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[House Hearing, 106 Congress]
[From the U.S. Government Publishing Office]

                THE FUTURE OF ROUND II EMPOWERMENT ZONES

=======================================================================

                                HEARING

                               before the

                   SUBCOMMITTEE ON RURAL ENTERPRISES,
                  BUSINESS OPPORTUNITIES, AND SPECIAL
                        SMALL BUSINESS PROBLEMS

                                 of the

                      COMMITTEE ON SMALL BUSINESS
                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED SIXTH CONGRESS

                             SECOND SESSION

                               __________

                      WASHINGTON, DC, JUNE 7, 2000

                               __________

                           Serial No. 106-61

                               __________

         Printed for the use of the Committee on Small Business

                    U.S. GOVERNMENT PRINTING OFFICE
67-149                      WASHINGTON : 2000
_______________________________________________________________________
            For sale by the U.S. Government Printing Office
Superintendent of Documents, Congressional Sales Office, Washington, DC 
                                 20402

                      COMMITTEE ON SMALL BUSINESS

                  JAMES M. TALENT, Missouri, Chairman
LARRY COMBEST, Texas                 NYDIA M. VELAZQUEZ, New York
JOEL HEFLEY, Colorado                JUANITA MILLENDER-McDONALD, 
DONALD A. MANZULLO, Illinois             California
ROSCOE G. BARTLETT, Maryland         DANNY K. DAVIS, Illinois
FRANK A. LoBIONDO, New Jersey        CAROLYN McCARTHY, New York
SUE W. KELLY, New York               BILL PASCRELL, New Jersey
STEVEN J. CHABOT, Ohio               RUBEN HINOJOSA, Texas
PHIL ENGLISH, Pennsylvania           DONNA M. CHRISTIAN-CHRISTENSEN, 
DAVID M. McINTOSH, Indiana               Virgin Islands
RICK HILL, Montana                   ROBERT A. BRADY, Pennsylvania
JOSEPH R. PITTS, Pennsylvania        TOM UDALL, New Mexico
JOHN E. SWEENEY, New York            DENNIS MOORE, Kansas
PATRICK J. TOOMEY, Pennsylvania      STEPHANIE TUBBS JONES, Ohio
JIM DeMINT, South Carolina           CHARLES A. GONZALEZ, Texas
EDWARD PEASE, Indiana                DAVID D. PHELPS, Illinois
JOHN THUNE, South Dakota             GRACE F. NAPOLITANO, California
MARY BONO, California                BRIAN BAIRD, Washington
                                     MARK UDALL, Colorado
                                     SHELLEY BERKLEY, Nevada
                     Harry Katrichis, Chief Counsel
                  Michael Day, Minority Staff Director
                                 ------                                

Subcommittee on Rural Enterprises, Business Opportunities, and Special 
                        Small Business Problems

                FRANK A. LoBIONDO, New Jersey, Chairman
RICK HILL, Montana                   DONNA M. CHRISTIAN-CHRISTENSEN, 
JIM DeMINT, South Carolina               Virgin Islands
JOHN THUNE, South Dakota             DAVID D. PHELPS, Illinois
JOHN E. SWEENEY, New York            TOM UDALL, New Mexico
                                     BRIAN BAIRD, Washington

                            C O N T E N T S

                              ----------                              

                      Hearing held on June 7, 2000
                               Witnesses

                                                                   Page
Bono, Mary, Member, U.S. House of Representatives, California....     4
Capuano, Michael, Member, U.S. House of Representatives, 
  Massachusetts..................................................     5
Mathews, Maria, Deputy Administrator for Rural Development, 
  United States Department of Agricuture.........................     7
Velazquez, Gerard, Executive Director, Cumberland County 
  Empowerment Zone...............................................     9
Dunkins, James, Vice-Chairman, Cumberland County Empowerment Zone    12

                                Appendix

Opening statements:
    LoBiondo, Hon. Frank.........................................    22
Prepared statements:
    Bono, Mary...................................................    26
    Capuano, Michael.............................................    29
    Mathews, Maria...............................................    31
    Velazquez, Gerard............................................    36
    Dunkins, James...............................................    45
Additional material:
    Written Statement of the EZ/EC Initiative Office, U.S. 
      Department of Housing and Urban Development................    48

 
                THE FUTURE OF ROUND II EMPOWERMENT ZONES

                              ----------                              

                        WEDNESDAY, JUNE 7, 2000

              House of Representatives,    
               Committee on Small Business,
       Subcommittee on Rural Enterprises, Business,
         Opportunities and Special Small Business Problems,
                                                    Washington, DC.
    The Subcommittee met, pursuant to call, at 2:45 p.m., in 
room 2360, Rayburn House Office Building, Hon. Frank A. 
LoBiondo [chairman of the Subcommittee] presiding.
    Chairman LoBiondo. Committee will come to order. I would 
first like to apologize to our panelists and guests for the 
delay, unfortunately, beyond our control. Welcome to the 
Subcommittee on the Future of Round II Empowerment Zones. I am 
going to have a brief opening statement and then turn to our 
ranking member for her opening statement, and then we will move 
into the first panel.
    Good afternoon, ladies and gentlemen. Today the 
Subcommittee on Rural Enterprises, Business Opportunities and 
Special Small Business Problems is convening to discuss the 
Future of Round II Empowerment Zones. As many of you know, the 
EZ/ECs program was enacted in 1993. This 10-year program 
targets Federal grants to economically distressed urban and 
rural communities for social services and community 
redevelopment, and provides tax and regulatory relief. In what 
is now referred to as round I of the program, 104 empowerment 
zones and enterprise communities were created. As part of this 
program, each urban and each rural empowerment zone received 
$100 million and $40 million respectively in flexible Social 
Service Block Grant funds. In addition, qualifying EZ employers 
are entitled to a 20 percent credit on the first $15,000 of 
wages paid to certain qualified zone employees.
    The Taxpayer Relief Act of 1997 authorized a second round 
of 20 EZ designations known as Round II Empowerment Zones. In 
the round II competition, 279 communities and groups of 
adjacent communities, 119 in urban areas and 160 in rural 
areas, competed for 15 urban and five rural zone designations.
    In my congressional District in Cumberland County, New 
Jersey, we were one of the 15 urban areas to receive this 
designation on January the 13th, 1999.
    Unfortunately, employers in Round II Empowerment Zones are 
not currently able to benefit from the hiring tax credit 
afforded to employers located in the Round I EZs. Additionally, 
the block grant funding that is available for Round I EZs has 
not been made fully available to Round II zones. Cumberland 
County should be receiving $10 million a year for the next 10 
years. To date, they have received approximately 6.7 million, 
only one third of the amount of funding promised at the Federal 
level over two years. Business people, community groups and 
residents of the Round II Empowerment Zones have no choice but 
to sit through Congress' annual appropriations battles before 
they are able to construct, with a level of certainty, economic 
plans that will revitalize their community. Those of us 
representing one of these distressed communities in Congress 
understand the vital need to have full funding mechanism in 
place for Round II, as it is in place for Round I designations.
    This is the second hearing that the Small Business 
Committee has held on this issue. The first was held on April 
26th, 2000 in Mecca, California and was chaired by one of our 
witnesses, Representative Mary Bono. At that hearing, members 
of the community discussed their concerns with the uncertainty 
that Round II zones face and how these uncertainties affect 
their business plans.
    Surely, these uncertainties are not what Congress intended 
to subject these communities to when we decided to create new 
empowerment zones. Indeed, with the newly reached agreement 
regarding the Talent-Watts Community Renewal Legislation, 
Congress runs the risk of creating a fractured structure of 
community development zones and forgetting about the promises 
made to communities that were designated Round II Empowerment 
Zones in 1999.
    Over the last several years, our Nation has experienced an 
historic period of wealth creation. Our challenge now is to 
expand that prosperity to lower income families in rural and 
urban communities. Through empowerment zone opportunities, we 
invite low income working Americans to be participants in our 
strong American economy and to determine how resources will be 
used within their neighborhoods.
    Today, we will hear from two distinguished panels of 
witnesses to discuss the future of Round II Empowerment Zones. 
On the first panel we have a member of our full committee, 
Representative Mary Bono. Additionally, I would also like to 
welcome Representative Mike Capuano. Mike and I decided several 
months ago to form the EZ/EC congressional bipartisan caucus to 
highlight the fact that the 20 round II EZ/ECs designated by 
the President in 1999 still have not received the full funding 
allotment they were promised.
    Our second panel consists of Maria Matthews, the Deputy 
Administrator for Rural Development from the United States 
Department of Agriculture; Jerry Velazquez, Executive Director 
of the Cumberland County EZ; and Reverend James A Dunkins, Vice 
Chairman of the Cumberland County Empowerment Zone.
    [Mr. LoBiondo's statement may be found in appendix.]
    Chairman LoBiondo. I look forward to the enlightening 
testimony of our witnesses, and now I turn to the ranking 
member for any opening statement she may have.
    Ms. Christian-Christensen. Thank you, Mr. Chairman. I am 
pleased to join you this afternoon for this hearing on 
something that I consider to be an important issue, the future 
of Round II and also Round III Empowerment Zones. I would like 
to welcome our panel of witnesses also, and especially extend a 
welcome to our colleagues, Representative Bono and 
Representative Capuano, and I look forward to hearing from all 
of you and learning your experiences and concerns and receiving 
some of your insights into this issue.
    Coming from a particularly economically distressed 
community, the U.S. Virgin Islands, and having introduced 
legislation myself, H.R. 3643, to create empowerment zones for 
the territories because they are not included in any of these 
authorizations, the EZ/EC program has been and continues to be 
of major interest to me. To this subcommittee, which represents 
the interests of rural business particularly, it is important 
that we look at this program, which has the potential to be a 
lifeline to our often overlooked or forgotten communities, 
either urban or rural.
    It is our responsibility to ensure that the EZ/EC program 
represents more than an empty promise, but that it will indeed 
provide the resources to enable parts of this country, which 
have not yet begun to share in its extraordinary economic 
bounty, to be able to do so.
    Today's hearing focuses on whether or not, given the 
limited funding we have provided theopportunities to Round II 
Empowerment Zones, to realize the goals set out in their strategic 
plans. We will also explore the need for additional tax incentives and 
other tools to encourage investment in these zones and review the 
recent agreement on new market provisions.
    The Taxpayer Relief Act of 1997 created what is now known 
as Round II of the empowerment zone enterprise communities, 
which provides for the designation of additional EZs. However, 
one of the major issues before us today is the fact that the 
Act failed to provide Social Service Block Grant funding for 
the second round, which was a key feature of that first round. 
Over the 10-year life of the program urban and rural EZs are 
each to receive 100 million and 40 million respectively. 
Currently, only 3 million for each urban zone and 2 million for 
each rural zone has been approved in Round II.
    The Empowerment Zone program is a vital antidote to the 
economic and social problems confronted by distressed urban and 
rural areas in this country. According to Vice President Gore, 
Round I resulted in more than 80 million in private sector 
investment to the designated communities and unprecedented 
public private partnerships. Round II should add more substance 
to the program because the Taxpayer Relief Act designated 20 
additional communities, making them eligible for a share of 50 
million in proposed Federal grants over the next 10 years.
    Despite these new provisions, the reason that we are all 
here today is because Round II lacks what it takes to fully 
empower these communities by encouraging the investment they 
need to make them whole. I must note at this point that it is 
the administration's goal and that of the Congress to obtain 
full funding for Round II of the Empowerment Zone program. Such 
legislation in the Congress would include H.R. 4463 introduced 
by Representative Bono, which would amend the Internal Revenue 
Code of 1986 to allow the empowerment zone employment credit 
for additional empowerment zones and enterprise communities and 
increase funding for those zones and communities. It is 
important that we look at this legislation as we seek a remedy 
to improve Round II Empowerment Zones.
    Last week, the White House announced an agreement between 
the administration and Speaker Hastert on the New Markets 
Initiative. This agreement incorporates a designation of yet a 
third round of EZs. We must look at the new components that 
that third round designation would add, either before creating 
a new program, or at least at the same time we consider the 
status of the current program.
    I look forward to listening to your testimony and 
discussing these issues with you. Again, thank you for being 
here.
    Chairman LoBiondo. Thank you. We will now move to the 
panel. Congresswoman Mary Bono, we thank you for joining us. 
Mary has sponsored legislation that a number of us are 
cosponsoring, that would help in the funding scenario, and has 
been a very strong advocate. We thank you for your help and 
welcome you today.

 STATEMENT OF THE HON. MARY BONO, A REPRESENTATIVE IN CONGRESS 
                  FROM THE STATE OF CALIFORNIA

    Ms. Bono. Thank you, Mr. Chairman. I would like to thank 
you and the ranking member for holding this hearing on the 
Round II Empowerment Zones and on H.R. 4463, the Empowerment 
Zone Enhancement Act of 2000.
    As we continue to study the very exciting agreement 
recently reached between the Speaker of the House and the 
President regarding the American Community Renewal Act and the 
New Markets Initiative, it has become even more clear that we 
must finish the work that was begun in the Round II Empowerment 
Zones.
    In 1997, 20 empowerment zones were authorized as part of 
the tax reconciliation package in the Balanced Budget Act. This 
second round of empowerment zones, 15 urban and five rural, 
were designated in January 1999. Unlike the first round, the 
Round II Empowerment Zones were not authorized to benefit from 
the employer wage tax credit, also referred to as the hiring 
tax credit, nor were there funds available to implement the 
strategic plans upon which the designations were made.
    A couple of months ago, the Small Business Committee held a 
hearing in the Desert Communities Empowerment Zone, which I 
have the pleasure of representing. While this hearing discussed 
some of the positive initiatives that have begun in eastern 
Coachella Valley, it also brought to light the obvious need, 
especially in rural empowerment zones, for consistent funding 
as well as the employer wage tax credit.
    I am concerned that Congress has an unfulfilled obligation 
to complete the process begun for the Round II Empowerment 
Zones. That is why I have introduced H.R. 4463, a bill to 
provide title 20 funding to the Round II Empowerment Zones and 
extend the hiring tax credit. I, along with my colleagues on 
the Round II Empowerment Zone Caucus, am committed to doing all 
that we can to ensure that we pass legislation to provide full 
funding along with the hiring tax credit for the second round 
empowerment zones and complete the commitment that we have made 
to our distressed communities.
    Thank you again for allowing me to testify on an issue that 
means very much to my district and to all of the Round II 
Empowerment Zones that are trying to better their communities. 
Thank you.
    [Mrs. Bono's statement may be found in appendix.]
    Chairman LoBiondo. Thank you, Mary. Next is Congressman 
Mike Capuano representing Boston, Massachusetts. I want to 
thank Mike for all his effort and energy in helping with the 
caucus that we set up. He has been a tireless advocate. This 
has been a very strong bipartisan effort. Mike, thank you for 
joining us today.

    STATEMENT OF THE HON. MIKE CAPUANO, A REPRESENTATIVE IN 
            CONGRESS FROM THE STATE OF MASSACHUSETTS

    Mr. Capuano. Thank you, Mr. Chairman, and thank you for 
inviting me here, and thank you, Madam Ranking Member, although 
some day it ought to be chairman soon, I hope, nothing 
personal.
    I really came to talk a little bit about promises made, 
promises broken, hope uplifted and hope shattered. That is what 
the EZs and ECs are all about. I know that many of the things 
that have happened in my community would not have happened 
without the promise of an empowerment zone. Some things have 
actually physically happened. We have had some social programs 
and we have had some investment, but we have many things in the 
pipeline that if we don't get the funding that we were 
promised, will never come to fruition, which I personally think 
is the worst thing that any government can do, which is to tell 
people we are going to help you, we are here to help and then 
walk away. And I honestly think, in many ways, that if we are 
not going to fund the Round III, we shouldn't designate them, 
just walk away, forget it and don't do it.
    I know in Boston, as you said, the numbers are the same. We 
are only getting 33 percent of themoney that we were promised 
to get, and that money has been put to great use. People have been 
hired, money has been invested. We have already leveraged, I think the 
number is, about $700 million are either leveraged already or in the 
pipeline to be leveraged on projects to go into some of the poorest 
areas in my district.
    And I know that many people think of places like Boston as 
a wealthy area, and in general, that is true, but the 
empowerment zone in Boston represents the area of the city, the 
typical core area of the city that has been walked away from 
years after years after years from all government agencies that 
are now mostly populated by minorities, many of whom don't 
speak English.
    If we don't reinvest in those communities, you are going to 
have nothing but a hot bed of trouble forever, and I know that 
that is why empowerment zones were created. I know you know 
this. I know that anybody who understands what this whole 
program is all about understands it and supports it, and I 
recommend to anyone who doesn't know that to take a walk 
through any of them, either the urban ones or the rural ones. 
They are all the same. They look a little different but the 
bottom line is still the same. There are environmental 
concerns. In the cities you have dumps that that were there, 
walked away from years after year, and in the rural areas you 
have dumps they don't even know they are there until they walk 
across and stumble across them as they try to build something.
    So for me, I really came to talk about the promises that 
were made by the government. We should fulfill them. I make the 
same arguments when it comes to veterans. We have promised 
veterans certain things, and this House has voted to give those 
things because we feel strongly that if we made those promises, 
we need to live up to them. The same is true for every other 
American citizen. When the government makes a promise, we need 
to live up to it and we need to do that before we go on to the 
next step. That includes both Round IIIs, that includes the New 
Markets Initiative, that includes APIC, all of which are great 
programs. I support every one of them. I want to be there to 
vote for them, but they will not work, they will not work if we 
walk away from our commitments on Round II because anyone 
coming in the pipeline next is going to have to look at those 
Round II people who did all of the same things, followed all of 
the same rules, and were able to fulfill their commitments.
    What would you do if you were a city manager or a town 
manager and you know you have this wonderful APIC, all these 
new initiatives we are talking about, if you look right next 
door and the community next door has an empowerment zone or an 
EC that wasn't funded, you are not going to step up to the 
plate too quickly.
    We have only about 40 of these communities all across the 
country. They deserve to have the promises made to them 
fulfilled so we can get back to the business of fulfilling the 
hope that this Congress told them that we would fulfill, and 
that is why I came to say this today. Mr. Chairman, I 
appreciate your effort. You have been a fantastic leader. I 
have learned a lot in the short time that we have been working 
together on this issue, both on the issue on how to get things 
accomplished. You have done a great job for this year, and 
obviously we will be there forever to work on this issue to 
make sure that these commitments are fulfilled. Thank you.
    [Mr. Capuano's statement may be found in appendix.]
    Chairman LoBiondo. Thank you, Mike. If there are any 
questions that the committee has of our two Members on the 
panel, this would be the time. Otherwise, I think that the 
indication was that both Members had markups. You are welcome 
to join us if you have the time on this side. No questions. I 
am sorry.
    Ms. Christian-Christensen. It is a very brief question, but 
I completely agree with everything that you said, and I am a 
health person. I represent the health branches of the caucus, 
and we will never be able to address even the health issues 
unless we can address the economic and other issues in our 
community.
    The nine new empowerment zones, if they come into being, I 
understand don't have any grant funding. They just have tax 
incentives. Does that meet what you think our communities need?
    Mr. Capuano. As far as I am concerned, the answer is no. 
But for me, the most important thing, I was the mayor of my 
community for 9 years before I came here, and I would say that 
the most important thing, tell me what the rules are and stick 
by them so that I can make plans. You don't just build a 
building or set up a social network in matter of a year. It 
takes years to develop these things, to get a hold of the 
property. You may not own most of the property. You may not 
have people who want to develop properties that you want to 
develop. It takes years to find them, years to get the money 
lined up, and if the rules change when you are halfway down the 
road, you have already found the developer to develop that dump 
and you walk away, it is the worst thing. So the answer is no, 
I don't think it does enough. But my argument, my strongest 
argument comes that whatever we say we are going to do, we need 
to do it for the length of the program.
    Ms. Bono. I agree wholeheartedly with what he said. I think 
that, first of all, whatever the rules are from day one should 
be the rules. I think people can do a lot better if they know 
that what they are told they are going to get is what they get. 
It makes planning an awful lot easier, and that is what I heard 
in the field hearing, too, is that people, the uncertainty was 
probably the biggest deterrent of all.
    Chairman LoBiondo. We have a very strong feeling within the 
caucus that while we certainly don't object to the Round IIIs, 
we object to the Round IIIs being designated without the full 
commitment to the Round IIs, and that if Round II had the full 
commitment and funding scenario that the Round I's had, then we 
would open our arms to the new designation of Round III zones, 
welcome them in and help them through the process that we went 
through, but we find it very puzzling, many of us, that these 
Round IIIs are going to be designated when we have a very clear 
record of how the Round IIs have not been handled properly, and 
that is part of the reason of the hearing, to focus attention 
so that we can rectify this situation, and maybe through some 
of the testimony that we are going to have, the brakes will be 
put on those Round III designations until we can get our Round 
II straightened out.
    Thank you both very much.
    I would like to welcome--Mr. Phelps, Thank you for joining 
us.
    Okay. I would like to welcome our second panel. Thank you 
for joining us. And first we will call on Maria Matthews, 
Deputy Administrator for Rural Development for the Office of 
Community Development for the United States Department of 
Agriculture. Thank you for joining us.

  STATEMENT OF MARIA MATTHEWS, DEPUTY ADMINISTRATOR FOR RURAL 
  DEVELOPMENT, OFFICE OF COMMUNITY DEVELOPMENT, UNITED STATES 
                   DEPARTMENT OF AGRICULTURE

    Ms. Matthews. And thank you very much, Mr. Chairman, and 
ranking member, for your invitation to the committee. I am 
very, very pleased to be here, and I am also very grateful to 
you and Congressman Capuano for your vision in beginning the 
EZ/EC congressional caucus forum so vitally needed by both the 
urban and the rural empowerment zones. And I would liketo 
stress also our enterprise communities, who have certainly demonstrated 
that in rural America, if you give them a lot, they learn how to do 
something with it very quickly.
    I do have a prepared statement, but I think it is best at 
this point that we have conversation, and I like to do that 
because I am originally from a Round I enterprise community in 
the Imperial Valley, California. I was the executive director 
of that enterprise community and the full beneficiary of Round 
I, and saw, prior to coming USDA, what that opportunity has now 
done for that community in establishing new jobs and new 
industry and in giving the community hope.
    And I think that that is definitely the foundation of the 
EZ/EC program and what it does, it has such a vision, and it 
gives a community hope in looking at itself holistically, and 
we required of these communities that had this hope and had 
this vision that the Federal Government would come in a 
different capacity as in past history and really provide them 
with a tool that gave them the reigns to solving their own 
problem while we gave them the resources with which to begin to 
implement those solutions.
    It was a completely new way of doing business, and in a 
sense, the community has embraced it wholeheartedly, and we 
promised them that if they went through this wonderful 
bittersweet, agonizing, sometimes painful process, a true 
community development planning and put together a 10-year 
vision that we would assist them with the resources, at least 
just the seed resources, to begin making these solutions a 
reality. We did it in Round I, and the full anticipation of 
Round II applicants was that this would be the same promise.
    We have heard that mentioned and could not agree with you 
more fully on that. What it does do, and I am in complete 
agreement, to communities, when you do not provide them the 
funding they had an expectation of receiving, it does stagnate 
the implementation of their strategic plans. They cannot put 
all of those projects that they worked so hard to leverage 
resources and create partnerships to complete. It does not 
allow them to move forward.
    I think that if you look at the record in rural America for 
the 57 communities that we have designated, both as empowerment 
zones and enterprise communities, if you take a look at what 
they have done with the dollars that were given in Round I, for 
example, with their initial allocations of 40 million for first 
three zones and nearly three million for the 30 enterprise 
communities that were designated, they have leveraged, as of 
February of this year, about $1 billion in additional resources 
from other areas, both the Federal Government, State 
governments, local government, the private sector and nonprofit 
institutions. With that, they have created well over, close to 
11,000 jobs, created 250 new businesses, put in 50 new water 
and waste lines, and on and on and on and trained people. They 
are on a leveraging ratio of about 8\1/2\ to 1 in terms of 
dollars.
    When you look at what Round II has done, and I believe 
Congressman Capuano talked a little bit about what the Round 
IIs have done with leveraging, considering the fact that they 
have received a third of what they were promised, on the rural 
side, the Round IIs have drawn down approximately $3 million of 
what they have received at this point, and this is based on our 
benchmark management system that we have at USDA where we 
collect this data. Well, they have already leveraged close to 
$30 million and are on a leveraging ratio of 9\1/2\ to 1, and I 
think what that demonstrates is that if we keep our promise, 
our communities keep their promise.
    They gain capacity. They learn how to use the resources 
that we give them in terms of technical assistance and the seed 
money that we give them, and they find partners in the public 
and the private sector to fulfill the intentions of their 
strategic plans. And I think that that is probably one of the 
most unique features of this particular initiative.
    In the President's request for fiscal year 2001, it had 
indicated, or it had requested 15 million a year on the rural 
side for the next 8 years, and although that is not full 
funding, because that follows the line for rural communities at 
2 million a year for the zones and 250,000 for the enterprise 
communities, which is not what would equal the 40 million for 
the zones in the year and the 3 million for the enterprise 
communities, that has now been superseded by the new agreement 
between the President and the Speaker and has caused, as I 
think Congresswoman Bono said, great uncertainty within the 
Round II communities as to what the future of their funding is.
    I believe in recent information, it states 200 million, but 
the concern from the community is that it doesn't mention the 
enterprise communities in terms of the funding scheme and it 
doesn't really indicate how that funding is going to be 
distributed. And just this week for the U.S. Department of 
Agriculture's Office of Community Development has their 
enterprise committees and their empowerment zones in town for 
our annual training meeting, and in a session that we heard, 
this is a concern they have that they are uncertain about the 
Round II communities, they are uncertain about what that means 
for their funding future.
    And I think that we must find a way to calm that 
uncertainty and to fulfill the promise that we made to them and 
to see them flourish and continue to create jobs and continue 
to increase their capacity, continue to add potable water 
systems in communities that don't have them, continue to train 
people for this new business environment as they have been 
doing so well and continue to create the partnerships that will 
fundamentally change the social and economic conditions within 
their communities.
    I want to thank you very much for the opportunity to speak 
to you today. I believe that our communities are a shining 
example of what they can do when you provide them with some 
resources and allow them to have hope and innovation and look 
for their own solutions. Thank you.
    Chairman LoBiondo. Thank you very much, Ms. Matthews.
    [Ms. Matthews' statement may be found in appendix.]
    Chairman LoBiondo. Now, we will hear from Gerard Velazquez, 
executive director of the Cumberland County Empowerment Zone 
located in Bridgeton, New Jersey. Jerry, thank you.

 STATEMENT OF GERARD VELAZQUEZ, EXECUTIVE DIRECTOR, CUMBERLAND 
         COUNTY EMPOWERMENT ZONE, BRIDGETON, NEW JERSEY

    Mr. Velazquez. Thank you, Mr. Chairman, members of the 
committee, for allowing me to speak before you today.
    When I first came on board at the empowerment zone, I was 
asked two questions: Number one, what empowerment zone meant to 
me, and number two, what I thought about the funding and the 
fact that funding had been cut. When we talk about empowerment 
zone in Cumberland County, we talk about three main issues: 
Number one, education and training. We have employers who have 
gone out of business who have left the area and left us with 
employees who are in big need of a retraining and retooling, 
which is really consistent with a lot of the empowerment zones 
in the distressed neighborhoods that we have.
    Number two, we talk about opportunity. We talk about 
opportunity to obtain the education, we talk about opportunity 
to obtain the training. We also talk about the opportunity to 
access the types of transportation, the types of initiatives 
that the urban areas and the distressed areas in the Round IIs 
in the rural areas as well, the residents, the businesses and 
the communities did not have.
    And lastly, most importantly, we talked about a 
transformation, a revitalization, if you will, of not only the 
community, but also the vision. One of the biggest problems 
that we have in our community is the whole issue around vision, 
where the vision of our distressed area has gone as a result of 
the businesses fleeing the areas, what the morale of the people 
in our communities is, why we don't have homeownership in our 
distressed areas. And those were the keys to our empowerment 
zone designation. Those were the keys to our strategy, if you 
will. We don't consider the empowerment zone as a program. This 
is definitely not a program. It is a long-term strategy that 
not only allows us to change what is going on in our community, 
but it really allows us to change the foundation of the 
programs, of the systems that are in place now that allows us 
to set up the mechanisms for long-term sustainability, long 
after the empowerment zone has gone away.
    The beauty of the empowerment zone is that we understand 
that it takes an entrepreneurial spirit to make the empowerment 
zone successful. We are not here to perpetuate the types of 
things that have been going on, good yes, bad no. We don't want 
to recreate the wheel, so to speak. We want to put rubber on 
the wheel. We want to make things happen. We want to enhance, 
we want to create and we want to move the process forward, so 
that when we are gone, hopefully 10-years from now when we get 
our full appropriation, that the sustainability of our 
neighborhoods is longstanding. If after 10 years we do not have 
a mechanism in place, or the mechanisms in place, the economic 
viability, then we have not done our job and we understand that 
fully, and that is a part of the process that we have gone 
through to put together our strategy.
    I talk about the initiatives, I talk about the types of 
activities that we have already been successful with in our 
zone. Our zone only has 16,000 residents in our census track. 
We have already created 700 jobs, a year and a half. I have 
only been on board for four months. We have already leveraged 
$43 million. We have already trained 300 residents within our 
zone. We have already saved businesses $300,000 in tax 
incentives as a result of the zone. That is with our existing 
incentives. That doesn't include the new incentives that are 
coming in. So we have had a lot of success.
    Part of our problem is that that success has dwindled as we 
have gone along in the process. The residents of our community 
are shying away from the empowerment zone because they were 
promised a lot of things, and obviously now, with one third of 
the money, we are having a big problem achieving all of things 
that we had in our 2-year plan, and then obviously, our 10-year 
implementation strategy.
    Businesses who were willing to come in, who were ready to 
come into our neighborhoods have now thought about it again and 
said, well, if you are not going to revitalize your downtown 
areas, if you are not going to create viable employees and 
viable communities, then maybe we want to take a second look 
about coming into the zone, and it is very critical that 
everyone understand that the strategy that we have implemented 
will create opportunity not only for the residents, for the 
businesses, but also the region as a whole, and it is a 
critical aspect of what we are trying to do here.
    Lastly, I think that it is just very important to 
understand that when we talk about the funding that is 
necessary, it is really the funding will create a foundation 
for us. We have been asked to set up a strategy that builds a 
neighborhood, that revitalizes a community. We have been given 
enough money to build a few houses. That is not going to work. 
We need to be given the opportunities, we need to be given the 
resources. Again, $100 million over 10 years is not a whole lot 
of money in the scheme of things. We are talking about 
investment that is going to go, and just in Cumberland County, 
we are talking about leveraging our money at least 10 to one.
    So for the $100 million that you are putting in there, you 
are going to get $10 for every dollar at least, new businesses 
coming in, and again, in the end, the biggest benefit to us 
will be that some money today, over the course of the next 10 
years, has created a mechanism that will allow us to have 
Cumberland County be sustainable long into the future and that 
is the key to the empowerment zone.
    And I am here to talk and ask you to please do whatever you 
can to give us the resources that we need to bring our 
communities back to life, to bring the hope back, to bring 
sustainability back, to bring the viability back that has been 
lost over the course of time.
    We are not going to fix this today, we are not going to fix 
this tomorrow, but over the course of the next 10 years, we can 
definitely implement strategies, implement mechanisms, 
implement the types of programming that is necessary to help 
Cumberland County be brought back to life.
    Thank you.
    [Mr. Velazquez's statement may be found in appendix.]
    Chairman LoBiondo. Thank you, Jerry, very much for your 
testimony, and also, since I have had a chance to sort of up 
close and personal see your work, thank you for the commitment, 
the dedication you bring to making our zone work, and it is a 
tremendous asset to enabling us.
    Next on the panel is Reverend James A. Dunkins, the vice 
chair of the Cumberland County Empowerment Zone, and I would 
like to just take a minute and say just a personal observation, 
that we can craft legislation and we can have the best of 
intentions, and this legislation is a very good example of 
identifying sections of our nation that can use additional 
help, a role that the Federal government should play. We can 
put the right language in. We can provide tax incentives, we 
can provide funding.
    What we are not able to do is to put in the legislation and 
mandate an energy and enthusiasm from the people who have to 
make it work. I have known Jim Dunkins for a lot of years. Our 
community is enriched beyond measurement by, Jim, what you have 
done, the dedication, the energy, the enthusiasm, the countless 
hours that you put in to working with the youth of the 
community, working with employment issues, working in areas 
that many other people would have given up on.
    The ability for us to succeed with legislation like this 
is, in large measure, in direct proportion to the energy that 
people like yourself bring to the program. I want to thank you 
so very much for what you have done or what you are going to 
continue to do, for being here today, and I look forward to 
your testimony.
    Reverend Dunkins. Thank you, Mr. Chairman. I am almost 
afraid to speak after that eloquent introduction, but I do 
thank you for allowing me to speak today.

    STATEMENT OF REVEREND JAMES A. DUNKINS, VICE CHAIRMAN, 
   CUMBERLAND COUNTY EMPOWERMENT ZONE, BRIDGETON, NEW JERSEY

    Reverend Dunkins. My name is Reverend James A. Dunkins. I 
am the pastor of the Shiloh Baptist Church in Port Norris, New 
Jersey, which is in Cumberland County, which is a part of the 
empowerment zone. I have heard so many people speak already, so 
I don't have to use any of the terminology that you all are 
familiar with, designations and zones and all the other stuff. 
I want to talk about people.
    I am an administrator in the Bridgeton school system. I had 
to leave school at 2:00 because a 16-year old student in our 
county was killed in a collision. He was riding with another 
student who is 24 years old. This student was in the 
alternative program that was shut down becausefunding was not 
available for him to immediately get into the slot. He was put out of 
school or placed out waiting for a slot to open up. So in the meantime, 
what did they do, they ride around, they sell drugs, they become 
involved in other areas that is going to give them some sort of 
notoriety and something to do.
    As has been stated, our problem is not the problem of not 
knowing what to do. It is that we can never get a light at the 
end of the tunnel. We can never see beyond someone starting a 
program, designating some money and then saying that it is over 
and we don't worry about the community suffering, I am talking 
about the people suffering.
    I would like to tell you about the residents of Cumberland 
County, the residents of Port Norris, a very desolate area 
where we are building more prisons than we are doing anything 
else because we don't have the social service programs, we 
don't have the long-term commitments that we can make any 
inroad into getting any kind of viable training.
    I believe that the empowerment zone, no, I know the 
empowerment zone is the answer to giving us some stability. We 
have high crime. We have social diseases that are left worse by 
someone promising us to give money and when we don't get the 
money, we have programs that leave dilapidated buildings, that 
leave eyesores, that leave people with no hope, that leave 
grandmothers in the community saying, Reverend, I am not 
getting involved anymore because nothing is going to be done. 
We drag people out to the polls. We tell them money is coming 
in. We tell them Mr. LoBiondo is going to do it, we tell them 
this person is going to do it, and then we still don't have any 
kind of viable commitment in our area.
    In our program we probably could have saved that young 
man's life because I started a program through some of the 
money the empowerment zone has promised. We have even placed 
some of our community money into it. I started a program called 
the Job Readiness Program. We take juveniles off the street who 
may not ever make it in a mainstream social setting of a 
regular school system, may not make it in the programs that are 
already here, but they can make it if someone puts some time 
into them. We are teaching them skills such as anger 
management. We are teaching them skills how not to get fired at 
your job, how not to curse your job out, how to make sure you 
are going to become a productive member of society.
    It is programs like these that need to have some long-term 
investments because what we are going for, we can make a stable 
program that can be self-sufficient if we can get the money and 
we can save people's lives.
    Port Norris, as I said, is a small desolate community. You 
have seen the numbers, but you know what we do have, we have a 
community policing unit. We have young men standing on the 
corner. We have women who are having babies who are long-term 
third generation welfare recipients. We have all of the same 
indicators that you have. If you look at the composite ranking 
out of the 21 counties in New Jersey, we have some of the 
highest numbers in all of the negative areas, and what happens, 
we get an empowerment zone designated--I have served on 
countless boards, countless numbers of committees, and we do it 
tirelessly because we see some benefits to people.
    I am telling you that if you really want to make a 
difference, if you really want to see some people's lives 
changed, forget all of these numbers, all this designation, all 
this Round II, Round III, and give us what we said we are going 
to get. And if you give it to us, we can make a difference in 
the community. We have stagnant industry, we have industries 
leaving us, and I am telling you, you are looking for chaos in 
the street, you are looking for people who have no hope, they 
are going to have no determination and no commitment to doing 
things the right way.
    If I could tell you what the empowerment zone means in just 
closing up, I can tell you this. I can see that our young 
people can be turned around. I can see that we can have 
businesses. We have young entrepreneurs in our minority, in the 
minorities of our county who definitely, if they had some long-
term commitment, can make businesses work. I hate to bring up 
something like institutional racism, but we don't have the 
loans. They don't get the cooperation from the banks. You know 
what they do? They put together money on their credit card, 
they start businesses, and then we come along and say we can 
help you, and then the help is never forthcoming.
    I am saying that the empowerment zone can help us see that 
light at the end of the tunnel if you will give us the funding 
we have. I know our program maybe will have a 5-year projection 
where we can be self-sufficient surviving on our own because we 
can take kids, at a prorated basis, out of the high schools. 
They get dropped out, maybe they won't graduate, but you know 
what they won't do, they won't be wearing an orange prison 
suit. They will be able to get a job. It may be small skilled 
labor, but they will start somewhere.
    So I know that if you can help us in any way to get that 
money through, I can go along with Mr. Velazquez and we can do 
something in Cumberland County that is going to make a 
difference in people's lives.
    Chairman LoBiondo. Well, Jim, thank you.
    [Reverend Dunkins' statement may be found in appendix.]
    Chairman LoBiondo. One of the things that we hope to 
accomplish through this hearing and hearings like this are to 
be able to put the human face on what happens here inside the 
Beltway, that this drastically affects people's lives. We have 
the ability to impact in a very positive way if we do the right 
thing, and your testimony very much helped to highlight that. 
We will go into the questions now and I would like to start 
with Ms. Matthews.
    And in your written testimony, you mentioned that the New 
Markets Community Renewal agreement calls for 100 million in FY 
2001 and 100 million in FY 2002. I am a little taken back. It 
was my understanding in the agreement that we entered into that 
we would receive 200 million for Round IIs in FY 2001. Could 
you please help clarify this discrepancy?
    Ms. Matthews. I think that a lot of those details are still 
being worked out, but I can tell you that still having those 
details in the working out phase is what is creating the 
uncertainty with the communities. I wish I could give you more 
information to clarify that, but I don't have any more to give 
you at this time.
    Chairman LoBiondo. Because from my standpoint, there was no 
doubt in my mind of what the memorandum called for, and it 
clearly called for 200 million, and I don't recall seeing 
anywhere a spread over a 2-year period. So that is a great 
cause for concern, and as I just want to very stridently state, 
that that scenario is totally unacceptable because of all the 
reasons said before.
    Reverend Dunkins, I wanted to follow up and ask you, you 
talked in some terms of problems with the youth, and while much 
of the focus of the legislation has to deal with job creation 
and what would be considered help in the adult community, I 
think you touched on an area that is important because it 
speaks directly to our future. Can you give us some more 
specific examples of how you think the youth in our community, 
and I am sure it would be the same in other communities, would 
benefit from programs and give us any specifics that you might 
be able to come up with about examples that you think would be 
there if we are able to deliver on this promise.
    Reverend Dunkins. Yes. I can start with something very 
concrete. In the Port Norris area, one of the barriers is a 
water waste treatment system. That may not seem like it is 
connected directly to youth, but it is, because one of the 
things is we don't have a car wash, we don't have alaundromat. 
We don't have certain things that we can give these young people, 
unskilled labor. So what I am saying, a lot of times young people get 
involved in the juvenile justice system and become habitual offenders, 
but also the ones that don't even become offenders don't also become 
contributing adults.
    So one of the things that we look at that the zone can do 
is give us the money we need to take away some of these 
barriers. Transportation is a barrier. When I talked about 
second and third generation welfare recipients, one of the 
reasons is the training is in Vineland and Bridgeton, but 
Cumberland County doesn't have a transportation system or bus 
system that runs from Port Norris. So they can't even get 
there. So a lot of times there is no baby-sitting.
    So while we are waiting on all of this help to become as 
adults, I am saying that a lot of times they start out as 
teenage mothers, they start out as juveniles. And then we get 
an adult population that have no school skills and have no 
training.
    So what I see is a direct impact, not only on the youth 
because if the adults can get a job and become examples--one of 
the things I tell my teachers when we are training, and I am 
going to be very brief, is when they tell me when a kid does 
something that is catastrophic, something that is crazy, they 
say they should know better. My answer always to them is who 
taught them better, and if we don't get some adults that know 
better, that there is hope, that there is jobs, who is going to 
teach the young people better?
    Chairman LoBiondo. Great answer.
    Mr. Velazquez, you stated that we have created over 700 new 
jobs with our zone, and could you give me your take on what the 
additional hiring tax credit would mean to this number, and 
provide some specific examples if you can think of them?
    Mr. Velazquez. Sure. I think obviously, when we talk about 
the tax incentives, the most important thing the tax incentives 
bring to the table is an opportunity for our residents to be 
hired in situations where they typically would not have been. 
The incentives allow us to invest in human capital. It allows a 
business to take a chance on hiring someone from the zone that 
they may not have hired before. It allows us to get involved 
with programs such as Reverend Dunkins' and the local training 
where we are going to train people, and those incentives are 
the linchpin that allow the businesses, or that provide the 
businesses kind of the mechanism to take a chance that they 
would not have.
    One of the things that I would like to point out about the 
700 jobs we have created, we are talking about small 
businesses, we are talking about businesses that are local. 
Even for the businesses that are coming in, we have a business 
that is coming in from Belgium, we have a business that is 
coming in from another county, we are talking about hiring 
locally. We are talking about people who have lived in the 
area. We are talking about the leverage of human capital within 
our zones. The benefit, and it is appropriate that we hear 
today of the tax incentives, is that the major thrust and the 
major benefactors of the tax incentives are the small 
businesses. The largest sole business that we have created 
through the empowerment zone only employs eighty people.
    So we are talking about many, many businesses that compose 
the 700 that are hired, and again, those tax incentives that we 
now have, the additional tax incentives that are proposed are 
going to allow businesses to take a chance where they didn't 
before, to hire someone that is not quite as skilled as they 
would have liked. However, with the knowledge that there is 
empowerment zone backing, with the knowledge that there are 
programs in place, they are willing to take that chance and 
willing to hire people that typically would not have been 
hired.
    Chairman LoBiondo. Thank you. I have some more questions, 
but I would like to turn to Congresswoman Christian-
Christensen.
    Ms. Christian-Christensen. Thank you, Mr. Chairman. I want 
to join the panelists and thank you for calling this hearing 
and for the new caucus that you have started because it has 
been a very enlightening hearing. We don't have an empowerment 
zone, as I said in my opening remarks, but being on the 
outside, we kind of thought that things were moving along a lot 
better than they are, and we really have heard quite a bit 
about our communities that are so much in need of hope, 
communities that are so hard to convince to hope one more time, 
and to have those hopes dashed is really a travesty in those 
communities.
    It makes most of the questions that I did have not really 
very relevant at this point, but let me ask Reverend Dunkins, 
we have several pieces of legislation in the Congress that talk 
about applying Federal funding to faith-based organizations, 
and it is a little bit of a controversy over the people that 
feel that we should and others that feel that we shouldn't.
    Can you talk about the role that faith-based organizations, 
particularly, have played in this empowerment zone?
    Reverend Dunkins. Yes. I can tell you that in our state, 
when faith-based organizations were started, we were one of the 
only organizations, churches. We do have a development 
corporation at our church. I convinced my traditional old 
congregants that we now need to move into accepting grants. You 
will find that my people are well-informed from the oldest to 
the youngest on what a 501(C)(3) is. They understand how to put 
together a corporation, but this is what they didn't 
understand. They now see how we have made the segue of doing 
old benevolent fund and doing WIC and knowing the people in the 
community, they understand now how we can take our expertise, 
which was maybe unskilled and thought to be unskilled, and 
really make an impact by partnering with other people.
    So the faith-based look or the faith-based advantage which 
people should look at is we can be effective, whereas regular 
programs cannot be effective if they look at the bureaucracy 
attached. I can go in to Annie Lane's house and say, you have a 
young man on drugs and we now have a program that is a halfway 
house at our church. Because we have a faith-based 
organization, we can get to that young man quicker than the 
police can. So the faith-based piece you are talking about is 
very important with the empowerment zones because most of the 
churches and most of the activities that are in the community 
lead some way to the religious community or lead to the 
institution of the church.
    So I think that the social impact of the church of faith-
based can make the quality of the programs better and that is 
what we have been able to do. We are partnering with welfare, 
we are partnering with every agency in our area because they 
are glad to get the help that we can provide as an organized 
community of faith.
    Ms. Christian-Christensen. I don't know if anyone else 
wanted to comment.
    Ms. Matthews. Well, I think that I would like to comment on 
that because we see faith-based organizations as a good 
community partner in rural America. Oftentimes, a faith-based 
institution in some of our rural communities will be the 
centerpiece of that neighborhood or that community and will be 
the one place where many community members feel safe to come 
and talk about the issues, form their strategic plan and what 
have you.
    I think that the empowerment zone/enterprise community 
initiative does exactly that. It opens the spectrum of 
partnership to every organization that is a key member of truly 
beginning to solve the problems of endemic poverty in the 
community, and a faith-based organization in many of our 
poorest communities plays the key role of being one of the 
central places, safety oflearning, of child care, and so you 
cannot exclude any partner when you are looking at a holistic view to 
community economic development.
    Ms. Christian-Christensen. Thank you, Mr. Chairman. I don't 
have any other questions at this time.
    Chairman LoBiondo. Mr. Phelps, do you have any questions?
    Mr. Phelps. I don't have any questions other than just say 
I have an empowerment zone in deep southern Illinois in my 
district, which shares many of the demographics that all of you 
have experienced in your territories, so I fully support and 
hope that we can advance from here. And I guess what I would 
ask maybe ourselves, what do we need to do beyond pushing for 
funding? Is there a vacuum in what is going on right now that 
is not getting clearly indicated in the process?
    Mr. Velazquez. I think one of the keys to the process is 
have everyone understand or clearly define what full funding 
is. Are we talking about $10 million for this year? Are we 
talking about multiyear funding? Are we talking about 
implementing our strategy over the long term? I think that we 
need to come to grips with the terminology that we are using so 
that everyone understands when we say ``full funding,'' when we 
say ``200 million,'' does it mean 100 million over 2 years? 
Does it mean 200 hundred million this year? I think that is 
critical as we have, as empowerment zone directors have gotten 
together and talked about the issues and concerns that we have. 
One of our biggest concerns is just the clarity and the 
definitions of what those meanings and what the terminology is 
because, again, one person's understanding of full funding may 
be totally different.
    Our understanding as empowerment zone directors is full 
funding is $10 million a year over the next nine years. That is 
full funding for us. So if we can make sure that the 
definitions are clear, I think that would help in pushing the 
process forward.
    Mr. Phelps. As members that participate in the process, one 
of the things, not necessarily speaking for everyone, but one 
of the things that concerns me is when we talk about expanding 
the program that is in the middle of yet being commitment to 
funding, do you think this helps our chances of solidifying our 
funding that hasn't been forthcoming, or are we going to sort 
of distribute what is available among all the new as well as 
old commitments? What do you think our chances are, better or 
worse, from expanding sort of Round III so to speak? How would 
you feel?
    Sometimes this process works where the more you get 
involved, the better everybody is in the way of terms of 
dollars. Sometimes it can erode what was originally intended 
but yet never quite met.
    So that is my concern as a member here, what do I push on, 
get on board for the whole program as the full scope of things 
or do I just push for what McKinley intended was originally and 
not yet met?
    Mr. Velazquez. Again, from the point of view of a Round II, 
one of the things that we as a board had to kind of deal with 
was the whole issue around, okay, we had a $20 million plan 
that is now a $6.7 million plan, do we fund all the programs 
that were proposed at a lower level and have a lot of programs 
that are halfway successful or partially successful, or do we 
fund enough programs or the programs that we have that are 
going to make a difference and are really going to have 
sustainability, and from our point of view, we decided that we 
were going to fund programs fully so that they would have the 
full impact on a community.
    And again if it was only five programs that were fully 
effective, that had long-term viability that 3 years from now, 
if the empowerment zone went away, still worked, then that is 
what we decided we were going to do.
    So again, speaking from a Round II, as a Round II director, 
obviously in our opinion we would like full funding for Round 
II. We would like to make the difference, and I think the 
difference that would be made and really realized would allow 
possibly for Round III in the future.
    Reverend Dunkins. I want to speak from my perspective from 
what have you just said, because to me, I think my answer to 
you would be yes, we have got to keep pushing it no matter what 
is coming down. I believe the empowerment zone, in its weakest 
element, is still whatever program you keep coming up with, 
maybe a light bulb will come on in someone's head sooner or 
later, and say we keep coming up with the same type programs 
that we have already said will make a difference but we are not 
funding.
    So as long as you keep that in the forefront, I think 
somebody along the way is going to see that the empowerment 
zone, in its weakest element, is going to be successful, 
because if I can leave one person with a business that wouldn't 
have had a business, if I can leave one person with a job that 
didn't have a job, that is going to be better than all the 
promises in the world.
    So I guess what I see in this whole malaise of things is 
that we continue, no matter what other program I hear about, 
they all seem to be similar, and we are talking about not fully 
funding what we have already promised to fund. So somewhere 
along the line somebody's got to say, hey, we have got 
something good, let us put some money in it.
    Mr. Phelps. Just real quickly, in terms of faith-based 
concerns, I very much applaud you for your concern and your 
input and activity because I am one that believes that while we 
need resources in these poor communities, that for those people 
that believe that there is going to be a value system, all of a 
sudden raise up, because you have got resources pouring in, 
even though a good job is a good start for teaching the family 
values, I hope that your leadership in the community from the 
standpoint of faith-based is really the key to try to get 
dysfunctional families, teaching their young people that 
violence and destruction of property and not staying in school, 
whatever else we promote that is decent, is going to have to 
come from the community. We don't have the answers here for the 
few dollars, but we can sure help those families that are 
struggling. Thank you.
    Ms. Matthews. If I may, I think I would like to address it 
from the standpoint of something Mr. Velazquez said earlier, 
that in the scheme of things, when you look at an urban or a 
rural designation, you look at the actual amounts. $40 million 
over the course of 10 years is not a lot of money when you are 
looking at a 10-year vision for the change of an entire social 
and economic structure and community that begins with hope. I 
think that the $40 million that we promised those zones and the 
$3 million we promised those enterprise communities are, again, 
just a piece of the puzzle that they have put together with 
partnerships, and leveraging has demonstrated already, when it 
comes to $9 million, there is something that we, as rural 
communities, need to look at in terms of what is being 
proposed. One is that it is only tax incentives.
    We have capacity issues in rural America that may not put 
us in a position to be able to use solely tax incentives. We 
need to build infrastructure systems that will allow rural 
communities to diversify their economies and grow new markets 
and what have you. So that alone may be something that would 
require a discussion from rural communities and see how much 
excitement there is about the prospect of a zone with only 
those characteristics, and also talking to the question of a 
little equity.
    I think in current conversations the distribution of the 
nine new zones is seven urban and two rural. Well, two rural 
don't seem like an awful lot when we have more than 13,000 
rural placesand 1,400 rural counties, and I think also that we 
have demonstrated in rural America that we know how to gain capacity 
and make small dollars go very far. I think the enterprise communities 
are a good example of that so that would be my comments on the 
question.
    Chairman LoBiondo. Let me reemphasize that Congressman 
Capuano and myself, and I believe I speak for most of the 
members of the caucus, feel very strongly about the Round IIIs 
with any designation and possible funding before Round IIs are, 
fully enabled by virtue of the promises that were made. We 
think that, since we are dealing with one year at a time right 
now, to expand to Round IIIs without the firm commitment for 
Round IIs leads to a path for potential trouble, if not worse, 
than the way of disaster for programs--any of these zones that 
we have that are up and running, putting plans together, if on 
any single year the funding drops or is--some reason isn't 
there, we have got a catastrophe on our hands. I think that 
unless we have that commitment on the Round IIs, the Round IIIs 
only put more pressure that way.
    Let me just take a moment to say that we find that with any 
successful program, there are partnerships that are developed. 
I think we have a clear indication today, with the partnerships 
between the Federal government, our local communities, 
different agencies within the government, but I also want to 
publicly thank Senator Bob Torricelli. He has been a great 
partner for us in New Jersey. He was very instrumental in the 
designation of our zone. He continues to remain very 
instrumental in our help in putting together what we need to 
additionally do. We have had personal discussions and meetings. 
We have his commitment of pushing on the Senate side, because 
there are a lot of questions of we are working on the House 
side, what happens on the Senate side. Senator Torricelli has 
assured me of his continued strong backing for the program, and 
I want to publicly thank him for that.
    Another question for Ms. Matthews, but any of our 
panelists, as we are going through this, we are talking 
specifically about doing something with the tax credits and 
specifically for the funding. But as we are examining what we 
have been able to do with empowerment zones in the rural and 
the urban and the communities and all the aspects of this, do 
you have any suggestions of areas that can or should be tweaked 
with wording and/or authorization, other than the tax credits 
or the funding, that would help in allowing the zones to be 
more productive and just be better off?
    Ms. Matthews. I think I can only tell you what some of the 
rural communities are telling me as I go out and visit them in 
the community, and I think that some rural communities that do 
not maybe fit within the current eligibility criteria in terms 
of poverty and what have you would like an exploration of other 
criteria that may bring more rural areas into eligibility for 
this community development planning process, because I think, 
as Mr. Velazquez said, and as you said, actually, that maybe 
consider that some of these metropolitan areas are considered 
very wealthy, or they have a lot of money, or a high per capita 
income or what have you, but there are certainly pockets within 
these communities as there are in rural America, especially 
when you take the eligibility from a census track perspective, 
that sometimes--particularly in the West, for example, you will 
take a very, very large area into a census track that can skew 
numbers--there are other measurements that indicate need. I 
think we could have a discussion on how we might be able to 
better serve some of those areas.
    Certainly for Round II specifically, the tax incentives and 
full funding are just the two things that are going to be 
continuously on the mind of those communities so that they 
continue the implementation of the plans.
    Chairman LoBiondo. Mr. Velazquez, do you find that in the 
day-to-day operation of our zone, that there are any 
particularly onerous rules and regulations that you are 
compelled to work under that are hampering your ability to have 
full maximization in the zone of what our potential is?
    Mr. Velazquez. I think functionally the zones are working 
pretty well actually. The process that has been set up seems to 
be working well, allows us some flexibility. It also provides a 
monitoring mechanism so that everyone is aware of what is 
happening. Obviously, there are some areas that we can tweak as 
far as how the funds are utilized.
    Part of our other problem, back to the definition issue, is 
the money originally was coming through the social service 
block grant, which allowed for more flexibility in the types of 
programs that we were going to implement.
    The money came through HUD, which then had a whole new 
definition of how the money could be used, economic opportunity 
versus the more general definition that was used in the CFR.
    So, again, that is the result of the type of money that 
came out of the Round II appropriation, but I think it is 
important and critical--again, I hate to go back to this, but 
for us it is important that we know up front how our money can 
be used so that when we are implementing our strategies, it is 
clear and the opportunities are clear for us, because what it 
has meant for us as a Round II, and the changing definition, 
means we have to go back and revisit all of our implementation 
plans and then tweak them, and maybe in some cases, some 
programs, such as the local programming, the human service 
programming, has fallen by the wayside because we have not been 
able to put it into that category of economic development.
    Again, that is a critical issue for us. But as far as 
process goes, it has actually been a pretty easy process to 
work with.
    Chairman LoBiondo. Well, I want to thank our panelists for 
being here today. This was, I think, very helpful for us in our 
quest for full funding for our Round IIs, Empowerment Zones in 
order to help the many people that we have the potential to 
reach.
    Your testimony was extremely valuable. I appreciate your 
taking the time to spend with us here. With that, the 
subcommittee is adjourned.
    [Whereupon, at 3:55 p.m., the Subcommittee was adjourned.]
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