the fragmentation of the Federal economic development efforts.

Establish a permanent mechanism to provide overall policy-level guidance to other

Federal activities such as work force training, environmental protection, technology

and research, and other endeavors that contribute to economic development outcomes.

Reorient Federal programs, especially business finance programs, toward strategies that address the underlying obstacles to obtaining credit.

Encourage States and localities to stimulate links among businesses to enhance

overall economic performance.

The nation’s economic development programs will be a critical factor in two of the

most significant domestic policy challenges of the coming decades: America’s adjustment and response to an increasingly competitive global economy and the recent

transformation of social policy from one based on dependency to one that stresses

opportunity and personal responsibility. A reformed Federal approach to economic

development will help States and communities make real and far greater contributions to addressing these issues.

EDA does not have the authority to implement all of the panel’s recommendations. For example, it would take action by the Congress and leadership by the

President to substantially reduce the fragmentation of the Federal economic development effort.

However, EDA has taken the panel’s recommendations to heart. On an informal

basis, we have been watching EDA’s actions to implement the recommendations

under its statutory authority and have been pleased at many of the steps they have

taken. Phillip Singerman, Assistant Secretary for Economic Development, recently

provided to us a detailed list of these steps, and I ask that a copy of his letter be

entered into the record. While we have not formally studied or assessed EDA’s actions, it is clear that the agency has taken the panel’s recommendations seriously

and has taken some useful steps -- especially in the area of technical assistance and

training, or as the panel put it, learning.

For example, Mr. Singerman’s letter informs us that EDA is working to develop

a methodology to assess the costs and benefits of State incentive programs. EDA has

engaged a contractor to assess how Federal statistical agencies can better serve the

needs of economic development practitioners. EDA is seeking to strengthen the

planning processes of the States and regions that it works with. And EDA has commissioned independent evaluations of its own programs, hopefully as a step toward

encouraging the States and regions with which it works to evaluate their own efforts. Thoughtful, sound evaluations can be tremendously useful to economic development efforts in sifting the wheat from the chaff, sharing good ideas, and finding

better ways that EDA and other Federal agencies can support their work.

For many years, EDA has been at risk of being terminated. When we were doing

the research for our study, we were told repeatedly about the chilling effect this had

on the morale and the capabilities of the agency. EDA is now working hard to revitalize itself. We are pleased that the Academy report has been of some use to the

agency in this process and hope that the Committee will also find the report useful

in its work.

Conclusion

Mr. Chairman, this concludes my prepared statement. I would be pleased to answer any questions. Thank you.

STATEMENT OF FLOYD G. ‘‘BUDDY’’ VILLINES, JUDGE/EXECUTIVE, PULASKI COUNTY,

ARKANSAS

Mr. Chairman, distinguished members of the Panel: Thank you for holding this

important hearing and for inviting us here today to discuss the long overdue reauthorization of an agency that is very important to revitalization efforts in our economically distressed rural and urban areas.

My name is Floyd Villines. I’m Judge/Executive of Pulaski County, Arkansas and

a former Mayor of Little Rock. I’m here today on behalf of the Coalition for Economic Development, a group of fifteen (15) national organizations committed to supporting the Economic Development Administration.
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Our coalition represents national organizations representing rural and urban economic development practitioners, professionals and academics, and local elected officials. These organizations include the American Economic Development Council, the

Association of University Centers, the Council for Urban Economic Development,

the National Association of Counties, the National Association of Business Incubators, the National Association of Development Organizations, the National Association of Installation Developers, the National Association of Management and Technology Assistance Centers, the National Association of Regional Councils, the National Association of State Development Agencies, the National Association of Towns

and Townships, the National Congress for Community Economic Development, the

National League of Cities, the Public Works and Economic Development Association

and the U.S. Conference of Mayors.

Members of the coalition applaud your efforts and the efforts of Committee Chairman John Chafee to produce a reauthorization bill that continues the reforms that

have been underway at the Economic Development Administration for several years.

We also pledge our support to work with you to reauthorize EDA.

Members of the coalition believe that reauthorization of the Economic Development Administration is critical because:

The agency is moving into the 21st Century with authorizing legislation that goes

back to the early 1980’s. The agency needs reinforcement with new language that

allows it to help our rural and urban communities meet the continuing and everchanging challenges of economic revitalization. Among those challenges will be access to and expertise in information age technology. Our businesses in small cities

and rural areas will be unable to compete in the global economic without access to

these information and marketing tools.

Reauthorization will allow the agency to focus on its core mission and to develop

multi-year plans for its programs, rather than draining off its energy in an annual

battle for survival.

The coalition’s support for EDA is based on a very simple concept: EDA works.

It is a Federal agency that does what it was designed to do. It serves the Federal

role of leveling the playing field for those communities that need to become productive parts of the national economy, rather than a drain on it. It is a lean, streamlined agency with a clearly defined mission. It supports and helps revitalize our economically distressed communities. As a local government official, it is important to

me that EDA is there to provide the seed money necessary for the infrastructure

improvements we need to attract new business and help existing businesses expand

and grow.

I emphasize ‘‘seed money’’ because that is what EDA support is. It’s a boost, a

leg up. It requires local governments to provide as much as 50 percent in matching

funds, although for extremely distressed communities, this match can be reduced.

Often, however, EDA funds are the linchpin that allows us to leverage other financial resources and to buy down loans, making those loans affordable for particularly

distressed areas. For example, in my own county, two census tracts In the vicinity

of North Little Rock were facing a 33.4 percent and a 36.7 percent unemployment

rate. There was no industrial park in the area and no attractive place to locate industry that could provide jobs to these unemployed residents.

Through the efforts of the North Little Rock Industrial Development Corporation

and the Central Arkansas Planning and Development District, an appropriate site

was found. With a $462,000 grant from EDA and a $300,000 plus match from North

Little Rock, water, sewer and an access road were constructed to reach the industrial park site.

Soon after completion, three companies moved in, providing 323 new jobs, a payroll in excess of $3.1 million, with private investments of approximately $4.4 million.

We now have 13 tenants, employing 365 people, with an annual payroll of $4.1 million and private investments totaling $9.5 million.

We believe economic development efforts in this area contributed significantly to

a $10,000 average household income increase in Pulaski County between 1990 and

1995.

This project could not have been completed without the assistance of EDA.

Following are but a few examples, selected from across the country, of what EDA

investments have meant to our distressed communities.

A project in cooperation with the State of Maine to build a Fish Pier at

Stonington, on Deer Isle in East Penobscot Bay. As a result of the new pier, 100

new jobs were created and 262 jobs retained in the fishing community. Since its

completion, a seafood company with three trailers has opened, along with smaller

businesses for fish sorting. The city has benefited as owner of the Pier through user

fee charges. The pier, called ‘‘the Cadillac of piers’’, is expected to last for 300 years.
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Increase in sewage treatment capacity for the Borough of Berwick, Pa., enabled the town to retain 506 jobs, part of a plant operation that was a heavy user of the

sewage facility. The company has expanded its work force, creating about 450 new

jobs. Cost to EDA was $1 million; cost to the community was $4.5 million. Private

sector investment was $14.250 million.

The Rochester Science Park in Rochester, N.Y., helped boost a sagging economy that had few jobs for entry level workers. The Science Park, funded at $1 million

by EDA and $2.12 million from other sources, has created 534 jobs and retained another 55 jobs and resulted in a private-sector investment of $13.175 million. The Martin Luther King Industrial Park in St. Louis is completely filled and has generated a total of 600 new jobs while retaining 600 more. The park has attracted

$50 million in private-sector investments.

—A regional business development system created by the Association of South Central Oklahoma Governments, Duncan, in cooperation with the city of Lawton.

This is an example of a rural area taking a model developed by a metropolitan area.

The program integrated a ‘‘going into business and business plan preparation’’

courses and seminars in conjunction with a Vocational Technical School. The development district worked with its member communities to pull together twelve revolving loan funds. The program provided course work for Fort Sill employees when the

defense facility was going through a reduction in force; has helped hundreds of individuals in their business creation and expansion efforts and has helped course graduates that have gone into business. A project in a deteriorating area in inner Philadelphia that has brought back to life the old American Bandstand Building and turned it into a center for business

incubation. The center is the brain child of the Wharton Small Business Development Center at the University of Pennsylvania. The center’s 10 year goal is to create 200 new businesses, 3,500 new jobs and leverage $660 million in private investment.

Esperanza Unida (New Hope) business incubator center that serves a predominantly Hispanic area in southside Milwaukee has been in existence since 1971, but

its efforts were redoubled in the early 1980’s when all of the factories in which people worked in the neighborhood closed down. In response, the center started an auto

repair training business, but over the years, it has expanded into 11 different training centers, all starting around market niches where there were jobs and wages adequate to support a family. These are but a few of the successful economic revitalization projects in which the Economic Development Administration has played a major role. Numerous other

successful efforts can also be documented.

As I mentioned earlier, EDA is an agency that works. We believe there are sev- eral reasons why:

The EDA network EDA’s regional offices and State economic development rep- resentatives assist local governments and other recipients of funding. These regional

office people and EDRs are available to assist with any problems that arise. They

watch over the projects, make sure there are no problems and help us get projects

completed on time.

The EDA planning process. EDA requires an overall economic development strat- egy that engages the community, various organizations and local governments in a

process to assess needs and to determine goals. That plan is a realistic road map

that keeps us focused. That plan is developed on a regional basis, with specific input

from local governments in the economic development district, citizens and others.

The process allows us to identify our strengths and weaknesses and work to build

on those strengths and eliminate or reduce our weaknesses. It allows us an opportunity to look at where we, as local governments, can be working together, rather

than competing, for economic growth. The academic connection. EDA has a network of university centers that can pro- vide economic development practitioners with academic research to assist them in

planning and project management. In our State, the center at the University of Arkansas-Little Rock is currently collecting and acting as the repository for a consistent set of data that can be used by all economic development districts in developing

their overall plans. These university centers can also operate over a broader base

than one economic development district.

The revolving loan fund program. EDA’s revolving loan fund has assisted thousands of entrepreneurs in establishing their businesses and has kept thousands of

other small businesses in operation. These loan funds serve those that do not meet

the criteria for loans from traditional lending institutions. We all know that small

businesses are providing the majority of new jobs in America. The EDA loan fund

allows us at the local and regional level to invest in our communities by assisting

businesses that are home grown and are more likely to stay at home.
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EDA’s Trade Adjustment Program. EDA’s network of 12 Trade Adjustment Assistance Centers provide vital help to businesses impacted by our changing trade policy

and the growing global competition. The program is designed to help those businesses that receive certification as truly impacted businesses to develop an adjustment proposal that includes the firms recovery strategy and technical assistance

needs.

EDA’s eligibility criteria. The agency’s emphasis is on the most economically distressed areas in rural and urban America and on the most viable projects. The criticism that too much of America is eligible to receive EDA finding in not valid. While

many areas that were designated as economic development districts over the years

remain as ‘‘designated’’ districts, they receive no finding because they no longer

meet the eligibility criteria.

EDA’s job creation focus. The emphasis in EDA programming is on job creation.

EDA grants are tied to job retention and the creation of new jobs, either through

new companies or expansion of existing companies.

EDA’s willingness to listen. EDA has demonstrated a willingness to change. EDA

has listened to its grantees about the timeframe for processing grant applications

and for simplifying the process and has corrected many of the problems of the past

by moving decisionmaking to the regional level. EDA has demonstrated a willingness to reform. EDA, in actuality, has been reforming itself. The agency has listened

and responded to criticism and suggestions from Congress and from its grantees.

All of you are aware, I’m sure, that many communities that are struggling to comply with welfare reform. That means we must find ways to increase the number of

jobs available, and in many parts of the country, communities are faced with an ongoing struggle to attract enough job opportunities. EDA is the one Federal agency

that places all its program emphasis on job creation and job retention, and it is the

agency already positioned to help those rural and urban communities struggling to

respond to welfare reform requirements. In my own county, EDA assistance has

meant that we have been able to add living wage jobs for many of our citizens. EDA

has been there through the years to assist us with our struggle for economic revitalization.

In conclusion, Mr. Chairman and members of the Panel, the Economic Development Administration has earned the respect of all of us who have worked with it.

It is time the agency was recognized through reauthorization for the lasting benefits

it has contributed—and will continue to contribute—to our communities.

Again, thank you for the opportunity to appear before you today. The longer coalition testimony submitted for the record includes numerous examples of the investments EDA has made in America’s economically distressed rural and urban areas.

We have also included a tabulation of the investments EDA has made in every State

since the agency started in 1965.

In addition, we have included a list of coalition member contacts. Please feel free

to call any of them with any questions you may have specific to their areas of expertise.

I’ll be happy to answer any questions. And again, I want to assure you, Mr. Chairman, and other members of the panel that you may rely on members of the coalition

to assist you in any way we can.
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STATEMENT OF ERIC P. THOMPSON, EXECUTIVE DIRECTOR OF THE LOWER SAVANNAH

COUNCIL OF GOVERNMENTS, AIKEN, SOUTH CAROLINA, AND PRESIDENT OF THE NATIONAL ASSOCIATION OF DEVELOPMENT ORGANIZATIONS ON BEHALF OF THE COALITION FOR ECONOMIC DEVELOPMENT

Mr. Chairman and Mr. Baucus, thank you for inviting me to testify on reauthorization of the Economic Development Administration (EDA) on behalf of the Coalition for Economic Development. I am Eric Thompson, Executive Director of the

Lower Savannah Council of Governments headquartered in Aiken, South Carolina.

As President of the National Association of Development Organizations (NADO), I

am pleased to join the other members of our coalition in offering strong support for

EDA reauthorization.

My fellow coalition member Judge Villines has given an excellent overview of the

importance of EDA programs to rural and urban communities. I would like to focus

on an issue of great importance to my region, the State of South Carolina and other
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places throughout the country affected by defense industry contract cuts and base

closures.

Despite the small size of EDA, the agency has always provided flexible programs and funding needed in times of sudden economic dislocation. EDA’s Defense Adjustment Program helps communities impacted by base closures and/or defense contract

reductions to rebuild and diversify their economies and move away from defense dependency. EDA is the only Federal agency with flexible program tools to help communities implement base reuse plans. The agency allows local communities to establish their

own priorities and use EDA grants to fill funding gaps. EDA investments require

local commitment and funding. This creates a true public-private partnership to address long term strategic needs. Working with their local partners, economic development districts, EDA funds are highly leveraged and targeted to areas of greatest

need.

In the State of South Carolina there have been a number of base closings and significant cutbacks at the Department of Energy (DOE) Savannah River Site located in the Lower Savannah region. In April 1996 the Charleston Naval Base was closed resulting in the loss of 21,902 direct jobs with $644 million in annual payroll. When a base closes, there is a need

for a regional approach to provide a transition to other jobs for dislocated workers

and to increase economic diversity for long-term sustainability. Military base reuse

is important, but meaningful defense adjustment must focus on the structural recovery of defense impacted communities and not just base reuse. EDA’s programs and

funding are critical in order to achieve structural adjustment because they allow

local communities to establish their own priorities. Working with the local Economic

Development District, the Berkeley-Charleston-Dorchester Council of Governments,

EDA funds have been invested in infrastructure, a revolving loan fund and a regional marketing plan to create and retain jobs in the region. EDA funds significantly leveraged private-sector investment and have resulted in the creation and retention of 12,800 jobs. In the Lower Savannah region the Savannah River Site produced material for nu- clear weapons used in the US defense program. It is the largest employer in the

State of South Carolina. With the end of the cold war, the Department of Energy

(DOE) downsized the facility, resulting in a loss of over 10,000 jobs, increasing unemployment, causing real estate values to stagnate and essentially halting new

home starts. In 1997, all six counties in the Lower Savannah COG—Aiken,

Allendale, Bamberg, Barnwell, Calhoun and Orangeburg—had unemployment rates

above the State average. The rural counties of Allendale, Bamberg, and Orangeburg

have almost twice the State average and are the three highest unemployment counties in the State.

In order to help the Lower Savannah region adjust to this drastic cutback, the

Department of Energy needed a Federal agency to administer DOE funds provided

for community transition. Using the existing EDA system and grant process, DOE

transferred funds to EDA to administer and now requires that EDA approve all requests for community adjustment assistance from DOE’s Office of Worker and Community Transition.

While defense spending cuts appear to be bottoming out, the defense adjustment

challenge remains. Consolidation and mergers in the defense industry and additional base closures will continue to require EDA’s support and participation in defense adjustment activities. Used for a variety of purposes, EDA funds are tailored

to meet the needs of local communities; they are not based on rigid Federal directives and guidelines.

One of EDA’s greatest strengths is the ability to use the existing network of 320

Economic Development Districts, such as the Lower Savannah COG, for defense adjustment, disaster relief and overall economic development assistance. These regional development organizations provide local governments with professional and

technical assistance. Districts, the core of EDA’s delivery mechanism, are multicounty public-private partnerships whose boards are composed of local elected officials, private-sector and minority representatives. They are critically important in

small metropolitan and rural regions where professional and technical assistance is

limited or nonexistent. Of the nation’s 39,000 units of local government, 33,000 have

populations of less than 3,000 and 11,500 governments have no employees.

Larger cities and counties have professional staff including engineers and planners to assist elected officials in the decisionmaking process. However, in most of

the country’s small and rural communities, Economic Development District employees are the only professional staff who are able to navigate the mountains of red

tape, regulations and application forms necessary to apply for Federal and State assistance. It is through EDA planning grants to districts that distressed communities
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gain access to professional capacity and technical expertise to plan for the future.

Today, EDA’s small planning grants to districts support an Overall Economic Development Program (OEDP) for the communities served. OEDPs are blueprints providing a comprehensive plan for sustainable community and economic development.

EDA is extremely effective both in helping communities cope with long-term economic disasters such as resource-dependent economies facing the decline of coal or

timber industries or sudden economic crises caused by plant and base closings and

natural disasters. It is important to remember that not all of the Base Realignment

And Closure (BRAC) listed installations are yet closed. It takes several years to actually shut down a facility so the need for EDA’s defense adjustment programs will

continue.

EDA has demonstrated its effectiveness and has earned the right to be reauthorized. Under the leadership of Assistant Secretary Phillip Singerman, EDA has

streamlined its operations and significantly reformed and reinvented itself. Now is

the time to provide the agency with legislative tools and congressional guidance to

bring EDA into the 21st century. It is particularly important that America’s distressed communities be prepared to compete in the global marketplace through

state-of-the-art technology. We strongly encourage EDA to once again assume a

leadership role during this transition.

On behalf of the members of the Coalition for Economic Development, I urge the

committee to work with EDA to update the authorizing legislation so that the nation’s distressed communities will continue to have this vital Federal partner as we

move into the next century. I can assure you that those of us who work in economic

development at the local level will do everything we can to help make EDA more

efficient and effective.

STATEMENT OF NATIONAL ASSOCIATION OF DEVELOPMENT ORGANIZATIONS (NADO)

The members of the National Association of Development Organizations (NADO),

strongly support reauthorization of the Economic Development Administration

(EDA). EDA is the only Federal agency that has the program tools necessary to address the broad range of economic development challenges facing America’s distressed communities. Whether through infrastructure grants, strategic planning or

economic adjustment assistance, EDA helps distressed communities compete economically and enter the mainstream. During the past 30 plus years, the agency has

created or retained more than 2.8 million jobs resulting from 39,000 assistance

projects throughout the country; generated $1.9 billion in private-sector capital

through revolving loan funds that have supported more than 7,000 businesses; and

leveraged more than $10 in private-sector investment for every Federal dollar invested.

The National Association of Development Organizations is a public interest group

founded in 1967 to help professionals and local elected officials build communities

and create jobs. The association is the leading advocate for a regional approach to

economic and community development in America’s small metropolitan and rural

communities. Economic distress and development needs transcend jurisdictional

boundaries, and solutions to rural distress are most effective when implemented at

the substate regional level. NADO members provide community, economic and rural

development technical assistance to local governments and the private sector. The

members of NADO directly serve over 1,800 counties and 15,000 cities and towns.

NADO members are regional development organizations, known variously as economic development districts, planning and development councils, councils of governments, area development districts and regional councils. Regional development organizations draft long-term strategic economic development plans, offer a wide range

of technical assistance and provide small business financing. EDA supports these regional planning and development efforts through the economic development district

program.

There are four major reasons why Congress should pass reauthorization legislation for the Economic Development Administration this year.

1. Public Investment in Infrastructure Is Essential for Private Sector Job Creation

For distressed communities outside the economic mainstream, EDA’s public works

grants are the major source of infrastructure funding for projects related directly to

the creation of private-sector jobs. Among the projects funded are water and sewer

facilities serving industry and commerce; access roads to industrial parks or sites;

port investments; and business incubator facilities. While these are not glamorous

projects, they play an essential role in the process of upgrading and expanding the

nation’s aging public infrastructure which directly impacts communities’ ability to
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develop new businesses, retain and expand existing companies and generate local

tax revenues. Since 1965, EDA public works investments have assisted in the creation of more than 1.5 million jobs. The Economic Development Council of Northern Vermont (EDCNV) an economic

development district serving six counties where dairy farming is important, created

a regional dairy industrial park with EDA funding. The focus of this industrial park

is on using dairy by-products such as whey for pharmaceutical products and fertilizer. This kind of careful investment based on local planning continues to pay substantial returns to the economy and builds on and adds value to existing resources. EDA funding for infrastructure improvements to the Mallord Fox Creek Industrial Park in Decatur, Alabama through the North-central Alabama Regional Council of

Governments has resulted in bringing more than 4,000 jobs to the area. This includes the recent announcement by the Boeing Company to employ between 2,000

and 3,000 people to build the common booster core for the new Delta IV rocket.

2. Planning Is Essential for Long Term Sustainable Development

EDA provides support for a network of 320 Economic Development Districts (EDDs) that serve local communities with professional and technical assistance.

EDDs are multi-county public-private partnerships whose boards are composed of

local elected officials, private-sector and minority representatives. EDDs are the core

of EDA’s delivery mechanism. Districts have evolved into the central planning and

service coordination mechanism for many other Federal programs in rural areas including job training, housing, environmental protection, aging services, emergency

management and small business assistance.

As former Representative Bill Clinger (R-PA) stated during the debate on the Economic Development Reauthorization Act of 1994 (HR 2442), ‘‘EDA has established

a network of regional development organizations throughout its service areas, and

I cannot stress too much their importance. EDA is directed toward rural areas of

distress, rural communities that are having trouble competing in a wide variety of

ways. What this program does is provide an expertise that would not otherwise be

available to these communities.’’ NADO members heartily agree with this analysis.

The districts are providers of professional capacity and technical assistance. In

the current fiscal year, Congress appropriated $24 million for EDA’s Title III planning grants. Of this, EDA provides slightly more than $17 million for EDD planning

grants. Districts receive an average of $53,000 from EDA. Like all EDA funds, these

planning grants leverage additional funding from nonFederal sources, including

State and local funds. EDA’s planning grants support a staff person in each EDD

who prepares an Overall Economic Development Program (OEDP) for the communities they serve. OEDPs are blueprints providing a comprehensive plan for community and economic development. They are developed with, and approved by, the local

elected officials from all the participating communities.

It is important to note that the real purchasing power of the planning grants has

been greatly diminished over the past 30 years by inflation. The average planning

grant to districts was approximately $54,000 at the start of the program in 1966.

Today, the average planning grant remains only $54,000. Adjusted for inflation, the

value of a 1998 planning grant is only $10,800, or 20 cents on the dollar, when compared to its original purchasing power in 1966. While districts have leveraged and

stretched these small but significant dollars to help thousands of America’s small

metropolitan and rural communities forge ahead and create jobs, NADO members

strongly encourage Congress to dramatically increase the authorization levels for

the planning grant program.

Larger cities and counties have professional staff including engineers and planners to assist elected officials in the decisionmaking process. However, in most of

the country’s small and rural communities, district employees are the only professional staff that are able to navigate the mountains of red tape, regulations and application forms necessary to apply for Federal assistance. It is through EDA grants

to districts for planning assistance that many distressed communities gain access

to professional capacity and technical expertise. Of the 39,000 general purpose local

governments in the US, 33,000 have populations of less than 3,000 and 11,500 have

no employees.

EDDs are also the local institution that facilitates the flow of Federal assistance

to rural and small metropolitan communities. Districts help smaller communities

prepare applications for Federal and State assistance and often administer EDA infrastructure and economic adjustment grants. Districts are critically important in

obtaining aid for rural counties and towns from other State and Federal agencies

including: the US Department of Agriculture’s rural development grants and loans,

Department of Housing and Urban Development Community Development Block

Grants, Department of Health and Human Service Welfare to Work and Older
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Americans programs, Department of Labor job training, Small Business Administration micro-loan and Certified Development Company programs. Economic Development Districts are entrepreneurial, extremely flexible and pro- vide assistance far greater in scope than that provided by EDA or the Federal Government programs. Because they serve local communities and are governed by a

majority of local elected officials, they respond to the needs of the communities and

deliver a variety of services to meet locally identified needs. The Lower Savannah Council of Governments (LSCOG) headquartered in Aiken,

South Carolina was officially established on June 20, 1967 with an EDA grant of

$31,450 and local funds of $10,500. Today, LSCOG’s base has broadened to include

not only economic development but also law enforcement assistance programs, comprehensive local and regional planning, services to older Americans, health planning

and historic preservation. During the past 31 years, the Lower Savannah Council

of Governments has worked with EDA on a number of successful projects, including: Creation of the Aiken Technical Education Center and the Denmark Area Trade

School which have helped increase both the number of jobs and the qualified persons to fill those positions.

Testing the effectiveness of exporting goods produced by small businesses or farm- ers. The council identified current exporters and industries with the potential to export goods and assisted in developing the capacity of persons who had never participated in the export process.

LSCOG planning staff provides mapping services which facilitate environmental,

land use and economic planning, as well as the preparation of custom census and

other data reports, using a Geographic Information System (GIS). GIS is an organized collection of computer hardware, software, geographic data and personnel designed to efficiently capture, store, update, manipulate, analyze and display all

forms of geographically referenced information. A Global Positioning System (GPS)

which allows locations to be mapped with satellite technology is also being used by

LSCOG.

3. Small Business Assistance Through Revolving Loan Funds Helps Fill Credit Gaps

EDA’s revolving loan fund (RLF) program is one of the most successful and powerful economic development tools for addressing the credit gaps that exist in many

distressed communities, particularly in underserved rural areas. RLFs provide financing when standard lending institutions will not fund smaller, riskier or unconventional business ventures. These funds are lent to businesses that cannot obtain

financing through traditional lending institutions. RLFs are managed by public or

private nonprofit lending institutions as part of an overall economic development

program by lending their initial capital and then relending funds as payments are

made.

The Mount Rogers Planning District Commission (PDC), an EDA Economic Development District, headquartered in Marion, Virginia offers an excellent example of

the impact EDA’s revolving loan fund program has in distressed communities. The

commission has been a major beneficiary of EDA grants and special funding that

have provided the critical infrastructure and site development for several industrial

parks and facilities. Established in 1986, the commission’s revolving loan fund has

developed an outstanding track record with $1,368,000 loaned for 12 loans that

range from $25,000 to $150,000. Over 840 jobs have been created or saved via the

commission’s RLF program with a cost per job portfolio of $1,622 per job. Of the

loans, approximately 28 percent went to industry and business startups and 81 percent to manufacturers. The RLF also targeted 4 percent of the firms that were

women or minority owned.

One of the Mount Rogers RLF’s most successful borrowers, Jack Galyean, President and Entrepreneur of Printed Circuit Solutions, recently received the Appalachian Regional Commission (ARC) Entrepreneur of Virginia Award. With the assistance of Mount Rogers PDC, Mr. Galyean established one of the region’s most technically advanced/leading edge manufacturing facilities, specializing in the printed

circuit board industry. Following a successful career in technology at Rockwell &

Honeywell, he brought his expertise and business experience home to realize his

dream of establishing a manufacturing operation in Galax, Virginia which would

provide technically advanced, much needed jobs with above average wages. Printed

Circuit Solutions Manufacturing, Inc. has grown to 30 employees with at least 50

percent of the work force having 2 years of college or more. The company provides

wages 20 to 30 percent above the industry average in the Galax area.

Based on the success of the RLF program, NADO members strongly encourage

Congress to help strengthen the program. The agency should be strongly encouraged

to continue to allocate resources to capitalize or recapitalize RLFs, to review their

regulations to allow more flexibility and responsiveness to local priorities and make
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use of existing training programs such as the NADO Research Foundation’s Economic Development Finance Service to ensure top level performance of new and existing RLFs.

4. Assistance Is Needed for Communities Facing Long Term and Sudden Economic

Decline

EDA is extremely effective in helping communities cope with long-term economic

disasters, such as resource-dependent economies facing the decline of coal or timber

industries or sudden economic crises caused by plant closings and natural disasters.

The agency is also a major player in the Federal Government’s efforts to assist communities and industries struggling with defense conversion to shift their emphasis

from military-based to private-sector economies.

NADO members applaud EDA for its past success and encourage the agency to

continue using economic development districts as part of its defense conversion

strategy. In distressed communities, the districts are prepared to respond to and

meet needs identified at the local level. The districts have the flexibility and expertise to respond to challenges, as well as the capacity to provide rural communities

with the ability to react to new causes of economic distress, such as base or industry

closure due to military downsizing. Through the overall economic development program, districts can help communities plan for defense conversion related problems

and prepare a regional strategy to counter these obstacles.

The South Western Oklahoma Development Authority (SWODA), an EDA Economic Development District, converted a former B–52 Strategic Air Command Base

into the Clinton-Sherman Industrial Air Park owned by the city of Sherman. Employing 500 people, the industrial park is a small town in itself, with an airport,

and commercial and industrial operations. Currently the State of Oklahoma has

formed a team with SWODA to compete for a launch site for the next generation

space shuttle.

EDA Has Earned the Right to Be Reauthorized

The Economic Development Administration has demonstrated its effectiveness

and deserves the stability in programmatic structure and funding that reauthorization would provide. During the past 30 plus years, the agency has created or retained more than 2.8 million jobs resulting from 39,000 assistance projects throughout the country; generated $1.9 billion in private-sector capital through revolving

loan funds that have supported more than 7,000 businesses; and leveraged more

than $10 in private-sector investment for every Federal dollar invested.

Under the leadership of Assistant Secretary Phillip Singerman, EDA has streamlined its operations and significantly reformed and reinvented itself. Now is the time

to provide the agency with legislative tools and congressional guidance to bring EDA

into the 21st century.

EDA infrastructure grants are not only necessary, they are extremely successful

and cost effective investment of Federal resources. The Federal Government receives

a return on their investment far greater than the size of the Federal share of EDA

infrastructure grants. As Assistant Secretary Singerman testified during House

hearings last summer, a May 1997 performance evaluation of the EDA Public Works

Program conducted by Rutgers University shows that EDA assistance helps distressed communities create jobs (at a cost of $3,058 per job), expands the local tax

base (an increase of $10 for every $1 of EDA investment), and leverages private investment ($10 for every $1 of EDA investment). The results of this evaluation were

gathered from a study of 203 public works projects that received their final payment

from EDA in fiscal year 1990.

In addition to EDA legislation, NADO members support reauthorization of the Appalachian Regional Commission (ARC) which provides assistance to distressed areas

in this 13 State region. ARC, working with Local Development Districts, has focused

its resources on their most distressed counties and should also be reauthorized.

To restate briefly the main reasons why Congress should reauthorize the Economic Development Administration this year. EDA is the only Federal agency that

has the array of program tools needed to meet the challenges facing America’s distressed communities including: public works, revolving loan funds, planning and

economic adjustment. The Economic Development Administration supports a network of 320 Economic Development Districts (EDDs) that serve small metropolitan

and rural communities as vital providers of professional and technical assistance.

EDA has demonstrated its effectiveness and has earned the stability in programmatic structure and funding that reauthorization would provide.
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EDUCATIONAL ASSOCIATION OF UNIVERSITY CENTERS,

Cullowhee, North Carolina 28723, July 14, 1998.

SENATOR JOHN WARNER Chairman,

Subcommittee on Transportation and Infrastructure,

Senate Office Building,

Washington, DC 20510.

SENATOR MAX BAUCUS RANKING Minority Member,

Committee on Environment and Public Works,

Senate Office Building,

Washington, DC 20510.

DEAR CHAIRMAN WARNER AND RANKING MINORITY MEMBER BAUCUS: The Educational Association of University Centers, a member of the Coalition for Economic

Development, is pleased to provide comments for the record in strong support of the

reauthorization of the Economic Development Administration (EDA).

As we all know, there are a myriad of different reasons why a particular geographical area may fall behind the economic development level of other regions of

the country. Once this slide begins, however, standards of living further erode and

poverty increases. EDA stands alone as our national resource to stem and hopefully

reverse the economic decline in many distressed communities. By working through

grants and local resource partners, EDA brings investment and critical technical expertise to create sustainable economic development in the most cost-effective manner possible.

The University Center program, funded by EDA through its technical assistance

account, provides the technical expertise component in the menu of EDA services.

As you know, there are 69 university centers nationwide that uniquely link the

knowledge, expertise, and resources of the nation’s higher education system with
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the private sector and communities to solve economic development problems. By

providing the feasibility studies, community economic development planning, data

collection and dissemination, regional economic development studies, work force

competitiveness training, non-profit development and local government official training, the university center program offers the technical expertise underpinning any

successful economic development strategy.

University centers are often the vital link between a community’s economic development plan and the capital investment to make that plan reality. In fact, in 1995

alone the university center program, which is currently funded by EDA at $6.9 million, secured $200 million in capital investments. That means that this one small

EDA program leverages $26 for every one Federal dollar EDA invests in the program. This extraordinary level of success is indicative of the value EDA brings to

our nation’s communities.

But, the university center program is only one small part of EDA’s economic development arsenal. The planning process, EDA’s network of regional offices and

State economic development representatives, the revolving loan fund, the trade adjustment assistance program are all available to insure eligible communities get the

help they need, when they need it. In the end, EDA and all of its partners focus

on creating the jobs that are so crucial to the long-term viability of a community.

Job creation remains job one.

Under the excellent leadership of Assistant Secretary Phillip Singerman, EDA has

also instituted a number of measures to insure the highest possible quality from all

of its programs. Several years ago, for instance, the university center program in

conjunction with EDA developed a peer review process conducted by EDA staff and

experienced University Center Directors to strengthen the overall program delivery.

These onsite program assessments seek to correct instances of unsatisfactory performance and to proscribe new strategies for better serving our communities. The

result has been a stronger, more efficient university center program.

While this is only one example, EDA’s commitment to quality, cost-efficient programs shines through in its strategies to prepare itself for the 21? Century. While

EDA has planted and nurtured the seedlings of a long term and highly effective

presence in America’s economy, it will take reauthorization to ensure these strategies take root and develop the strength to resist the political winds of change. Economic development is critical to the overall prosperity of our nation. Perhaps it is

a tired cliche, but it still holds true: we are only as strong as our weakest link. EDA

works to strengthen us all.

Reauthorization of EDA is vital to distressed communities nationwide. The Educational Association of University Centers urges you to act favorably and expeditiously to reauthorize EDA.

Thank you for your time and consideration of this vital matter.

Sincerely,

THOMAS MCCLURE,

Educational Association of University Centers.
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