Report to Congressional Committees 

United States General Accounting Office 

GAO 

March 2004 COMMUNITY 

DEVELOPMENT 

Federal Revitalization 

Programs Are Being 

Implemented, but 

Data on the Use of 

Tax Benefits Are 

Limited 

GAO-04-306 
www.gao.gov/cgi-bin/getrpt?GAO-04-306.

To view the full product, including the scope 

and methodology, click on the link above. 

For more information, contact William Shear, 

(202) 512-8678, ShearW@gao.gov. 

Highlights of GAO-04-306, a report to 

Congressional Committees 

March 2004 

COMMUNITY DEVELOPMENT 

Federal Revitalization Programs Are 

Being Implemented, but Data on the Use 

of Tax Benefits Are Limited 

Both the EZ/EC and RC programs were designed to improve conditions in 

distressed American communities; however, the features of the programs 

have changed over time. Round I and II EZs and ECs received different 

combinations of grant funding and tax benefits, while Round III EZs and RCs 

received mainly tax benefits. To implement the programs, federal agencies 

have, among other things, designated participating communities and 

overseen the provision of program benefits. Since 1994, HUD and USDA 

have designated a total of 41 EZs and 115 ECs, and HUD has designated 40 

RCs. Available data show that Round I and II EZs and ECs are continuing to 

access their grant funds and IRS data show that businesses are claiming 

some tax benefits. However, IRS does not collect data on other tax benefits 

and cannot always identify the communities in which they were used. Also, 

efforts by HUD to obtain these data by survey were limited to Round I 

designees, and EZ and RC officials have had difficulty obtaining such 

information directly from businesses. The lack of tax benefit data limits the 

ability of HUD and USDA to administer and evaluate the programs. 

The few evaluations that systematically collected and analyzed data on 

EZ/EC program effectiveness used a variety of research methods to study 

different aspects of the program. The most comprehensive of these 

studies—the HUD Interim Assessment—found that employment of Round I 

EZ residents had increased from 1995 to 2000, that larger businesses were 

more likely to use tax benefits than smaller businesses, and that resident 

participation in EZ or EC governance has been uneven, among other things. 

Geographic Location of EZ/EC and RC Communities as of September 2003 

Congress established the 

Empowerment Zone and 

Enterprise Community (EZ/EC) 

program in 1993 and the Renewal 

Community (RC) program in 2000 

to provide assistance to the 

nation’s distressed communities. 

To date, Congress has authorized 

three rounds of EZs, two rounds of 

ECs, and one round of RCs. 

The Community Renewal Tax Relief

Act of 2000 mandated that GAO 

audit and report in 2004, 2007, and 

2010 on the EZ/EC and RC 

programs and their effect on 

poverty, unemployment, and 

economic growth. This report 

describes (1) the features of the 

EZ/EC and RC programs, (2) the 

extent to which the programs have 

been implemented, and 

(3) the methods used and results 

found in evaluations of their 

effectiveness. 

To facilitate the administration, 

audit, and evaluation of the EZ/EC 

and RC programs, we recommend 

that HUD, USDA, and IRS 

collaborate to (1) identify the data 

needed to assess the use of the tax 

benefits; (2) determine the costeffectiveness of collecting these 

data; (3) document the findings of 

their analysis; and, if necessary, 

(4) seek the authority to collect the 

data, if a cost-effective means is 

available. HUD and IRS agreed 

with our recommendation, and 

USDA said such data could have 

marginal utility. 
Page i GAO-04-306 Community Development 

Letter 1

Background 2

Results in Brief 5

EZ/EC and RC Programs Share Similar Goals and Objectives, but 

Features Vary 7

The EZ/EC and RC Programs Are Well Under Way, but Data on the 

Use of Some Benefits Are Limited 20

Among the Few EZ/EC Evaluations That Have Been Conducted, 

Research Methods and Results Have Varied 41

Conclusions 45

Recommendation 46

Agency Comments 46

Appendix I Scope and Methodology 50 

Appendix II List of Designated Communities 55 

Appendix III Federal Benefits Available to EZs, ECs, and 

RCs at the Time of Designation and as of 

September 30, 2003 61 

Appendix IV Other Tax Benefits Available to Businesses 

Serving Distressed Communities and Low-Income 

Individuals 63 

Appendix V Other Benefits Available to Certain Designees 65 

Appendix VI Summary of Evaluations of the EZ/EC Program 70 

Contents 
Page ii GAO-04-306 Community Development 

Appendix VII Comments from the Department of Housing and 

Urban Development 78 

Appendix VIII Comments from the Internal Revenue Service 80 

Appendix IX Comments from the U.S. Department of 

Agriculture 81 

Appendix X Comments from the Department of Health and 

Human Services 84 

Appendix XI GAO Contacts and Staff Acknowledgments 86 

GAO Contacts 86

Acknowledgments 86

Bibliography 87 

Related GAO Products 89 

Tables 

Table 1: Summary of Legislation Authorizing the EZ/EC and RC 

Programs 3

Table 2: Some Eligibility Requirements Differ among Rounds of the 

EZ/EC Program and between the EZ/EC and RC Programs 10

Table 3: Social Services Block Grant Funds Authorized for Round I 

EZs and ECs 14

Table 4: Economic Development Initiative Grants for Supplemental 

Empowerment Zones and Enhanced Enterprise 

Communities 15

Table 5: HUD Appropriations for Round II Urban Designees, Fiscal 

Years 1999-2003 (Dollars in thousands) 16
Page iii GAO-04-306 Community Development 

Table 6: USDA Allocation of Appropriations for Round II Rural 

Designees, Fiscal Years 1999-2003 (Dollars in thousands) 17

Table 7: Federal Tax Benefits Specifically Available to Businesses 

Operating in EZs, ECs, and RCs 18

Table 8: Number of EZ/EC and RC Nominations and Designations 25

Table 9: Amount of Grant Funds Awarded and Drawn Down, as of 

September 30, 2003 (Dollars in thousands) 30

Table 10: Limitations with Data on EZ, EC, and RC Tax Benefits 35

Table 11: Variation in Census Statistics for EZs, ECs, and RCs 51

Table 12: Confidence Intervals for EZ Employment Credit 

Estimates 53

Table 13: List of Designated Communities 55

Table 14: Summary of Benefits Provided to EZs, ECs, and RCs at 

the Time of Designation and as of September 30, 2003 61

Table 15: Other Tax Benefits Available to Businesses Serving 

Distressed Communities and Low-Income Individuals 63

Table 16: Section 108 Loan Guarantees for Supplemental 

Empowerment Zones and Enhanced Enterprise 

Communities 67

Table 17: Amount of Section 108 Loan Guarantees Awarded and 

Used as of September 30, 2003 (Dollars in thousands) 67

Figures 

Figure 1: Timeline of Events in the Selection of EZ/EC and RC 

Program Participants 22

Figure 2: Geographic Distribution of Designees By Round 24

Figure 3: Geographic Location of All Designated Communities as of 

September 30, 2003 27

Figure 4: Variation in Average Characteristics of EZs, ECs, and RCs 

(Based on 1990 census data) 29

Figure 5: Corporate Returns with EZ Employment Credit 31

Figure 6: Individual Returns with EZ Employment Credit 32

Figure 7: Number and Amount of Enterprise Zone, D.C. Enterprise 

Zone, and EZ Facility Bonds Issued 1995 through 2001 34
Page iv GAO-04-306 Community Development 

Abbreviations 

EC Enterprise Community 

EZ Empowerment Zone 

HHS Department of Health and Human Services 

HUD Department of Housing and Urban Development 

IRS Internal Revenue Service 

RC Renewal Community 

USDA U.S. Department of Agriculture 

This is a work of the U.S. government and is not subject to copyright protection in the 

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reproduce this material separately. 
Page 1 GAO-04-306 Community Development 

March 5, 2004 

The Honorable Charles E. Grassley 

Chairman 

The Honorable Max S. Baucus 

Ranking Minority Member 

Committee on Finance 

United States Senate 

The Honorable William M. Thomas 

Chairman 

The Honorable Charles B. Rangel 

Ranking Minority Member 

Committee on Ways and Means 

House of Representatives 

For decades the nation has faced the challenge of revitalizing its distressed 

urban and rural communities. To help such communities, the federal 

government provides assistance in the form of grants, tax benefits, loans, 

and loan guarantees involving more than 100 programs and billions of 

dollars. Within the past 11 years, Congress has created two new programs 

to help distressed communities—the Empowerment Zone and Enterprise 

Community (EZ/EC) program and the Renewal Community (RC) program. 

When it was enacted in 1993, the EZ/EC program provided grants to public 

and private entities for social services and community redevelopment and 

tax benefits to local businesses to attract or retain jobs and businesses in 

distressed communities. More recently, this program has provided mainly 

tax benefits. Since its enactment in 2000, the RC program has focused on 

providing tax benefits to businesses in designated communities to attract 

or retain jobs and businesses. 

The Community Renewal Tax Relief Act of 2000, which created the RC 

program, also mandated that we audit and report in 2004, 2007, and 2010 

on the EZ/EC and RC programs and their effect on poverty, 

unemployment, and economic growth. This report is the first in a series 

examining these programs. Specifically, this report describes (1) the 

features of the EZ/EC and RC programs, (2) the extent to which the 

programs have been implemented, and (3) the methods used and the 

results found in evaluations of the programs’ effectiveness, especially in 

terms of poverty, unemployment, and economic growth in the 

participating communities. 

United States General Accounting Office

Washington, DC 20548 
Page 2 GAO-04-306 Community Development 

To determine the features of each program, we reviewed statutes, 

regulations, and program documentation and interviewed agency 

personnel. To describe the implementation of these programs, we 

reviewed program documentation, financial data, and taxpayer data and 

interviewed agency personnel, community officials, and experts. To 

describe the methods used in and the results of evaluations, we identified 

relevant research by conducting several literature searches and 

interviewing agency personnel and community development experts. Our 

descriptions include analyses of data that have been and could be used to 

administer and evaluate the programs. However, we did not evaluate the 

effectiveness of the programs or their implementation in this report. We 

conducted our work between April 2003 and February 2004 in accordance 

with generally accepted government auditing standards. Appendix I 

provides additional details on our scope and methodology. 

The EZ/EC and RC programs target federal grant monies to public and 

private entities, tax benefits to businesses, or both in order to improve 

conditions in competitively selected, economically distressed 

communities. To be considered for these programs, areas must be 

nominated by one or more local governments and the state or states in 

which they are located.1

 Areas on Indian reservations must be nominated 

by the reservation’s governing body. 

Congress authorized the EZ/EC and RC programs under four separate acts 

of legislation (see table 1). To date, Congress has authorized the 

designation of three rounds of EZs, two rounds of ECs, and one round of 

RCs. See appendix II for a list of all designated communities. 

 1

An area can also meet this nomination requirement if it is nominated by an economic 

development corporation chartered by the state. 

Background 
Page 3 GAO-04-306 Community Development 

Table 1: Summary of Legislation Authorizing the EZ/EC and RC Programs 

Program Title Summary 

Round I EZ/EC Omnibus Budget Reconciliation Act of 1993 • Established the EZ/EC program and its package of grants and 

tax benefits. 

• Authorized six urban and three rural Round I EZs. 

• Authorized 65 urban and 30 rural Round I ECs. 

• Established the eligibility requirements and selection criteria for 

EZ/ECs. 

Round II EZ/EC Taxpayer Relief Act of 1997 • Authorized 5 rural and 15 urban Round II EZs. 

• Authorized two additional Round I EZs. 

• Changed the eligibility requirements for EZ/ECs. 

• Created the Washington, D.C. Enterprise Zone.a

Omnibus Consolidated and Emergency 

Supplemental Appropriations Act of 1999 

• Authorized up to 20 additional rural ECs. 

Round III EZ and 

RC 

Community Renewal Tax Relief Act of 2000 • Authorized two rural and seven urban Round III EZ designations. 

• Established the RC program and its package of tax benefits. 

• Authorized designation of 40 RCs, with 12 designations reserved 

for rural areas. Designation valid until December 31, 2009. 

• Made some additional tax benefits available to EZs. 

• Extended Round I and II EZ designations through December 31, 

2009.b

Source: GAO summary of P.L. 103-66, P.L. 105-34, P.L. 105-277, and P.L. 106-554. 

a

The D.C. Enterprise Zone received a set of tax benefits that are similar to those of EZ/ECs, but are 

unique to this designation. 

b

The designation for all Round I ECs will expire as previously scheduled on December 31, 2004. 

The Omnibus Budget Reconciliation Act of 1993 authorized the number of 

EZ/EC designations to be awarded in the first round of the program, as 

well as the benefits that the designated communities would receive. The 

legislation authorized the special use of $1 billion in Social Services Block 

Grant funds for the EZ/EC program.2

 It also established three tax benefits 

for businesses in the designated communities: (1) a tax credit for wages 

paid to employees who both live and work in an EZ, (2) an increased 

expensing deduction for depreciable property, and (3) tax-exempt bonds.3

 2

Social Services Block Grant funds, administered by the Department of Health and Human 

Services (HHS), have been available to state governments since 1981 to address the social 

service needs of their residents. 

3

Businesses in Round I ECs are eligible only for the tax-exempt bond benefit. 
Page 4 GAO-04-306 Community Development 

At the same time that the Department of Housing and Urban Development 

(HUD) and the U.S. Department of Agriculture (USDA) announced the 

Round I designations, HUD created two additional designations—

Supplemental Empowerment Zones and Enhanced Enterprise 

Communities. Unlike EZs or ECs, these designations were not legislatively 

mandated. Rather, they were awarded to communities that had been 

nominated for but did not receive EZ designations.4

 HUD designated two 

communities as Supplemental Empowerment Zones and four communities 

as Enhanced Enterprise Communities. HUD provided these communities 

with certain grants and loan guarantees, which can be used for activities 

eligible under the Community Development Block Grant program. 

The second round of EZ/EC designations and the benefits those designees 

would receive were authorized by two acts of legislation—the Taxpayer 

Relief Act of 1997 and the Omnibus Consolidated and Emergency 

Supplemental Appropriations Act of 1999. However, neither act authorized 

block grant funding for Round II EZs and ECs. Instead, Round II EZs and 

ECs received annual appropriations through HUD and USDA 

appropriations bills each year from 1999 to 2004. 

The Community Renewal Tax Relief Act of 2000 enhanced the tax benefits 

available to businesses in newly designated EZs and made these new tax 

benefits available to EZs that had been designated in previous rounds, but 

not to ECs. The legislation also did not make any appropriations or grant 

funds available to Round III EZs or to RCs. However, in January 2004, the 

Consolidated Appropriations Act of 2004 appropriated a total of $994,100 

to Round III rural EZs. This legislation did not make any funding available 

to Round III urban EZs or RCs. 

Four federal agencies are responsible for administering the programs: 

• HUD oversees the EZ/EC program in urban areas, administers the grants 

to Round II urban EZs, and oversees the RC program in both urban and 

rural areas. 

• USDA oversees the EZ/EC program in rural areas and administers the 

grants to Round II rural EZ/ECs and Round III EZs. 

 4

One Supplemental Empowerment Zone and all four Enhanced Enterprise Communities 

had also received Round I EC designations. 
Page 5 GAO-04-306 Community Development 

• The Department of Health and Human Services (HHS) administers the 

Social Services Block Grant funds to communities designated in Round I 

of the EZ/EC program.5

• The Internal Revenue Service (IRS) is responsible for administering the 

tax benefits available under the EZ/EC and RC programs. 

Although the EZ/EC and RC programs have similar goals and objectives, 

we found that the features differed among the EZ/EC rounds and between 

the EZ/EC and RC programs. First, administrative features varied under 

the different EZ/EC rounds and between the EZ/EC and RC programs. For 

example, an interagency Community Empowerment Board consisting of 

high ranking federal officials existed to facilitate interagency coordination 

in Rounds I and II of the EZ/EC program, but not in Round III, and a 

smaller Advisory Council appointed by the HUD Secretary and consisting 

of individuals from nonprofit and for-profit organizations advises HUD on 

the RC program. Second, eligibility requirements often differed among 

rounds and between the programs. For example, the poverty level required 

for eligibility decreased between EZ/EC rounds and between the EZ/EC 

program and the RC program. Third, the participants for the two programs 

were selected differently. For instance, EZ/EC nominees were judged on 

the effectiveness of their strategic plans and assurances that these plans 

would be carried out, while RC nominees were selected on the basis of the 

communities’ poverty, unemployment, and income statistics. Finally, the 

benefits available to designees varied both by round and by program. EZs 

and ECs in the first two rounds of designation received different 

combinations of benefits, including grant funding and tax benefits, while 

Round III EZs and RCs received mainly tax benefits. 

To implement the EZ/EC and RC programs at the national level, the federal 

agencies involved have carried out selection procedures; designated 

participating communities; provided program benefits, outreach, and 

technical assistance; and monitored community performance. Since 1994, 

over the course of three rounds HUD has designated 31 urban EZs and 65 

urban ECs, and USDA has designated 10 rural EZs and 50 rural ECs.6

 In 

 5

HHS does not participate in the administration of Rounds II and III of the EZ/EC program 

or in the RC program, because Congress only authorized these grants in Round I of the 

EZ/EC program. 

6

At the same time as Round I EZ/EC designations, HUD also designated two Supplemental 

Empowerment Zones and four Enhanced Enterprise Communities. 

Results in Brief 
Page 6 GAO-04-306 Community Development 

2002, HUD also designated 40 RCs—28 urban and 12 rural. In addition, 

several federal agencies have provided grant funding, tax benefits, and 

other program benefits. Data from HHS indicate that the 104 Round I 

EZ/EC designees have drawn down about 70 percent of their $1 billion in 

Social Services Block Grant funds, while HUD and USDA data show that 

the 40 Round II designees have drawn down about 40 percent of their $434 

million in grant funds. IRS data showed that taxpayers claimed an 

estimated $251 million in EZ Employment Credits between 1995 and 2001. 

Over that same period of time, state and local governments issued about 

$315 million in tax-exempt facility bonds for the benefit of businesses in 

EZs and Round I ECs. However, IRS does not have data on the use of other 

benefits, such as the increased expensing deduction, the Commercial 

Revitalization Deduction, or the Nonrecognition of Gain on the Sale of EZ 

Assets. In addition, IRS does not collect data that would enable it to link 

the use of data for the employment credit to specific designated 

communities. Senior IRS officials indicated that they do not collect this 

information because, among other things, these tax benefits are not 

considered high risk since the amount claimed is small, compared with 

revenues collected from other tax provisions. The lack of data on the use 

of the tax benefits available to businesses in designated communities 

limits the ability of (1) HUD and USDA to administer the programs; (2) 

designated communities to attract additional resources; and (3) HUD, 

USDA, and others to audit or evaluate the programs.7

 We found that 

federal agencies had provided outreach and technical assistance to 

applicants and designees through training, conferences, written guidance, 

and Web sites. HUD and USDA have also established oversight procedures 

for participating communities that include online reporting systems to 

collect performance data. But recent GAO, HUD Inspector General (IG), 

and USDA IG reports have raised concerns about EZ/EC program 

oversight and the reliability of program performance data. 

The few evaluations that systematically collected and analyzed data on 

EZ/EC program effectiveness used a number of research methods and 

reported results that varied, depending upon the aspect of the program 

studied.8

 None of the evaluations we reviewed assessed the effect of the 

program on poverty, although one assessed its effect on resident 

employment and three assessed its effect on aspects of economic growth 

 7

HUD and USDA expect EZs, ECs, and RCs to use their designations to attract additional 

investment. 

8

None of the evaluations we reviewed analyzed the RC program. 
Page 7 GAO-04-306 Community Development 

in the designated communities. Those evaluations that have been 

conducted used a variety of research methods—including statistical 

analyses, surveys, and document reviews—to carry out their research. In 

some cases, the data available to researchers affected the methods they 

chose. For example, the most comprehensive of these evaluations—the 

HUD Interim Assessment—included a survey of businesses as a way to 

partly address a lack of data on the use of tax benefits.9

 The HUD Interim 

Assessment found, among other things, that employment of Round I EZ 

residents had increased from 1995 to 2000, that larger businesses were 

more likely to use tax benefits than smaller businesses, and that resident 

participation in EZ or EC governance had been uneven. As with all 

evaluations of community development programs, these evaluations were 

also subject to some limitations. In particular, the researchers faced 

challenges demonstrating what would have happened in the communities 

in the absence of the program. 

This report contains a recommendation to facilitate the administration, 

audit, and evaluation of the EZ/EC and RC programs. We recommend that 

HUD, USDA, and IRS collaborate to (1) identify the data needed to assess 

the use of the tax benefits and the various means of collecting such data; 

(2) determine the cost-effectiveness of collecting these data, including the 

potential impact on taxpayers and other program participants; (3) 

document the findings of their analysis; and, if necessary, (4) seek the 

authority to collect the data, if a cost-effective means is available. 

Although the EZ/EC and RC programs have similar goals and objectives, 

several features of the programs vary within the EZ/EC program by round 

and between the EZ/EC and RC programs. The EZ/EC and RC programs 

share the goal of improving conditions in distressed communities by 

reducing unemployment and fostering investment in designated areas. 

However, certain administrative mechanisms, eligibility requirements, 

selection criteria, and benefits vary among EZ/EC rounds and between the 

EZ/EC and RC programs. 

 9

Scott Hebert and others, Interim Assessment of the Empowerment Zones and Enterprise 

Communities (EZ/EC) Program: A Progress Report, prepared for U.S. Department of 

Housing and Urban Development (Washington, D.C.: November 2001). 

EZ/EC and RC 

Programs Share 

Similar Goals and 

Objectives, but 

Features Vary 
Page 8 GAO-04-306 Community Development 

Although the legislation that created the EZ/EC and RC programs does not 

explicitly state the goals for these programs, HUD’s and USDA’s 

performance plans suggest that the goals of the programs are similar. 

According to HUD’s Annual Performance Plan for Fiscal Year 2004, the 

EZ/EC and RC programs are contained within its strategic goal to 

strengthen communities. Similarly, in its Fiscal Year 2004 Annual 

Performance Plan and Revised Plan for Fiscal Year 2003, USDA includes 

the EZ/EC program under the strategic goal to “support increased 

economic opportunities and improved quality of life in rural America.” 

HUD’s and USDA’s implementing regulations for the EZ/EC program 

include a statement of their “objective and purpose,” each of which 

generally states that the EZ/EC program is intended to reduce 

unemployment and promote the revitalization of economically distressed 

areas. HUD’s regulations implementing the RC program do not have an 

objective and purpose statement; however, HUD’s guidance states that the 

RC program is intended “to foster investment in the designated areas, 

which are some of the most severely distressed and development-resistant 

areas in the Nation.”10 Further, HUD program officials have stated that they 

regard the RC program as pursuing the same objective and purpose as the 

EZ/EC program, but relying on different methods. 

Certain features designed to help in the administration of the EZ/EC and 

RC programs varied by round in the EZ/EC program and between the 

EZ/EC and RC programs. To facilitate federal interagency coordination in 

the EZ/EC program, a 26-member Community Empowerment Board was 

established in 1993, with the U.S. Vice President as its chair and cabinet 

secretaries and other high-ranking federal officials as members. The 

board’s function was to consult in the designation of Round I and II EZs 

and ECs and coordinate the various federal agency resources that EZs and 

ECs would use to implement their strategic plans. For example, the 

Community Empowerment Board encouraged other agencies to provide 

preference points to EZs and ECs in selection competitions for other 

federal programs. The Community Empowerment Board was disbanded 

prior to Round III of the EZ program. 

 10U.S. Department of Housing and Urban Development, “Renewal Communities: Urban and 

Rural Application Guide” (Washington, D.C.: 2001). 

EZ/EC and RC Programs 

Have Similar Goals and 

Objectives 

EZ/EC Program Rounds I 

and II and the RC Program 

Received Administrative 

Assistance 
Page 9 GAO-04-306 Community Development 

In 2000, the legislation creating the RC program established a sevenmember Advisory Council on Community Renewal to advise the HUD 

Secretary on the selection of designees and the operation of the RC 

program. Unlike the Community Empowerment Board, the Advisory 

Council does not have federal interagency membership. Instead, the 

members of the Advisory Council include individuals from nonprofit and 

for-profit organizations who are appointed by the HUD Secretary. The 

legislation that created it required the Advisory Council to hold hearings 

“as appropriate,” obtain data from federal agencies, and submit a report 

containing a detailed statement of the council’s findings and conclusions 

and any recommendations to the HUD Secretary by September 30, 2003. 

HUD officials expect an interim report from the Advisory Council to be 

released sometime in February 2004 and the final report in October 2004. 

Communities nominated for EZ/EC or RC designations have been required 

to meet certain eligibility requirements based largely on the 

socioeconomic characteristics of the residents living in the nominated 

areas. Specifically, nominated census tracts have been required to meet 

statutory or regulatory requirements for (1) poverty in each census tract, 

(2) overall unemployment, (3) total population, (4) total area in square 

miles (in the case of the EZ/EC program), and (5) general distress.11 In 

most cases, these requirements were based on 1990 census data. The 

levels required for eligibility differed by round, by program, and between 

urban and rural nominees. For example, the statutory requirements for 

poverty differed between Round I and subsequent rounds of the EZ/EC 

program, and between the EZ/EC program and the RC program. In the 

absence of statutory guidelines, HUD and USDA regulations defined other 

eligibility requirements differently (see table 2). For example, the 

requirements for unemployment differed between urban and rural 

nominees and between the EZ/EC program and the RC program.12 The 

 11In Rounds II and III of the EZ/EC program, nominated communities located in Alaska or 

Hawaii could also use income criteria instead of criteria for poverty, size, and general 

distress. 

12In the EZ/EC program, the legislation required that the nominated area have “pervasive” 

unemployment, but did not define this term. In its regulations, HUD defined unemployment 

as not less than the national average rate of unemployment in the 1990 census. In contrast, 

USDA specified that unemployment could be demonstrated by a combination of 

information on the unemployed, underemployed, discouraged workers, plant or military 

base closings, or “other relevant unemployment indicators,” but did not specify the 

required level of unemployment. In Rounds II and III, the legislation also allowed nominees 

in rural areas to use outmigration criteria as an alternative to poverty criteria. 

The EZ/EC and RC 

Programs Have Had 

Different Eligibility 

Requirements 
Page 10 GAO-04-306 Community Development 

population requirements also differed between urban and rural nominees 

and by program. Finally, communities nominated for the EZ/EC program 

were required to meet area requirements, while RC nominees were not. 13

Table 2: Some Eligibility Requirements Differ among Rounds of the EZ/EC Program and between the EZ/EC and RC Programs 

Urban EZ/EC Rural EZ/EC RC 

Round I Rounds II and III Round I Rounds II and III 

Minimum required 

poverty level in 

nominated census 

tractsa

35% in 50% of tracts and 

25% in 90% of tracts and 

20% in all tractsb

25% in 90% of 

tracts and 

20% in all tractsb

 35% in 50% of tracts 

and 

25% in 90% of tracts 

and 

20% in all tractsb

25% in 90% of 

tracts and 

20% in all tractsb

20% in all tractsc

Minimum required 

unemployment rate 

6.3%a,d 6.3%a,d No minimum specified; could be 

demonstrated by several different indicators 

9.45%a,e

Required 

populationa

Maximum: 200,000 or the greater of 50,000 

or 10% of the population of the most 

populous city within the nominated area 

Minimum: None 

 Maximum: 30,000 

Minimum: None 

Maximum: 30,000 

Minimum: None 

Maximum: 

200,000 

Minimum: 4,000 

if any portion is 

within a metro 

area, 1,000 

otherwisef

Maximum required 

areaa

20 square milesg

 20 square miles, 

with up to 3 

developable 

sitesg,h

 1,000 square milesg

 1,000 square miles, 

with up to 3 

developable sitesg,h

Nonei

Source: GAO summary of P.L. 103-66, P.L. 105-34, P.L. 106-554, 24 C.F.R. 597, 24 C.F.R. 598, 24 C.F.R. 599, and 7 C.F.R. 25. 

a

Based on 1990 census data. 

b

In all rounds of the EZ/EC program, communities were not able to include census tracts containing 

central business districts in the nominated area unless those areas have a poverty level of 35 percent 

or greater. The authorizing legislation also established special requirements for nominated census 

tracts with low or no population. 

c

In urban areas, at least 70 percent of households must have incomes below 80 percent of local 

median. 

d

The 1990 national average unemployment rate was 6.3 percent. Evidence of especially severe 

economic conditions could also be used to meet the unemployment test. 

e

This number is 1.5 times the 1990 national unemployment rate. 

f

No population restriction exists if nominated area is entirely within an Indian reservation. 

g

Nominated communities may include up to three noncontiguous parcels. 

 13Also, while Round I EZ/EC nominees could not include any area on an Indian reservation, 

nominees for other rounds of the EZ/EC program and for the RC program could. 
Page 11 GAO-04-306 Community Development 

h

A developable site is a parcel of land in a nominated area that may be developed for commercial or 

industrial purposes. The developable site can be no more than 2,000 acres and can be 

noncontiguous to other nominated areas. 

i

Although the legislation did not impose any maximum area requirements for the RC program, it did 

stipulate that the area boundary be continuous. 

Nominated communities were also required to show conditions of general 

distress. Because the legislation did not define the term “general distress,” 

HUD and USDA each provided communities with lists of potential 

indicators containing criteria that could be used to meet this requirement. 

HUD provided Round I urban EZs and ECs with a list of six indicators and 

communities in Rounds II and III of the EZ/EC program and the RC 

program with a list of 17 indicators.14 USDA provided Round I, II, and III 

rural EZs and ECs with a list of 14 indicators.15 For example, USDA’s 

Round I list included indicators not included in HUD’s Round I list, such as 

a below-average or declining per capita income, earnings per worker, per 

capita property tax base, and average years of school completed. USDA, in 

turn, did not include homelessness as an indicator of general distress, 

while HUD included homelessness. 

As a part of the EZ/EC eligibility requirements, nominated communities 

were also required to submit a strategic plan. The strategic plan had to 

follow the four key principles of the EZ/EC program, which were 

established by HUD and USDA in their regulations: 

• Economic opportunity—including job creation within the community; 

supporting entrepreneurship; small business expansion; and job training, 

job readiness, and job support services. 

• Sustainable community development—advancing the creation of livable 

and vibrant communities through comprehensive approaches that 

coordinate economic, physical, environmental, community, and human 

development. 

• Community-based partnerships—involving the participation of all 

segments of the community, including the political leadership, community 

groups, the private and nonprofit sectors, and individual citizens. 

 1424 C.F.R. 597.102(c), 24 C.F.R. 598.110(c), 24 C.F.R. 599.105(e)(2)(iii). 

157 C.F.R. 25.102(c). 
Page 12 GAO-04-306 Community Development 

• Strategic vision for change—coordinating a response to community needs 

in a comprehensive fashion and setting goals and performance measures. 

HUD’s and USDA’s regulations implemented legislative requirements 

regarding community participation in the development of their strategic 

plans. Nominees were to obtain community input to identify their 

communities’ needs and to develop plans for addressing them according to 

the four principles. Nominees were also required to describe the role 

citizens would play in the implementation of the plans. 

To be eligible for the RC program, nominees were required to submit a 

“course of action,” in which they committed to carry out four of six 

specific legislatively mandated activities: 

• A reduction of tax rates or fees applying within the RC; 

• An increase in the level of efficiency of local services within the RC; 

• Certain crime reduction strategies; 

• Actions to reduce, remove, simplify, or streamline governmental 

requirements applying within the RC; 

• Involvement in economic development activities by private entities, 

organizations, neighborhood organizations, and community groups; and 

• The gift or sale at below fair-market value of surplus real property in the 

RC held by state or local governments to neighborhood organizations, 

community development corporations, or private companies. 

In addition, communities nominated for RC designation had to certify that 

they would meet four of five legislatively specified economic growth 

promotion requirements, such as repealing or reducing some occupational 

licensing requirements, zoning restrictions, permit requirements, or 

franchise and other business restrictions. The designees were also 

responsible for submitting plans within 6 months of designation for 

promoting the use of the tax benefits and for carrying out other state and 

local commitments. RCs were required to certify that they had solicited 

community input but not that community representatives had been 

involved in developing the course of action. 
Page 13 GAO-04-306 Community Development 

The selection criteria contained in the authorizing legislation for the 

EZ/EC and RC programs differed substantially. For the EZ/EC program, 

HUD and USDA were required to rank nominees based on the 

effectiveness of their strategic plans, the nominees’ assurances that the 

plans would be implemented, and additional criteria specified by the 

respective Secretary.16 In Round I of the EZ/EC program, the legislation 

also reserved designation for nominees with certain characteristics.17 In 

contrast, the RC selection process did not require a review of the 

effectiveness of the planning documents, such as the course of action, that 

communities submitted to meet eligibility requirements. Instead, the 

legislation authorizing the program required HUD to select the highest 

average ranking nominees based on poverty, unemployment, and, in urban 

areas, income statistics. HUD was also required to consider the extent of 

crime in the area and whether the nominated area contained any tracts 

that were identified in one of our reports as being distressed.18 For the first 

20 designations, HUD was to give preference to existing EZs and ECs that 

had been nominated and met the eligibility requirements for designation as 

an RC; the remaining designations went to the next-highest scorers. 

As discussed earlier, the authorizing legislation provided EZ/EC and RC 

program participants with grants, tax benefits, or both. Over the course of 

the three rounds of the EZ/EC program, however, the amount of the grants 

available to EZs declined, and the number of tax benefits increased. In 

Rounds I and II, ECs received much smaller grant benefits than EZs. 

Businesses in Round I ECs were eligible for one tax benefit; however, 

businesses in Round II ECs were not eligible for any tax benefits. RCs did 

not receive grants, but businesses operating in RCs were eligible to receive 

tax benefits. In addition, HUD and USDA provided designated 

communities with other benefits. For example, HUD and USDA provided 

Round II EZ/ECs with grant funds from their annual appropriations. See 

 16The secretarial criteria used by HUD and USDA differed in each round of the EZ/EC 

program. For example, in Round I, HUD included geographic diversity. USDA also 

considered the diversity within and among the nominated areas in Round I, but did not 

limit it to the geographic diversity used in HUD regulations. In Round II, HUD removed the 

secretarial criteria used for Round I. 

17It specified that one urban EZ be designated in an area where the most populous city had 

a population of 500,000 or less and that one urban EZ be designated in an area that 

included two states and had a combined population of 50,000 or less. 

18U.S. General Accounting Office, Community Development: Identification of 

Economically Distressed Areas, RCED-98-158R (Washington, D.C.: May 12, 1998). 

EZ/EC and RC Selection 

Criteria Differ 

EZ, EC, and RC Benefits 

Differed by Round and by 

Program 
Page 14 GAO-04-306 Community Development 

appendix III for a table summarizing the benefits provided to the 

designated communities. 

Congress appropriated a total of $1 billion in Social Services Block Grants 

for the benefit of Round I EZs and ECs (see table 3). These funds were to 

be used to (1) prevent, reduce, or eliminate dependency; (2) achieve or 

maintain self-sufficiency; and (3) prevent neglect, abuse, or exploitation of 

children and adults. In addition, the legislation required that the funds be 

used to benefit EZ/EC residents and in accordance with designees’ 

strategic plans. Like other Social Services Block Grant funds, those 

allotted for the EZ/EC program were granted to the states, which were 

given fiscal responsibility for them. The legislation authorizing the EZ/EC 

program requires that the states obligate these grants for specific EZ or EC 

community-based organizations in accordance with state laws and 

procedures and within 2 years of the date that HHS awarded the funds. 

These block grant funds remain available to finance qualified projects until 

December 21, 2004, after which time the grants are subject to state closeout procedures, and all amounts reported as unspent must be returned to 

the federal government.19

Table 3: Social Services Block Grant Funds Authorized for Round I EZs and ECs 

Designation 

Total amount of block 

grants authorized

Amount per 

designee 

Round I urban EZs $600 million $100 million 

Round I rural EZs $120 million $40 million 

Round I ECs (urban and rural) $280 million $2.95 million 

Total $1 billion 

Source: P.L. 103-66 and GAO analysis. 

As stated previously, HUD created the Supplemental Empowerment Zone 

and Enhanced Enterprise Community designations at the same time as the 

Round I EZ/EC designations. HUD awarded $300 million in Economic 

Development Initiative grants to the two Supplemental Empowerment 

Zones and four Enhanced Enterprise Communities (see table 4).20 These 

 19According to an HHS official, HHS is currently establishing policies for granting 

extensions to EZs and ECs with unspent Social Services Block Grant funds. 

20HUD awarded separate Economic Development Initiative grants to overlapping or 

adjacent government entities in the city and county of Los Angeles, California, and in 

Kansas City, Missouri and Kansas City, Kansas. As a result, HUD awarded Economic 

Development Initiative grants to eight government entities. 

Grants Were Available to 

Round I and II EZs/ECs and to 

Some Rural Round III EZs 
Page 15 GAO-04-306 Community Development 

grants were designed to enhance the feasibility of certain economic 

development or revitalization projects by paying for certain project costs 

or providing additional security for loans that finance such projects. The 

government entities were required to use these grants in accordance with 

the community’s strategic plan and Community Development Block Grant 

regulations. 

Table 4: Economic Development Initiative Grants for Supplemental Empowerment 

Zones and Enhanced Enterprise Communities 

Local government entity 

Amount in allocated Economic 

Development Initiative grants 

Supplemental Empowerment Zones 

Los Angeles, Calif. (city) 

Los Angeles, Calif. (county) 

$100 million 

$25 million 

Cleveland, Oh. $87 million 

Enhanced Enterprise Communities 

Boston, Mass. $22 million 

Oakland, Calif. $22 million 

Houston, Tex. $22 million 

Kansas City, Mo. 

Kansas City, Kans. 

$14.2 million 

$7.8 million 

Total $300 million 

Source: HUD. 

Initially, the administration planned to provide the Round II EZ designees 

with the same level of funding as Round I designees. Instead, Round II 

EZ/EC designees received funding through annual appropriations for HUD 

and USDA in fiscal years 1999 through 2003 (see tables 5 and 6).21

According to HUD’s annual appropriations legislation, program grants for 

Round II urban designees are to be used in conjunction with economic 

development activities consistent with designees’ strategic plans.22 The 

 21The data in this report are as of September 30, 2003. However, in January 2004, the 

Consolidated Appropriations Act of 2004 appropriated an additional $14.9 million for 

Round II urban EZs and $11.6 million for Round II rural EZs and ECs. 

22According to HUD officials, HUD is currently developing regulations that would clarify 

“economic development activities.” In lieu of an explicit rule, HUD has advised Round II 

urban EZs that acceptable economic development activities include job creation and 

training, entrepreneurial activities, small business expansion, and job support services such 

as affordable child care and transportation services that would help zone residents gain 

employment in jobs that offer upward mobility. 
Page 16 GAO-04-306 Community Development 

USDA appropriations language did not impose these requirements on 

Round II rural designees; however, in March 2002, USDA issued 

regulations limiting the allowable uses of Round II grants to those for 

Round I EZ/EC Social Services Block Grants. Unlike Round I funds, which 

pass through a state agency, Round II EZs and ECs access their grants 

directly from HUD or USDA. In most cases, these funds are available to 

communities until expended.23

Table 5: HUD Appropriations for Round II Urban Designees, Fiscal Years 1999-2003 

(Dollars in thousands) 

Fiscal year 

Total appropriations to Round II 

urban EZs Appropriations per EZ

1999 $45,000 $3,000

2000 $55,000 $3,667

2001a,b $184,593 $12,306

2002 $45,000 $3,000

2003b $29,805 $1,987

Total $359,398 $23,960

Source: P.L. 105-277, P.L. 106-74, P.L. 106-377, P.L. 106-554, P.L.107-73, P.L. 108-7, and GAO analysis. 

a

In fiscal year 2001, funds were appropriated in two separate pieces of legislation. 

b

Appropriations in these years were affected by rescissions. 

 23However, fiscal year 2003 appropriations for Round II urban EZs will remain available 

only until September 30, 2005. 
Page 17 GAO-04-306 Community Development 

Table 6: USDA Allocation of Appropriations for Round II Rural Designees, Fiscal 

Years 1999-2003 (Dollars in thousands) 

Fiscal 

year 

Total allocations to 

Round II rural EZsa

Allocation per 

EZ

Total allocations 

to Round II rural 

ECsa

Allocation per 

EC 

1999 $10,000 $2,000 $5,000 $250 

2000 $10,000 $2,000 $5,000 $250 

2001b $9,978 $1,996 $4,989 $249 

2002 $9,978 $1,996 $4,989 $249 

2003b $9,913 $1,983 $4,957 $248 

Total $49,869 $9,975 $24,935 $1,247 

Source: P.L. 105-277, P.L. 106-74, P.L. 106-377, P.L. 106-554, P.L. 107-73, P.L. 108-7, and GAO analysis. 

a

Only the fiscal year 1999 bill distinguished between appropriations to the rural EZs and rural ECs. 

For other years, Congress appropriated funds for the rural EZ/EC program, and USDA allocated the 

appropriations between the EZs and ECs. 

b

Appropriations in these years were affected by rescissions. 

As of September 30, 2003, no direct funding was available for Round III 

EZs or RCs. However, the Consolidated Appropriations Act of 2004 

appropriated $994,100 for Round III rural EZs.24 It did not appropriate 

funding for Round III urban EZs or any RCs. 

Businesses operating in or employing residents of EZs and RCs are eligible 

for a number of federal tax benefits designed to encourage business 

investment (see table 7). Businesses operating in ECs are generally 

ineligible for the tax benefits, although state and local governments can 

issue tax-exempt bonds for businesses in Round I ECs. Since the initial 

legislation authorizing the EZ/EC program, the number of federal tax 

benefits has grown.25 For example, businesses operating in Round I EZs 

were originally eligible for three tax benefits: (1) a credit for wages paid to 

employees who both live and work in an EZ, (2) an increased expensing 

 24P.L. 108-199. We did not include these funds in our analysis because the data in this report 

are as of September 30, 2003. 

25In 1993, the Joint Committee on Taxation estimated that the tax benefits available to 

businesses in Round I communities would result in a $2.5 billion reduction in tax revenues 

between 1994 and 1998. In 2000, this committee estimated that the EZ and RC tax benefits 

contained in the Community Renewal Tax Relief Act of 2000 would reduce tax revenues by 

a total of about $3.9 billion between 2001 and 2005, and about $10.9 billion between 2001 

and 2010. 

Tax Benefits Have Increased 

Since the EZ/EC Program 

Began 
Page 18 GAO-04-306 Community Development 

deduction for depreciable property, and (3) tax-exempt bonds.26 By 2002, 

businesses operating in EZs were eligible for several additional tax 

benefits, including capital gains exclusions, and more generous taxexempt bond and expensing provisions. In addition to some of the same 

tax benefits available in EZs, businesses operating in RCs were also 

eligible for a deduction on commercial property and a different type of 

capital gains exclusion. These benefits are generally available until 2009, 

when the EZ and RC designations expire. 

Table 7: Federal Tax Benefits Specifically Available to Businesses Operating in EZs, ECs, and RCs 

Tax benefit Effective year Expiration year Applicable zones Provisions 

EZ Employment Credit 1994a 2009 EZs Businesses can claim a 20-percent credit on the 

first $15,000 paid in wages to EZ residents who 

perform substantially all of their work in the EZ. 

Increased Section 179 

Deduction 

1994 2009 EZs and RCs Qualified businesses can deduct $35,000 more 

than the maximum allowable deduction under 

section 179 of the Internal Revenue Code for 

certain qualifying property in the year the 

property was placed in service.b

Enterprise Zone 

Facility Bonds 

1994 2009c EZs and Round I 

ECs 

State and local governments can issue taxexempt bonds to provide loans to qualified 

businesses to finance certain property. A 

business cannot receive more than $3 million in 

bond proceeds for activities in any EZ or Round I 

EC or more than $20 million for activities in all 

EZs and Round I ECs nationwide. These bonds 

are also subject to state volume caps, which limit 

the amount of tax-exempt debt that state and 

local government entities can issue. 

EZ Facility Bonds 1998d 2009 EZse State and local governments can issue taxexempt bonds to provide loans to qualified 

businesses to finance certain property.f

 State 

and local government entities can issue up to 

$60 million for each rural EZ, $130 million for 

each urban EZ with a population of less than 

100,000, and $230 million for each urban EZ 

with a population greater than or equal to 

100,000. These bonds are not subject to state 

volume caps. 

Nonrecognition of 

Gains on the Sale of 

EZ Assets 

2000g 2009 EZs Taxpayers that incur capital gains on the sale of 

qualified assets may elect to postpone those 

gains from tax liability if they purchase a 

replacement asset within 60 days. 

 26A deduction for depreciable property reduces a taxpayer’s taxable income for assets that 

could be used for over 1 year. 
Page 19 GAO-04-306 Community Development 

Tax benefit Effective year Expiration year Applicable zones Provisions 

Partial Exclusion of 

Gain on the Sale of 

EZ Stock 

2000h 2009 EZs Taxpayers that hold stock for more than 5 years 

in corporations with assets under $50 million 

incur a tax liability on only 40 percent of their 

capital gains, provided the company offering the 

stock is a qualified zone business. 

RC Employment 

Credit 

2002 2009 RCs Businesses can claim a 15-percent credit on the 

first $10,000 paid in wages to RC residents who 

perform substantially all of their work in the RC. 

Commercial 

Revitalization 

Deduction 

2002 2009 RCs Businesses that receive an allocation from an 

agency authorized by the state for costs 

associated with new construction or renovation 

of nonresidential commercial property can either 

deduct half of the qualifying expense for the year 

in which a building is placed in service or 

amortize all of the expenses over a 10-year 

period. 

Zero Percent Capital 

Gains Rate for RC 

Assets 

2002i 2009 RCs Investments in qualified RC businesses 

purchased after 2001 and before 2010 and held 

for more than 5 years are not subject to tax 

liability on capital gains. 

Source: GAO summary of HUD and IRS publications; P.L. 103-66, P.L. 105-34, P.L. 105-277, and P.L. 106-554. 

a

Businesses in Round II EZs did not become eligible until 2002. 

b

The term “placed in service” indicates the year in which the business began using the property for 

which it is claiming the deduction. Between 1994 and 2001, businesses could deduct $20,000 more 

than the maximum allowable section 179 deduction. 

c

State and local governments can issue these bonds for the benefit of EZs through 2009. However, 

these bonds can be issued for the benefit of Round I ECs only through 2004. 

d

State and local governments could issue these bonds for qualified EZs beginning in December 1998, 

the month of Round II designation. However, no EZ Facility Bonds were issued until 1999. 

e

Businesses in Round I EZs did not become eligible until 2002. 

f

Purchasers of tax-exempt bonds incur no federal tax liability on interest income. 

g

Taxpayers have to purchase the asset after December 21, 2000, and before 2010 and hold it for 

more than a year to be eligible for this benefit. 

h

Taxpayers have to make the investment after December 21, 2000, and before 2010 and hold it for 

more than 5 years to be eligible for this benefit. 

i

Taxpayers have to make the investment after 2001 and before 2010 and hold it for more than 5 years 

to be eligible for this benefit. 

Taxpayers operating businesses in or employing residents of EZs, ECs, or 

RCs can also claim other tax benefits not specific to the federal 

designations. Some federal tax benefits are aimed at businesses that 

operate or invest in a distressed community or that employ or provide 

housing for low-income persons. For example, certain banks, insurance 

companies, and corporations that lend money may purchase Qualified 

Zone Academy Bonds, which raise funds for public schools located in lowTaxpayers Can Claim Other 

Benefits Not Specific to 

Federal Designations 
Page 20 GAO-04-306 Community Development 

income areas, such as those located in EZs or ECs. Purchasers of these 

bonds receive a tax credit in lieu of interest payments. (See app. IV for 

examples of federal tax benefits aimed at distressed communities and lowincome individuals.) In addition to the federal tax benefits, businesses 

operating in federally designated EZs, ECs, and RCs may also be eligible 

for tax benefits from the state when a federal designation overlaps with a 

state-designated Enterprise Zone. While the specific tax benefits provided 

to businesses operating in state Enterprise Zones vary from state to state, 

they can include credits on state taxes against withholdings, property tax 

reductions, and sales tax exemptions. 

In addition to grant monies and tax benefits, certain designees have also 

been eligible for other benefits. In Round I of the EZ/EC program, HUD 

and USDA guidance invited nominees to request, as an addendum to their 

applications, waivers from federal programmatic, statutory, or regulatory 

requirements to facilitate their ability to conduct revitalization efforts. 

Also, communities designated by HUD as Supplemental Empowerment 

Zones or Enhanced Enterprise Communities were provided with a total of 

$653 million in Section 108 Loan Guarantees to provide security for loans 

that finance economic development and revitalization projects.27 Finally, 

HUD and USDA expect EZs, ECs, and RCs to use their designations to 

attract additional investment. In some cases, EZ, EC, and RC designees 

were provided with a competitive priority in other federal programs to 

help them meet this expectation. Appendix V provides details on these 

benefits. 

To date, the federal agencies have selected three rounds of EZs, two 

rounds of ECs, and one round of RCs; provided program benefits, 

outreach, and technical assistance; and established oversight procedures. 

Available data indicate that community organizations and businesses are 

using the program benefits; however, certain limitations with tax benefit 

data will, among other things, make it difficult to audit or evaluate the 

programs and limit the ability of designated communities to report on their 

activities. 

 27A Section 108 Loan Guarantee allows local governments to obtain loans for economic 

development projects that (1) benefit low and moderate income families, (2) prevent or 

eliminate slums or blight, or (3) meet other urgent community development needs. 

Other Benefits Were Also 

Available to Certain Designees 

The EZ/EC and RC 

Programs Are Well 

Under Way, but Data 

on the Use of Some 

Benefits Are Limited 
Page 21 GAO-04-306 Community Development 

HUD and USDA have implemented three rounds of selection for the EZ/EC 

program, and HUD has implemented one round of selection for the RC 

program. Following the authorizing legislation for each round, HUD and 

USDA released interim rules for designation and formally invited 

community nominations through a notice inviting applications or notice of 

funding availability. Figure 1 shows a timeline of the selection process for 

each of the programs. 

HUD and USDA Have 

Selected Communities for 

the EZ/EC and RC 

Programs 
Page 22 GAO-04-306 Community Development 

Figure 1: Timeline of Events in the Selection of EZ/EC and RC Program Participants 

The implementation of the selection process varied by round of the EZ/EC 

program and between the EZ/EC and RC programs. In Round I of the 

EZ/EC program, HUD and USDA used several interagency review teams to 

rank nominees based on their strategic plans’ effectiveness and alignment 

with the program’s four principles. As a part of their review of nominees 
Page 23 GAO-04-306 Community Development 

for Rounds II and III of the EZ/EC program, the interagency review teams 

assigned point values based on the quality of various characteristics of the 

nominees’ strategic plans. In Rounds I and II, nominees that had applied 

for an EZ designation but had not been chosen were added to the list of 

eligible nominations for EC designations.28 For the RC program, HUD used 

a statistical formula that was based on the eligibility criteria to identify the 

eligible nominees with the highest scores. Figure 2 shows the geographic 

locations of the designated communities by round. 

 28Rural nominees that did not receive EZ or EC status from USDA were offered Champion 

Community status. Champion communities are eligible for technical assistance from USDA 

and preferences for other government programs. There are currently 118 Champion 

Communities. 
Page 24 GAO-04-306 Community Development 

Figure 2: Geographic Distribution of Designees By Round 

Communities that had received designations in prior rounds of the EZ/EC 

program were permitted to apply for subsequent rounds. Within the EZ/EC 

program, communities that had received EC designations in Rounds I and 
Page 25 GAO-04-306 Community Development 

II were permitted to apply for EZ status in subsequent rounds.29 If an EC 

was chosen to receive an EZ designation, it maintained both designations, 

along with the associated benefits. The five Round I ECs that also received 

Enhanced Enterprise Community or Supplemental Empowerment Zone 

designations maintained their EC status as well. In addition, ECs and EZs 

were encouraged to apply for RC designations. However, in contrast to the 

EZ program, the authorizing legislation for the RC program required that 

the communities forfeit prior designations when they received RC 

designation.30 Table 8 provides more information on the number of 

nominations, communities selected in each round, and the number of 

designations retained as of September 30, 2003. Figure 3 shows the 

geographic locations of the designated communities by designation status 

as of September 30, 2003. 

Table 8: Number of EZ/EC and RC Nominations and Designations 

Number of communities 

nominateda

Number of nominations 

selected for designation 

Number of designations as 

of September 30, 2003 

Urban 

Round I EZ 74b 8c 7c, d

Round I EC 219 65 49d

Round I Supplemental 

Empowerment Zones Not applicable 2 2 

Round I Enhanced Enterprise 

Communities Not applicable 4 4 

Round II EZ 119 15 15 

Enterprise Zone Not applicablee 1 1 

Round III EZ 36 8f 8 

RC 62 28 28 

Rural 

Round I EZ 88b 3 3 

Round I EC 139 30 28d

 

 29Enhanced Enterprise Communities were also permitted to apply for EZ status. One 

Enhanced Enterprise Community, Boston, Mass., received an EZ designation. 

30One exception occurred, in which an EC dissociated itself from the part of its area that 

had applied for RC status prior to that area receiving designation. 
Page 26 GAO-04-306 Community Development 

Number of communities 

nominateda

Number of nominations 

selected for designation 

Number of designations as 

of September 30, 2003 

Round II EZ 160 5 5 

Round II EC Not applicableg

 20 20 

Round III EZ 55 2 2 

RC 41 12 12 

Total 993 203 184h

Source: HUD and USDA program documents. 

a

Communities not selected in earlier rounds could apply for subsequent rounds. 

b

Nominations for Round I EZs that did not receive an EZ designation were added to the list of eligible 

nominations for ECs. Some ECs that were designated had originally been nominated for EZ 

designation. 

c

Six urban communities originally received EZ status in Round I, and the two Supplemental 

Empowerment Zones were later given full Round I EZ status. 

d

One urban Round I EZ and 16 urban and 2 rural Round I ECs lost their prior EZ or EC designations 

when part or all of the former community area received RC designation. 

e

The Washington, D.C. Enterprise Zone designation was awarded directly by the Taxpayer Relief Act 

of 1997. 

f

The legislation authorizing the third round of the EZ program authorized seven urban EZs. When the 

Atlanta EZ became an RC, HUD used its statutory authority to designate an additional Round III EZ. 

g

Selection of ECs made out of the pool of 160 nominations for Round II rural EZ designation. 

h

This figure represents the number of designations that are maintained as of September 30, 2003. 

Because communities did not lose prior designations when they subsequently received EZ, 

Supplemental Empowerment Zone, Enhanced Enterprise Community, or Enterprise Zone 

designations, 19 communities are counted more than once in this total. 
Page 27 GAO-04-306 Community Development 

Figure 3: Geographic Location of All Designated Communities as of September 30, 2003 

The average characteristics of the designated geographic areas in the three 

rounds of the EZ/EC program and the RC program had slightly different 

poverty and unemployment levels, but their average population, area, and 

population density statistics differed more greatly. As noted earlier, with 

some exceptions, nominees were directed to use 1990 census data to 

qualify for poverty, unemployment, population, and area criteria; however, 

the levels required for eligibility varied among rounds of the EZ/EC 

program and between the EZ/EC program and RC program. According to 
Page 28 GAO-04-306 Community Development 

1990 census data, a total of about 8 million people lived in EZs, ECs, and 

RCs. Among urban EZs, each round had somewhat lower average 

percentages of poverty, but similar percentages of unemployed.31 The 

poverty and unemployment rates of rural EZs were relatively constant, 

although unemployment was higher in Round I. ECs did not vary greatly 

between rounds in terms of poverty and unemployment. The RCs’ average 

percentages in poverty and unemployed are comparable to those of EZ 

designees in rounds II or III. However, the average population of the rural 

communities designated as RCs was much higher than that of rural EZs or 

ECs, and the average population for urban communities was highest in 

Round I EZs and in RCs. The average area of the communities varied 

among the rounds and between the two programs. The population density 

for urban communities remained much higher than that of rural 

communities, with urban communities ranging from about 4,000 persons 

per square mile to over 10,000 persons per square mile and rural 

communities ranging from less than 10 persons per square mile to about 45 

persons per square mile. Figure 4 shows the average characteristics of the 

communities by designation, round, and urban or rural location. 

 31Census poverty and unemployment data are estimates based on a sample of the 

population. All poverty and unemployment percentage estimates have 95 percent 

confidence intervals of plus or minus 1.2 percentage points or less. See appendix I for 

details. 
Page 29 GAO-04-306 Community Development 

Figure 4: Variation in Average Characteristics of EZs, ECs, and RCs (Based on 1990 census data) 

Note: All poverty and unemployment percentage estimates have 95 percent confidence intervals of 

plus or minus 1.2 percentage points or less. See appendix I for the confidence intervals for each 

estimate. Round I EZ averages include the Supplemental Empowerment Zone data, and Round I EC 

averages include the Enhanced Enterprise Community data. 

a

Percent based on individuals for whom poverty status has been determined. 

b

Percent based on individuals 16 years of age and older. 

c

The actual area of these communities could be smaller, because areas nominated for Round II and 

III rural EZ/ECs were not required to adhere to census tract boundaries if they were wholly within an 

Indian reservation and could exclude land owned by federal, state, or local governments from their 

calculation of the maximum area requirement. 

As of September 30, 2003, (1) state agencies had drawn down about 71 

percent of the Social Services Block Grants authorized for the EZ/EC 

program, (2) the eight local government entities that received Economic 

Development Initiative grants as part of the Supplemental Empowerment 

Zone and Enhanced Enterprise Community designations had drawn down 

about 55 percent of the $300 million in Economic Development Initiative 

Designees Are Drawing 

Down Grant Funds 
Page 30 GAO-04-306 Community Development 

funds that HUD had awarded, and (3) Round II EZs and ECs had drawn 

down 42 percent in HUD and USDA program grants appropriated between 

fiscal years 1999 and 2003 (see table 9).32

Table 9: Amount of Grant Funds Awarded and Drawn Down, as of September 30, 2003 (Dollars in thousands) 

 Type of funds awarded 

Amount 

awarded 

Amount 

drawn down % Drawn down 

Round I Urban EZs Social Services Block Grants $600,000 $362,737 60.5% 

 Rural EZs Social Services Block Grants $120,00 $95,521 79.6% 

 Urban ECs Social Services Block Grants $191,579 $172,663 90.1% 

 Rural ECs Social Services Block Grants $88,421 $80,575 91.1% 

Total $1,000,000 $711,496 71.1% 

 Supplemental Empowerment 

Zonesa

Economic Development Initiative Grants $212,000 $122,267 57.7% 

 Enhanced Enterprise 

Communitiesb

Economic Development Initiative Grants $88,000 $41,613 47.3% 

Total $300,000 $163,880 54.6% 

Round II Urban EZs HUD Appropriations $359,398 $155,293 43.2% 

 Rural EZs USDA Appropriations $49,869 $18,169 36.4% 

 Rural ECs USDA Appropriations $24,935 $9,084 36.4% 

Total $434,202 $182,546 42.0% 

Source: GAO analysis of HUD, USDA, and HHS data. 

a

Three government entities received these grants as part of the Supplemental Empowerment Zone 

designations. 

b

Five government entities received these grants as part of Enhanced Enterprise Community 

designations. Only one local government entity, Kansas City, Kansas, has drawn down all of its 

awarded Economic Development Initiative funds. 

IRS maintains two principal sources of tax data. The first is an electronic 

master file system, which includes a business master file and an individual 

master file, each of which contains selected line-item data from business 

and individual tax filings. In addition, IRS’s Statistics of Income Division 

maintains a second set of data files that are generally based on a sample of 

tax returns.33 IRS maintains selected information on the EZ/EC and RC 

 32A “draw down” occurs when a grantee accesses awarded funds. 

33While IRS’s Statistics of Income Division maintains data on the use of the EZ Employment 

Credit for all corporate tax returns from 1998 through 2000, it maintains sampled data on 

this tax credit from individual returns from 1995 through 2001 and from corporate returns 

from 1995 through 1997 and for 2001. 

Little Information Is 

Available on the Use of 

Some EZ- and RC-Specific 

Tax Benefits 
Page 31 GAO-04-306 Community Development 

programs’ tax benefits in the master file data sets for tax years 1996 

through 2002 and the Statistics of Income data set for tax years 1994 

through 2001.34 In addition, the contractor preparing the HUD Interim 

Assessment performed a survey of businesses to determine their use of tax 

incentives, but these findings are limited to Round I designees.35

Currently, IRS can report on the use of the EZ Employment Credit at the 

national level. The most readily available IRS data from the Statistics of 

Income Division indicate that taxpayers are making some use of this 

credit. Nationally, corporations and individuals claimed an estimated total 

of $251 million in EZ Employment Credits between 1995 and 2001 (see 

figs. 5 and 6).36

Figure 5: Corporate Returns with EZ Employment Credit 

 34Because it is not possible to compute a reliable estimate for 1994 returns, we are 

reporting only on the years from 1995 through 2001. 

35See Hebert and others, Interim Assessment. 

36With the exception of 1998 through 2000 corporate data, this number is based on sampled 

data. We calculated the 95 percent confidence interval for the total EZ Employment Credits 

claimed at between $224 million and $278 million. The 95 percent confidence intervals for 

all estimates are included in appendix I. 

IRS Collects Some Data on the 

EZ and RC Employment Credit, 

but Limitations Exist 
Page 32 GAO-04-306 Community Development 

Note: This figure includes employment credits claimed in the D.C. Enterprise Zone. However, data do 

not include credits claimed against the Alternative Minimum Tax or credits claimed by regulated 

investment companies, real estate investment trusts, or S corporations. Data from 1995 through 1997 

and for 2001 are estimates based on a sample of tax returns. The 95 percent confidence intervals for 

these estimates can be large, sometimes exceeding +/- 50 percent. See appendix I for these values. 

1998 through 2000 data are based on the population of returns. 

Figure 6: Individual Returns with EZ Employment Credit 

Note: This figure includes employment credits claimed in the D.C. Enterprise Zone. However, data do 

not include credits claimed against the Alternative Minimum Tax. Data from individual tax returns are 

based on a sample. The 95 percent confidence intervals for these estimates can be large, sometimes 

exceeding +/- 50 percent. See appendix I for these values. 

Businesses were able to begin claiming the RC Employment Credit in 

2002, using the same form they use to claim the EZ Employment Credit. 

IRS will be able to report on taxpayers’ use of the RC Employment Credit 

when some data becomes available in mid-2004.37 However, because the 

same line is used to record the amount claimed for both the RC 

Employment Credit and the EZ Employment Credit, IRS will not be able to 

distinguish between the amount claimed for RC Employment Credits and 

the amount claimed in EZ Employment Credits. 

In addition, according to IRS officials, the agency cannot reliably link 

businesses claiming the employment credit with specific EZs or RCs due 

 37The 2002 data from individual taxpayers will be available in mid-2004. The 2002 data from 

corporate taxpayers will be available in 2005. 
Page 33 GAO-04-306 Community Development 

to two factors. First, according to IRS officials the addresses business 

owners list on tax forms do not necessarily correspond with the location 

of their business operations, but may be a residence or the address where 

the business is incorporated. Second, the IRS form used to claim the EZ 

and RC Employment Credits does not require the taxpayer to identify the 

EZ(s) or RC(s) where the business operations eligible for the credit are 

located. 

To identify the amount of employment credits claimed by businesses in 

specific EZs or RCs, taxpayers would have to identify the EZs or RCs 

where they had business operations. One way to collect this information 

would be for IRS to amend its form to request additional information. 

Senior IRS officials cited several reasons why amending its tax forms is 

not a high priority for the agency. First, they said that IRS’s role is to 

administer tax laws, and that collecting more comprehensive data on the 

use of these benefits does not help the agency to acheive this objective. 

Second, the officials indicated that requesting taxpayers to provide more 

information would add to taxpayer burden and IRS workload. Third, IRS 

officials told us that they allocate their resources based on the potential 

effect of abuse on federal revenue and noted that these tax benefits are 

not considered high risk, since the amount claimed is small compared with 

revenues collected from other tax provisions or the amount of potential 

losses from abusive tax schemes. 

Between 1995 and 2001, state and local governments issued a total of 36 

different series of tax-exempt bonds with an aggregate issue price of $315 

million explicitly for the benefit of businesses operating in EZs and Round 

I ECs, as well as the D.C. Enterprise Zone.38 Figure 7 shows the number 

and aggregate issue price of tax-exempt bonds issued for the benefit of 

businesses operating in these communities between fiscal years 1995 and 

2001.39 The dramatic increase in the amount of bonds issued since 1999 can 

be attributed to the issuance of EZ Facility Bonds, which are not subject to 

state volume caps and can be issued for generally larger amounts than the 

original Enterprise Zone Facility Bonds, and the issuance of D.C. 

Enterprise Zone Facility Bonds. 

 38D.C. Enterprise Zone Facility Bonds are subject to a $15 million per borrower limit and 

are subject to the state volume cap. These bonds became available in 1998. 

39This figure includes bonds issued to refund previously issued debt. 

National Use of Tax-Exempt 

Bonds Has Grown 
Page 34 GAO-04-306 Community Development 

Figure 7: Number and Amount of Enterprise Zone, D.C. Enterprise Zone, and EZ 

Facility Bonds Issued 1995 through 2001 

Note: These figures include bonds issued to refund previously issued debt. These figures represent 

the issue price of these bonds, not the actual savings to businesses in EZs or ECs. These bonds 

were issued to provide loans to businesses at a lower interest rate than through conventional 

financing arrangements. Bond purchasers are willing to accept a lower interest rate because the 

interest income is not subject to federal income taxes. The actual savings to businesses in EZs or 

ECs are the lower interest rates at which they repay their loans. 

IRS cannot report on the extent to which businesses operating in an EZ or 

RC are claiming the increased expensing deduction, the Commercial 

Revitalization Deduction, or the Nonrecognition of Gain on the Sale of EZ 

Assets, because taxpayers do not report these benefits as separate items 

on their returns. In addition, two benefits, the Zero Percent Capital Gains 

Rate for RC Assets and the Partial Exclusion of Gain on the Sale of EZ 

Stock cannot be claimed until 2007 and 2005, respectively. Table 10 

provides a summary of the data available on all nine tax benefits. 

Amount of Other Tax Benefits 

Claimed by EZs and RCs Is 

Unknown 
Page 35 GAO-04-306 Community Development 

Table 10: Limitations with Data on EZ, EC, and RC Tax Benefits 

Tax benefit 

Does IRS have 

national level data? 

Can IRS reliably link 

data to a designated 

community? 

EZ Employment Credit Yesa Noe

RC Employment Credit Yesb Noe

Enterprise Zone Facility Bonds Yes Nof

EZ Facility Bonds Yes Nof

Increased Section 179 Deduction No Not applicable 

Commercial Revitalization 

Deduction 

No Not applicable 

Zero Percent Capital Gains Rate 

for RC Assets 

Noc Not applicable 

Nonrecognition of Gains on the 

Sale of EZ Assets 

No Not applicable 

Partial Exclusion of Gain on the 

Sale of EZ Stock 

Nod Not applicable 

Source: GAO analysis. 

a

Some Statistics of Income data are based on statistical samples and may not accurately represent 

the population of filers. For tax years after 2001, IRS data cannot distinguish between this benefit and 

the RC Employment Credit. 

b

The first Statistics of Income data will become available in 2004 when the 2002 individual return data 

become available. However, IRS will not be able to distinguish between taxpayers claiming this credit 

and the EZ Employment Credit. 

c

This benefit cannot be claimed until 2007. 

d

This benefit cannot be claimed until 2005. 

e

Taxpayers do not identify the EZ or RC where the business operations are located. 

f

IRS collects data on tax-exempt bonds issued by state and local governments. However, if a city or 

state government entity with more than one EZ/EC located in its jurisdiction issues these bonds, IRS 

data cannot identify which EZ or EC benefited from the bond issue. 

The lack of data on the use of some of the tax benefits available to 

businesses in EZs and RCs limits the ability of HUD and USDA to 

administer the programs. For example, HUD requires EZs and RCs to 

report on the extent to which businesses are using certain tax benefits, 

such as the EZ or RC Employment Credit, to demonstrate progress in 

meeting program outputs. However, EZ and RC officials have had 

difficulty in obtaining tax information directly from businesses. As a result, 

the lack of data on the use of these benefits limits the ability of the 

designated communities to comply with this requirement. Also, the lack of 

data on these tax benefits limits the ability of EZs and RCs to use their 

designations to attract additional resources, which is a program 

Lack of Data Limits Ability to 

Determine Use of Tax Benefits 

in Individual EZs and RCs 
Page 36 GAO-04-306 Community Development 

expectation. For example, according to tax and community development 

specialists, the inability to report on the extent to which some existing tax 

benefits are being used limits the ability of EZs and RCs to demonstrate 

the effectiveness of their revitalization programs. Moreover, the lack of 

data on these benefits limits the ability of HUD, USDA, or others to audit 

or evaluate the programs.40

Although available data show that businesses are using some tax benefits 

in EZs, ECs, or RCs, we found that some businesses might face obstacles 

in using the tax benefits. In 1999, we reported that businesses cited several 

reasons for not taking advantage of the tax benefits, including not 

knowing about them, finding them too complicated, not qualifying for 

them, and not having federal tax liability.41 During our current audit work, 

research results showed and tax experts expressed similar concerns. For 

example, a HUD-sponsored report noted that in 2000 many businesses did 

not know about the tax benefits available to them.42 In addition, one tax 

expert noted that businesses must make several complicated calculations 

about their business activities to determine whether they satisfy the 

requirements for using the tax benefits. IRS officials suggested that the 

complexities of the tax code and changes in it over time might prevent 

smaller businesses from taking advantage of the EZ or RC benefits, 

because smaller businesses may not have access to tax professionals.43

Also, one tax expert noted that some businesses, such as farms with assets 

greater than $500,000, do not qualify for the tax benefits. Moreover, 

businesses can only claim the tax credits against their reported profits. 

Since small companies and start-up businesses may not have federal tax 

liabilities, they may not be able to claim the EZ or RC credits to the same 

degree as larger or more profitable businesses. 

 40Even if these data were available, federal officials raised concerns regarding whether IRS 

could legally disclose taxpayer data to EZ or RC representatives. Under section 6103 of the 

Internal Revenue Code, IRS cannot release taxpayer information to unauthorized persons. 

Taxpayer information is generally defined as information that would reveal a taxpayer’s 

identity or financial position. 

41U.S. General Accounting Office, Community Development: Businesses’ Use of 

Empowerment Zone Tax Incentives, GAO/RCED-99-253 (Washington, D.C.: September 

1999). Our report was based on a survey of businesses operating in the original nine Round 

I EZs to determine the extent to which they took advantage of tax benefits available at that 

time. 

42See Hebert and others, Interim Assessment.

43HUD recommends that businesses contact a tax attorney or certified public accountant 

before claiming these benefits. 

Some Businesses Face 

Obstacles in Using the Tax 

Benefits 
Page 37 GAO-04-306 Community Development 

HUD, USDA, IRS, and HHS have provided outreach for the EZ/EC and RC 

programs through conferences, training, and other resources. HUD and 

USDA have sponsored conferences to educate nominated and designated 

communities on a variety of subjects. HHS has provided information on its 

EZ/EC Web site and has participated in HUD and USDA conferences. Both 

IRS and HUD have made efforts to educate businesses about the tax 

benefits available to them through educational workshops. HUD sponsors 

satellite broadcasts on a semiannual basis on issues pertaining to 

performance, tax benefits, availability of funds, regulatory changes, and 

other issues. To aid in the designees’ outreach to businesses, HUD has 

provided communities with lists of local businesses. 

The agencies have also provided technical assistance through a variety of 

means, including Web sites, published guidance, and desk officers. HUD, 

USDA, and HHS each have Web sites dedicated to the programs that 

include links to resources, such as relevant audit guidance, best practices 

from designated communities, and online training materials. HUD also 

provides an EZ/EC/RC address locator on its Web site that enables 

taxpayers to determine whether businesses or employees are located 

within a zone and therefore eligible for tax benefits. USDA worked with 

HUD to ensure that their rural EZs and ECs were included in this tool. In 

addition, HUD, IRS, USDA, and HHS have provided guidance to designated 

zones, community groups, and businesses about available benefits.44 HUD 

and USDA have also prepared application guides that explain the 

application process and benefits of designation. HUD and USDA have each 

published strategic planning guidebooks to help communities through the 

required strategic planning process, as well as guidebooks on program 

implementation and benchmarking.45 HUD and USDA also have a group of 

desk and field officers available to respond to community inquiries about 

the program. 

 44IRS is currently preparing guidance for professional tax preparers. 

45As used by HUD and USDA, “benchmarking” refers to specific tasks and timetables 

necessary to implement the strategic plan. 

Participating Federal 

Agencies Have Conducted 

Outreach and Provided 

Technical Assistance 
Page 38 GAO-04-306 Community Development 

HUD and USDA are responsible for overseeing the progress of the urban 

and rural EZs and ECs, and HUD is responsible for overseeing the 

progress of the RCs.46 The legislated role of HUD and USDA in both the 

EZ/EC and RC programs is to ensure that a community (1) does not 

modify the boundaries of the designated area and (2) is complying with or 

making progress toward the benchmarks of the EZ’s or EC’s strategic plan 

or, in the case of HUD, the RC’s course of action and economic growth 

promotion requirements. HUD or USDA can revoke a community’s 

designation if either of these two provisions is not met. 

To implement their oversight responsibility for the EZ/EC program, HUD 

and USDA rely on Memorandums of Agreement, benchmark tracking, and 

annual progress reports. The Memorandum of Agreement that is signed by 

the state and local governments and HUD or USDA states the 

responsibilities of the parties for compliance with federal requirements.47

HUD and USDA require designees to report annually on the steps they 

have taken in conjunction with their strategic plans. RC designees do not 

sign Memorandums of Agreement but do have to certify that they will take 

certain actions as part of the course of action and economic growth 

promotion requirements submitted with the application. 

HUD and USDA make determinations as to the progress of the EZs or ECs 

in implementing their strategic plans and, when necessary, send warning 

letters to the designated communities based on data reported in the 

performance management systems. In 1997, HUD issued warning letters to 

five EZs and ECs. These warning letters ultimately did not result in any dedesignations. As of late 2003, USDA has not sent warning letters to any 

rural EZs or ECs. 

Beginning with the Round II designations in 1998, HUD and USDA began 

using Internet-based performance management systems—the Performance 

Management System and the Benchmark Management System, 

respectively—to track the communities’ performance. These systems 

allow each community to enter baseline and benchmark data on funding 

and results. Although designated communities update the systems 

 46HHS administers the use of Round I EZ/EC Social Services Block Grants. As set out in its 

regulations covering block grants, HHS provides maximum fiscal and administrative 

discretion to the states and relies fully on state laws and procedures. 

47HHS also signs grant agreements with the recipients of Round I block grant funds. 

Participating Federal 

Agencies Have Developed 

Oversight Procedures 

HUD and USDA Have Set Up 

Systems for Reporting 

Performance Data 
Page 39 GAO-04-306 Community Development 

constantly, an annual reporting deadline exists to provide a firm date at 

which a community should have all of its information up to date. 

HUD’s Round III EZ and RC annual reporting requirements are less 

stringent than those of prior rounds. Since Round III urban EZs and RCs 

do not receive grant funds, HUD officials do not expect Round III EZs to 

have as many projects as Round II EZs to include in their annual reporting. 

The RCs use a much simpler report template that includes sections on 

required goals and actions, economic growth promotion requirements, tax 

incentive utilization, and other accomplishments. HUD officials have also 

said that the use of tax benefits in the Round III EZ and RC programs 

makes it difficult to design and execute a way of tracking the programs. 

HUD is exploring the idea of developing a data collection method on the 

use of the tax benefits. This data collection effort would require approval 

from the Office of Management and Budget. HUD officials noted that one 

concern in developing a data collection procedure is that potentially the 

additional paperwork burden could discourage businesses from using the 

benefits. USDA has the same reporting requirements for Round III EZs as 

it does for Rounds I and II. 

To assess the reliability of the performance data, field staff from HUD and 

USDA verify some of the community-reported data in the performance 

management systems. As part of its oversight role, HUD also provides field 

offices with a grant monitoring checklist, that requires determining 

whether (1) the documentation matches the information in the 

performance management system, (2) spending is reasonable in relation to 

progress, (3) the program and funds serve eligible purposes, (4) the 

activity took place within the EZ, (5) the resident benefit data are 

accurate, and (6) the EZ has appropriate accounting records and 

procedures. USDA state field staff check the reliability of the data entered 

by communities, and headquarters staff check for inconsistencies and 

outliers. In addition, every 2 years USDA has a “Management Control 

Review,” in which headquarters staff verify the accuracy of the state-level 

reviews. 

In our previous reports, we found weaknesses in program oversight. In 

1996, we reported that HUD and the EZs had not yet (1) described 

measurable outcomes for the program’s key principles or (2) indicated 

how the outputs anticipated from one or more benchmarks would help to 

Recent Audits Have Raised 

Some Concerns About EZ/EC 

Program Oversight and Data 

Reliability 
Page 40 GAO-04-306 Community Development 

achieve those outcomes.48 A HUD official reported that the agency 

implemented its Internet-based performance measurement system in 

response to a recommendation contained in our report. In 1997, we 

reported that rural EZ/ECs were not consistently reporting their progress 

to USDA and that USDA’s EZ/EC state coordinators were not providing 

systematic reporting on the progress of rural EZ/ECs.49 In response, USDA 

officials told us that they addressed this deficiency by adopting a 

nationwide community development field training program. 

Both HUD’s and USDA’s IGs have raised concerns about the accuracy of 

the performance management systems and the adequacy of EZ/EC 

program oversight. For example, in a 2003 audit the HUD IG found that 

some Round II activities were benefiting people who did not live in the 

zones. They also found that 76 percent of the activities in the performance 

management system selected for their audit contained inaccurate data.50

HUD noted in response that it had developed revised monitoring 

procedures and that it was developing regulations to clarify the 

requirements for resident benefits. During audits it conducted in 1999 and 

2001, USDA’s IG found that data pertaining to a Round I rural EZ and a 

Round II rural EC were not accurate or had not been updated as required. 

In response to the 2001 audit, USDA officials stated that the agency would 

initiate immediate actions to increase training efforts to community 

personnel in the areas of reporting, using the performance management 

system, maintaining proper accountability, and preparing annual 

budgetary reports. In another 2001 audit, which focused on one EZ, the 

USDA IG found that USDA staff had not looked at the performance and 

progress of any EZ-funded projects and provided little oversight of how 

the EZ used program funds. In addition, the audit noted that one funded 

project was located outside of the EZ and did not serve the required 

number of EZ residents. In response to the audit, USDA stated that the EZ 

tracking system would be amended to ensure that residents within the EZ 

were benefiting from EZ services but that the EZ was authorized to waive 

the resident benefit requirement if the project was deemed important to 

the community. USDA officials informed us that limited resources 

 48U.S. General Accounting Office, Community Development: Status of Urban 

Empowerment Zones, GAO/RCED-97-21 (Washington, D.C.: December 20, 1996). 

49U.S. General Accounting Office, Rural Development: New Approach to Empowering 

Communities Needs Refinement, GAO/RCED-97-75 (Washington, D.C.: March 31, 1997). 

50HUD IG’s sample was not randomly selected, but was based on the projects’ reported 

expenditures. 
Page 41 GAO-04-306 Community Development 

prevented the agency from performing a 100-percent verification of data 

contained in the performance management system. 

The few evaluations that have systematically collected and analyzed data 

on the effectiveness of the EZ/EC program involved a variety of research 

methods and reported results that varied depending upon the aspect of the 

program studied.51 In some cases, the methods researchers used depended 

on the data available to them. The most comprehensive of these 

evaluations—the HUD Interim Assessment—found, among other things, 

that employment of Round I EZ residents had increased from 1995 to 2000, 

that larger businesses were more likely to use tax benefits than smaller 

businesses, and that resident participation in EZ or EC governance had 

been uneven.52 As with all evaluations of community development 

programs, these evaluations were also subject to some limitations. In 

particular, the researchers faced challenges demonstrating what would 

have happened in the communities in the absence of the program.53

Although 10 years have passed since the first round of communities were 

designated, we found only 11 evaluations that systematically collected and 

analyzed data on EZ/EC program effectiveness.54 We found that none of 

these evaluations had assessed the effect of the EZ/EC program on 

poverty, one had assessed the effects of the EZ/EC program on resident 

employment, and three had assessed the effects of the EZ/EC program on 

aspects of economic growth in the distressed communities. Further, most 

of the evaluations examined the first few years of implementation by 

Round I designees. We found only one evaluation that assessed the 

effectiveness of Round II EZ/EC designees and no evaluations of the 

 51None of the evaluations we reviewed analyzed the RC program. 

52See Hebert and others, Interim Assessment. 

53This research challenge is often referred to as testing for the counterfactual. 

54We reviewed more than 1,100 article and report abstracts to identify outcomes-focused 

evaluations of the federal EZ/EC and RC programs. We included evaluations that met the 

following criteria: (1) they focused on the federal EZ/EC or RC program; (2) they were 

research evaluations that systematically collected and analyzed empirical data (as opposed 

to reports of Best Practices/Lessons Learned or policy discussions of the program); and 

either (3) they evaluated the program in terms of its effect on poverty, unemployment, 

and/or economic growth consistent with our congressional mandate; or (4) they evaluated 

the program’s effectiveness in any of the other program goal areas. 

Among the Few 

EZ/EC Evaluations 

That Have Been 

Conducted, Research 

Methods and Results 

Have Varied 

Relatively Few Evaluations 

Have Been Conducted on 

the EZ/EC Program 
Page 42 GAO-04-306 Community Development 

Round III EZs. In addition, we found that nine evaluations had assessed 

the implementation of the EZ/EC program’s community participation and 

governance processes. Only the HUD Interim Assessment attempted to 

assess on a national scale the effect of the early stages of Round I EZ/EC 

implementation on unemployment and aspects of economic growth. 

Although USDA, IRS, and HHS each published studies of some aspect of 

the Round I EZ/EC designees, we did not find that these agencies had 

sponsored or conducted a comparable evaluation. A summary of the 11 

evaluations we reviewed, listing the purpose and scope, primary research 

methods and data sources, major findings, and major limitations, appears 

in appendix VI. 

Quantitative research methods were generally used to assess the 

effectiveness of the EZ/EC program in increasing employment and 

promoting economic growth, while qualitative research methods were 

generally used to determine the program’s effectiveness in incorporating 

community participation and developing governance structures.55

Statistical analysis of survey data and existing data (e.g., census data) 

were the most common research methods used to assess the effect of the 

EZ/EC program on employment and economic growth. Document reviews, 

interviews, and comparative analysis were the most frequent type of 

methods used to examine site governance structures and community 

participation. When multiple program objectives were evaluated, 

researchers generally used both quantitative and qualitative methods. For 

example, the HUD Interim Assessment used multiple methods and 

analytical approaches, such as regression analysis, surveys, and document 

reviews, to assess the effectiveness of the federal EZ/EC program in the 

first 5 years after the first round of EZ/EC designation.56

In some instances, neither qualitative nor quantitative data were available, 

requiring researchers to collect original data. For example, because IRS 

data on tax benefits cannot be reliably linked to individual designated 

communities, some researchers were required to collect data on tax usage 

through qualitative methods. According to a HUD official, the HUD Interim 

Assessment relied on commercial data and surveys to collect information 

 55Quantitative methods are methods of analysis that use data in the form of numbers. 

Qualitative methods analyze data in the form of words. 

56Regression analysis is a method for determining the association between a dependent 

variable and one or more independent variables. 

A Variety of Methods Have 

Been Used to Evaluate EZs 

and ECs 
Page 43 GAO-04-306 Community Development 

on the use of the EZ Employment Credit, because existing IRS data could 

not be attributed to individual EZs. He added that without the ability to 

attribute the credits to particular EZs, researchers cannot establish the 

connection between the businesses’ use of the employment credit and 

observable changes in the EZ communities. Some evaluations, such as the 

HUD Interim Assessment and our 1998 report, also used surveys of 

business owners to assess their attitudes toward the tax benefits and to 

gauge the potential influence of the tax benefits on businesses.57 To collect 

qualitative information on the strategic planning process or community 

participation, researchers reviewed documents and conducted interviews. 

Lastly, several evaluations reported results from agency performance data 

on the EZ/EC program; however, both the HUD IG and USDA IG reported 

concerns about the reliability of these data. 

The HUD Interim Assessment found that resident employment within five 

of the six Round I EZs had generally increased between 1995 and 2000.58

Researchers also found that the employment of residents of four of the six 

EZs had grown faster than in similar neighborhoods. In addition, these 

researchers found that EZ residents owned an increasing number of the 

EZ businesses and that these businesses were more likely to hire other EZ 

residents. 

Several evaluations reported factors that affected economic growth.59 For 

example, the HUD Interim Assessment found that a variety of factors 

influenced the success of businesses (one measure of economic growth) in 

a designated community, with the central location of zones in their 

metropolitan areas cited as a positive influence and crime and poor public 

safety cited as the worst problems. In addition, GAO and the HUD Interim 

Assessment found that larger businesses were more likely to use available 

tax benefits than smaller businesses. 

Results of some evaluations concluded that citizen participation and 

influence were greatest during the planning phase of the EZ/EC initiative 

 57Hebert and others, Interim Assessment; GAO/RCED-99-253. 

58Hebert and others, Interim Assessment.

59Hebert and others, Interim Assessment; GAO/RCED-99-253; Richard P. Nathan and 

others, Investing in a New Future: Special Report on Community Development 

Financing in Selected Empowerment Zone/Enterprise Community Sites (Albany, NY: 

The Nelson A. Rockefeller Institute of Government, 1997). 

Early Evaluations 

Reported A Variety of 

Findings 
Page 44 GAO-04-306 Community Development 

and tapered off as the initiative moved into the implementation phase.60

Researchers suggested that the decline in citizen participation might have 

occurred for several reasons, including a lack of federal supervision during 

implementation, the difficulty of implementing projects in reasonable time 

frames, and the technical nature of implementation activities, such as 

benchmarking reports.61 Two evaluations concluded that citizen 

participation in the EZ/EC program was higher than participation in 

similar types of federal initiatives.62 However, the HUD Interim Assessment 

found that local attention to resident participation in zone governance has 

been uneven. 

The findings of these evaluations provide valuable descriptions of the 

early progress of Round I EZ/ECs. However, because of the difficulty of 

proving what would have happened in the absence of the program, these 

evaluations cannot be used to conclude that the program actually caused 

the observed changes. For example, the evaluations found that resident 

employment levels had increased, but it is possible that factors other than 

EZ/EC designation and the program benefits influenced employment 

levels. Although the HUD Interim Assessment attempted to control for 

these other factors by comparing EZ/EC employment to employment in 

both adjacent and nonadjacent comparison neighborhoods, the authors 

could not say conclusively what the employment levels in the zones might 

have been if these areas had not been designated as EZs or ECs. If, for 

example, the communities selected for the EZ/EC program were those 

with the most potential for development from among the eligible areas 

within a city, it is possible that these analyses overstated the program 

effects. 

 60Robert J. Chaskin and Clark M. Peters, Governance in Empowerment Zone 

Communities: A Preliminary Examination of Governance in Fifteen Empowerment 

Zone Communities (Chicago, IL: University of Chicago, Chapin Hall Center for Children, 

1997); Marilyn Gittell, Kathe Newman, and Francois Pierre-Louis, Empowerment Zones: An 

Opportunity Missed: A Six City Comparative Study (New York, NY: The City University 

of New York, The Howard Samuels State Management and Policy Center, 2001); Nathan, 

and others, Empowerment Zone Initiative: Building a Community Plan for Strategic 

Change (Albany, NY: The Nelson A. Rockefeller Institute of Government, 1997). 

61Gittell, Newman, Pierre-Louis, Empowerment Zones; Chaskin and Peters, Governance in 

Empowerment Zone Communities; Nathan and others, Empowerment Zone Initiative.

62Nathan and others, Empowerment Zone Initiative; Fahui Wang and Joseph A. Van Loo, 

“Citizen Participation in the North Delta Mississippi Community Development Block 

Grants, Empowerment Zones and Enterprise Communities,” Planning Practice and 

Research 13, no. 4 (1998), pp. 443-51. 

Evaluations of EZs and 

ECs Were Subject to Some 

Limitations 
Page 45 GAO-04-306 Community Development 

Many evaluations were unable to make generalizations about all EZ/ECs 

because their conclusions were limited to the specific communities that 

they studied. For example, the large number of EC sites makes it relatively 

difficult to fully investigate the effectiveness of programs in all sites. 

Authors of the HUD Interim Assessment and others have noted that 

creating an evaluation of the EZ/EC program and its four principles is 

difficult, because the program is based on the idea that effective 

community revitalization occurs when the strategy is tailored to the local 

site.63 This type of program requires an evaluation design, such as a case 

study, that is able to capture changes that result from each site’s specific 

strategic plan, but generalizing the results of such evaluations to a larger 

population may not be possible. For example, the diverse nature of the 

Round I EZ/ECs—in which each EZ/EC may differ in terms of objective, 

size of the targeted areas, type of designation, governance structure, 

projects used, and strategies for implementation—made it difficult for 

researchers to generate general conclusions for the early stages of Round I 

implementation. 

HUD, USDA, HHS, and IRS have implemented the EZ/EC and RC 

programs. As part of the implementation, HUD and USDA expect 

designated communities to report on how program benefits are being 

used, both directly and as a method of attracting additional resources. 

However, because of the limited amount of data on the use of EZ and RC 

tax benefits—which the Joint Committee on Taxation estimates will 

reduce federal tax revenue by about $11 billion between 2001 and 2010—

EZs and RCs cannot reliably report on their use by local businesses. In 

addition, Congress has requested that we audit and evaluate the programs. 

Acquiring additional data that can attribute the use of the tax benefits to 

particular EZs and RCs would provide information to facilitate an audit of 

these programs. Also, additional tax data would be necessary to evaluate 

certain aspects of the programs, such as the use of the tax benefits. While 

it is difficult to isolate the effects of these programs on improving 

conditions in distressed communities, without the ability to attribute the 

tax benefits to particular EZs and RCs, researchers cannot begin to 

establish the connection between the businesses’ use of the tax benefits 

and observable changes in the communities. Such data could potentially 

 63Hebert and others, Interim Assessment; N. T. Jenkins and M. I. J. Bennett, “Toward an 

Empowerment Zone Evaluation,” Economic Development Quarterly 13, no. 1(1999), pp. 23-

28. 

Conclusions 
Page 46 GAO-04-306 Community Development 

come from a variety of sources, including IRS forms, surveys of 

businesses, or commercial databases. 

To facilitate the administration, audit, and evaluation of the EZ/EC and RC 

programs, we recommend that HUD, USDA, and IRS collaborate to (1) 

identify the data needed to assess the use of the tax benefits and the 

various means of collecting such data; (2) determine the cost-effectiveness 

of collecting these data, including the potential impact on taxpayers and 

other program participants; (3) document the findings of their analysis; 

and, if necessary, (4) seek the authority to collect the data, if a costeffective means is available. 

We provided copies of a draft of this report for review and comment to 

HUD, IRS, USDA, and HHS. These agencies’ written replies are reproduced 

in appendixes VII through X, respectively. HUD and IRS agreed with the 

report’s descriptions of the EZ/EC and RC programs as well as the 

recommendation. HUD generally agreed with our descriptions of the 

features of the EZ/EC and RC programs, and the status of their 

implementation at the national level. IRS stated that the data they provided 

us on the tax benefits available to businesses operating in EZs, ECs, and 

RCs were accurately reflected in our report. USDA raised several concerns 

about our discussion of the EZ/EC program. In particular, the Acting 

Under Secretary for Rural Development stated that our focus on grants 

and tax incentives neglected the broader purpose of empowering 

impoverished communities to plan for and achieve their own goals 

through “holistic means.” HHS’s Administration for Children and Families 

had no comments. HUD, IRS, and USDA also provided technical 

comments, which we have incorporated into this report where 

appropriate. 

According to HUD’s Deputy Assistant Secretary for Economic 

Development, HUD agrees with the report’s recommendation that HUD, 

USDA, and IRS collaborate to examine options for collecting data on the 

use of tax benefits available to businesses operating in EZs, ECs, and RCs. 

He noted that HUD concurs with the report’s findings, including the 

finding that data on the use of the tax benefits is limited at this time, and 

added that HUD is currently developing a strategy to use available federal 

agency resources to develop the data needed to assess the use of the 

EZ/EC and RC tax incentives. In addition, he noted that IRS had assisted 

HUD in answering technical questions and participating in HUD training 

conferences and workshops. He stated that HUD would continue its 

Recommendation 

Agency Comments 
Page 47 GAO-04-306 Community Development 

efforts to work with IRS to gather the data needed to measure businesses’ 

use of tax benefits in designated communities. In response to findings 

from its Office of Inspector General, HUD’s Deputy Assistant Secretary 

indicated that HUD was taking action to improve program oversight, 

including developing guidance on eligible uses of EZ funds and 

instructions for reporting on the progress of EZ activities. 

The Commissioner of Internal Revenue agreed with our recommendation 

to work with HUD and USDA to identify the data needed to assess the use 

of the tax benefits and the costs of collecting that data. 

The Acting Under Secretary of Rural Development for USDA raised a 

number of concerns with our discussion of the EZ/EC program. While he 

indicated that USDA welcomed the opportunity to collaborate with IRS 

and HUD, he raised concerns that responding to the report’s 

recommendation could stretch the agency’s already scarce resources to 

produce data of possibly marginal utility and potentially invade taxpayers’ 

privacy. We believe that the lack of data on the usage of EZ/EC tax 

benefits limits the ability of USDA and HUD to administer the EZ/EC 

program, and limits the ability of these agencies and others to evaluate 

such programs. We stated in our report that data on the use of the tax 

benefits could come from a variety of sources, such as IRS forms, surveys 

of businesses, or commercial databases. As a result, collecting such 

information may not necessarily have a significant impact on USDA’s 

resources. Moreover, the recommendation calls for HUD, USDA, and IRS 

to determine the cost effectiveness of collecting these data. Any data that 

are collected on the use of the tax benefits should be done according to 

IRS rules for protecting taxpayer privacy. 

In his letter, the Acting Under Secretary also stated that our report 

addresses only two program tools (grants and tax incentives) and, by 

doing so, neglects the broader purpose behind the program of 

“empowering impoverished communities to plan for and achieve their own 

goals through holistic means.” To the contrary, the report describes a 

variety of program features including, but not limited to, grant and tax 

benefits. In particular, the report discusses the programs’ stated goals and 

objectives and the key principles nominated communities were required to 

include in their strategic plans, including the need for community-based 

partnerships that involve all segments of the community. However, 

because the report is largely descriptive, it does not examine the extent to 

which the objectives and purposes of the EZ/EC program have been met. 
Page 48 GAO-04-306 Community Development 

In addition, the USDA Acting Under Secretary indicated that our statement 

that the lack of data on tax benefits is a limiting factor in communities’ 

ability to attract additional resources presumes that these data are the 

only tool that designated communities have to attract additional resources. 

We agree with the Acting Under Secretary’s statement that such data are 

not the only means that communities can use to attract additional 

resources. However, representatives of EZs and RCs we spoke with stated 

that their ability to attract additional resources was limited by not being 

able to report on the extent to which the programs’ tax benefits were 

being used in their communities. 

The Acting Under Secretary also raised concerns about our description of 

the agency’s online performance management system. Our purpose in 

discussing the system was to describe the efforts USDA has made to 

oversee the EZ/EC program. We described the purpose of the system and 

the steps USDA takes to verify data contained in it. We also reported the 

findings of the USDA IG audits concerning the system and actions USDA 

officials reported that the agency had taken in response to the audits. We 

did not use data from the system in our report, nor did we evaluate the 

reliability of the data contained in it. 

Finally, the Acting Under Secretary also noted that our report did not 

include all federal programs that provided benefits to communities 

designated in the EZ/EC program, such as the AmeriCorps program 

benefits that Round I rural EZs and ECs received in the first two years of 

the program. As we reported in appendix V, we found that several federal 

programs offered preferences to applicants located in EZs, ECs, and RCs. 

However, the extent to which these applicants have taken advantage of 

these preferences is not known. 

We are sending copies of this report to the Secretary of Housing and 

Urban Development, the Secretary of Treasury, the Commissioner of the 

Internal Revenue Service, the Secretary of Agriculture, the Secretary of 

Health and Human Services, and other interested Members of Congress. 

We will make copies of this report available to others upon request. In 

addition, this report will be available at no charge on the GAO Web site at 

http://www.gao.gov. 
Page 49 GAO-04-306 Community Development 

Please call me on (202) 512-8678 if you or your staff have any questions 

about this report. Key contributors to this report are listed in appendix XI. 

William Shear 

Director, Financial Markets and 

 Community Investment 
Appendix I: Scope and Methodology 

Page 50 GAO-04-306 Community Development 

The objectives of this study were to describe (1) the features of the 

Empowerment Zone and Enterprise Community (EZ/EC) program and 

Renewal Community (RC) program; (2) the extent to which the programs 

have been implemented; and (3) the methods that have been used and the 

results that have been found in evaluations of the programs’ effectiveness, 

especially on poverty, unemployment, and economic growth in the 

participating communities. While our descriptions included analyses of the 

data that have been and could be used to address these three topics, we 

did not evaluate the effectiveness of the programs or their implementation 

in this report. We addressed the activities of federal programs in both rural 

and urban areas in all three rounds of the EZ/EC program and the RC 

program. 

To describe the features of each round of the program, we relied on a 

review of congressional legislation related to the EZ/EC and RC programs; 

the Department of Housing and Urban Development (HUD), the U.S. 

Department of Agriculture (USDA), and the Department of Health and 

Human Services (HHS) regulations; and HUD, USDA, the Internal Revenue 

Service (IRS), and HHS publications. To supplement our understanding of 

these documents, we interviewed a number of program officials at these 

agencies. We put the available program data and descriptions into data 

matrices and spreadsheets in order to summarize, compare, and contrast 

the features of the program in each of the rounds. 

To describe the implementation of the programs at the national level, we 

relied on reviews of legislation, regulations, program publications, Web 

sites, and existing Inspector General (IG) studies and interviews with 

program officials and other area experts. We analyzed 1990 census data to 

report on some characteristics of the designated communities. We also 

obtained and analyzed data from HUD, USDA, HHS, and IRS on the 

utilization of grants, tax benefits, and loan guarantees. To assess the data’s 

reliability, we searched for missing data and values outside an expected 

range and assessed the relationship of data elements to each other. As 

appropriate, we analyzed a sample of some financial data to confirm their 

reliability by comparing the agencies’ financial data with original source 

documents. We interviewed knowledgeable agency officials from IGs’ 

offices, divisions of payment management, and program offices regarding 

the work they had done to assess the data’s integrity and the results of that 

work. We determined that the data were sufficiently reliable for use in this 

report. This report does not include data from HUD’s or USDA’s 

performance management systems. 

Appendix I: Scope and Methodology 
Appendix I: Scope and Methodology 

Page 51 GAO-04-306 Community Development 

To determine the average characteristics of designated communities, we 

used data from the 1990 census. Because census estimates of poverty and 

unemployment rates for EZs, ECs, and RCs are estimates based on 

probability samples, each estimate is based on just one of a large number 

of samples that could have been drawn. Since each sample could have 

produced different estimates, we express our confidence in the precision 

of our particular sample’s results as a 95 percent confidence interval. For 

example, the estimated poverty rate is 45.23 percent for urban Round I EZ 

communities, and the 95 percent confidence interval for this estimate 

ranges from 44.86 to 45.59 percent. This is the interval that would contain 

the actual population value for 95 percent of the samples that could have 

been drawn. As a result, we are 95 percent confident that each of the 

confidence intervals in this report will include the true values in the study 

population. All poverty and unemployment percentage estimates have 95 

percent confidence intervals of plus or minus 1.2 percentage points or less, 

as summarized in table 11. 

Table 11: Variation in Census Statistics for EZs, ECs, and RCs 

 95 percent confidence 

interval 

Description Communities Estimate From To 

Percent in poverty 

Round I EZ Urban 45.23% 44.86% 45.59% 

 Rural 44.75% 43.70% 45.80% 

Round II EZ Urban 42.84% 42.42% 43.27% 

 Rural 35.60% 34.57% 36.64% 

Round III EZ Urban 42.92% 42.37% 43.48% 

 Rural 31.02% 29.83% 32.20% 

Round I EC Urban 41.12% 40.92% 41.33% 

 Rural 35.79% 35.40% 36.17% 

Round II EC Rural 37.67% 37.15% 38.20% 

RC Urban 41.33% 41.10% 41.57% 

 Rural 38.23% 37.89% 38.57% 

Percent unemployed 

Round I EZ Urban 20.75% 20.37% 21.12% 

 Rural 13.05% 12.22% 13.88% 

Round II EZ Urban 15.40% 15.04% 15.76% 

 Rural 12.26% 11.46% 13.07% 

Round III EZ Urban 15.36% 14.87% 15.84% 
Appendix I: Scope and Methodology 

Page 52 GAO-04-306 Community Development 

 95 percent confidence 

interval 

Description Communities Estimate From To 

 Rural 13.37% 12.41% 14.33% 

Round I EC Urban 15.73% 15.55% 15.91% 

 Rural 13.12% 12.80% 13.43% 

Round II EC Rural 15.39% 14.94% 15.84% 

RC Urban 18.62% 18.39% 18.84% 

 Rural 13.57% 13.29% 13.85% 

Source: GAO analysis of HUD, USDA, and Census data. 

In addition to sampling errors, census data (both sampled and 100 percent 

data) are subject to nonsampling errors, which may occur during the 

operations used to collect and process census data. Examples of 

nonsampling errors are not enumerating every housing unit or person in 

the sample, failing to obtain all required information from a respondent, 

obtaining incorrect information, and recording information incorrectly. 

Operations such as field review of enumerators’ work, clerical handling of 

questionnaires, and electronic processing of questionnaires also may 

introduce nonsampling errors in the data. The Census Bureau discusses 

sources of nonsampling errors and attempts to control them in detail. 

To address businesses’ use of the EZ Employment Credit, we obtained 

information from IRS’s Statistics of Income databases of corporate and 

individual tax returns for 1995 through 2001. Although there were some 

data available for 1994, we excluded it from our analysis because the 

sample was based on a small number of returns in this year and yielded 

unreliable confidence intervals. All reported individual return statistics 

and the corporate return statistics for years 1995 to 1997 and 2001 are 

estimates based on probability samples. Using IRS’s Statistics of Income 

Division sampling weights, we estimated confidence intervals for the 

estimated number and amount of total credits. These estimates and their 

confidence intervals are summarized in table 12. 
Appendix I: Scope and Methodology 

Page 53 GAO-04-306 Community Development 

Table 12: Confidence Intervals for EZ Employment Credit Estimates 

 95 percent confidence interval 

Description Year Estimate From To 

Corporate returns 

Number of returns claiming the EZ 

Employment Credit 

 1995 193 88 366 

 1996 464 176 989 

 1997 630 409 927 

 1998 402 a a 

 1999 420 a a 

 2000 479 a a 

 2001 559 555 562 

Amount claimed in EZ Employment Credit 

 1995 $7,409,228 $3,574,947 $11,243,510 

 1996 $9,382,387 $6,612,327 $12,152,448 

 1997 $13,222,819 $10,432,042 $16,013,595 

 1998 $19,117,527 a a 

 1999 $21,645,271 a a 

 2000 $23,527,478 a a 

 2001 $23,401,274 $23,037,765 $23,764,782 

Individual returns 

Number of returns claiming the EZ 

Employment Credit

 

 1995 239 126 412 

 1996 460 176 975 

 1997 686 291 1,368 

 1998 3,100 1,904 4,698 

 1999 4,752 3,571 6,199 

 2000 5,074 3,744 6,722 

 2001 6,745 5,199 8,606 

Amount claimed in EZ Employment Credit 

 1995 $8,497,429 $3,142,915 $13,851,942 

 1996 $10,810,233 $1,901,366 $19,719,099 

 1997 $19,090,668 $5,670,794 $32,510,542 

 1998 $22,088,019 $10,360,890 $33,815,148 

 1999 $26,728,435 $14,596,766 $38,860,105 

 2000 $21,948,244 $12,826,922 $31,069,565 
Appendix I: Scope and Methodology 

Page 54 GAO-04-306 Community Development 

 95 percent confidence interval 

Description Year Estimate From To 

 2001 $24,274,141 $17,115,109 $31,433,173 

Source: GAO analysis of IRS data. 

a

These data do not require confidence intervals because the total amounts are based on the 

population of tax returns. 

To identify the methods that have been used and the results that have been 

found in assessments of the effectiveness of the EZ/EC and RC programs, 

we conducted searches of the literature and interviewed agency personnel 

and community development experts. We reviewed more than 1,100 article 

and report abstracts to identify outcomes-focused evaluations of the 

federal EZ/EC and RC programs. We included evaluations that met the 

following criteria: (1) they focused on the federal EZ/EC or RC program; 

(2) they were research evaluations that systematically collected and 

analyzed empirical data (as opposed to reports of Best Practices/Lessons 

Learned or policy discussions of the program); and either (3) they 

evaluated the program in terms of its effect on poverty, unemployment, 

and/or economic growth consistent with our congressional mandate; or 

(4) they evaluated the program’s effectiveness in any of the other program 

goal areas. The remaining 11 evaluations, on which we focused our work, 

were program evaluations or described the process of implementation that 

affected how the program operated. 

We conducted our work in Washington, D.C., from April 2003 through 

February 2004 in accordance with generally accepted government auditing 

standards. 
Appendix II: List of Designated Communities 

Page 55 GAO-04-306 Community Development 

To date, Congress has authorized the designation of three rounds of EZs, 

two rounds of ECs, and one round of RCs. In addition, at the same time 

that HUD and USDA announced the Round I designations, HUD created 

two additional designations—Supplemental Empowerment Zones and 

Enhanced Enterprise Communities. See table 13 for a complete list of 

designated communities. 

Table 13: List of Designated Communities 

Round I Urban EZs (6) 

Atlanta, Georgiaa

Baltimore, Maryland 

Chicago, Illinois 

Detroit, Michigan 

New York, New York 

Philadelphia, Pennsylvania/Camden, New Jersey 

Round I Rural EZs (3) 

Kentucky Highlands, Kentucky 

Mid-Delta, Mississippi 

Rio Grande Valley, Texas 

Round I Urban ECs (65) 

Akron, Ohio 

Albany, Georgia 

Albany/Schenectadya

/Troy, New York 

Albuquerque, New Mexico 

Birmingham, Alabama 

Boston, Massachusetts 

Bridgeport, Connecticut

Buffalo, New Yorka

Burlington, Vermonta

Charleston, South Carolinaa

Charlotte, North Carolina 

Cleveland, Ohio 

Columbus, Ohio 

Dallas, Texas 

Denver, Colorado 

Des Moines, Iowa 

East St. Louis, Illinois 

El Paso, Texas 

Flint, Michigan 

Appendix II: List of Designated Communities 
Appendix II: List of Designated Communities 

Page 56 GAO-04-306 Community Development 

Harrisburg, Pennsylvania 

Houston, Texas 

Huntington, West Virginia 

Indianapolis, Indiana 

Jackson, Mississippi 

Kansas City, Missouri/Kansas City, Kansas 

Las Vegas, Nevada 

Little Rock/Pulaski, Arkansas 

Los Angeles, Californiaa

Louisville, Kentucky 

Lowell, Massachusetts 

Manchester, New Hampshire 

Memphis, Tennesseea

Miami/Dade County, Florida 

Milwaukee, Wisconsina

Minneapolis, Minnesota 

Muskegon, Michigan 

Nashville/Davidson, Tennessee 

New Haven, Connecticut 

New Orleans, Louisianaa

Newark, New Jerseya

Newburgh/Kingston, New York 

Norfolk, Virginia 

Oakland, California 

Ogden, Utah 

Oklahoma City, Oklahoma 

Omaha, Nebraska 

Ouachita Parish, Louisianaa

Phoenix, Arizona 

Pittsburgh, Pennsylvania 

Portland, Oregon 

Providence, Rhode Island 

Rochester, New Yorka

San Antonio, Texas 

San Diego, Californiaa

San Francisco, Californiaa

Seattle, Washington 

Springfield, Illinois 

Springfield, Massachusetts 
Appendix II: List of Designated Communities 

Page 57 GAO-04-306 Community Development 

St. Louis, Missouri 

St. Paul, Minnesota 

Tacoma, Washingtona

Tampa, Florida 

Waco, Texas 

Washington, District of Columbia 

Wilmington, Delaware 

Round I Supplemental Empowerment Zones (2) 

Cleveland, Ohiob, c

Los Angeles, Californiac

Round I Enhanced Enterprise Communities (4) 

Boston, Massachusettsb

Houston, Texasb

Kansas City, Missouri/Kansas City, Kansasb

Oakland, Californiab

Round I Rural ECs (30) 

Accomack and Northampton County, Virginia 

Arizona Border Region, Arizona 

Beadle/Spink Counties, South Dakota 

Central Appalachia, West Virginia 

Central Savannah River Area, Georgia 

Chambers County, Alabama 

City of East Prairie, Missouri 

City of Lock Haven, Pennsylvania 

City of Watsonville, California 

Crisp/Dooly County, Georgia 

East Arkansas, Arkansas 

Fayette/Haywood County, Tennessee 

Greater Portsmouth, Ohio 

Greene-Sumter, Alabamaa

The Halifax/Edgecombe/Wilson Empowerment Alliance, North Carolina 

Imperial County, California 

Jackson County, Florida 

Josephine County, Oregon 

La Jicarita, New Mexico 

Lake County, Michigan 

Lower Yakima County, Washington 

Macon Ridge, Louisianaa

McDowell County, West Virginia 
Appendix II: List of Designated Communities 

Page 58 GAO-04-306 Community Development 

Mississippi County, Arkansas 

North Delta Mississippi, Mississippi 

Northeast Louisiana Delta, Louisiana 

Robeson County, North Carolina 

Scott, Tennessee/McCreary, Kentucky 

Southeast Oklahoma, Oklahoma 

Williamsburg-Lake City, South Carolina 

Round II Urban EZs (15) 

Boston, Massachusetts 

Cincinnati, Ohio 

Columbia/Sumter, South Carolina 

Columbus, Ohio 

Cumberland County, New Jersey 

El Paso, Texas 

Gary/Hammond/East Chicago, Indiana 

Ironton, Ohio/Huntington, West Virginia 

Knoxville, Tennessee 

Miami/Dade County, Florida 

Minneapolis, Minnesota 

New Haven, Connecticut 

Norfolk/Portsmouth, Virginia 

Santa Ana, California 

St. Louis, Missouri/East St. Louis, Illinois 

Round II Rural EZs (5) 

Desert Communities, California 

Griggs-Steele, North Dakota 

Oglala Sioux Tribe, South Dakota 

Southernmost Illinois Delta, Illinois 

Southwest Georgia United, Georgia 

Round II Rural ECs (20) 

Allendale ALIVE, South Carolina 

Bowling Green, Kentucky 

City of Deming, New Mexico 

Clare County, Michigan 

Clinch-Powell, Tennessee 

Empower Lewiston, Maine 

Empowerment Alliance of Southwest Florida, Florida 

Fayette, Pennsylvania 

Five Star, Washington 
Appendix II: List of Designated Communities 

Page 59 GAO-04-306 Community Development 

Fort Peck Assiniboine & Sioux Tribe, Montana 

Four Corners, Arizona 

FUTURO Communities, Texas 

Huron-Tule, Californiaa

Metlakatla Indian Community, Alaska 

Molokai, Hawaii 

Northwoods NiiJii, Wisconsin 

Town of Austin, Indiana 

Tri-County Indian Nations, Oklahoma 

Upper Kanawha, West Virginia 

Wichita County, Kansas 

Round III Urban EZs (8) 

Fresno, California 

Jacksonville, Florida 

Oklahoma City, Oklahoma 

Pulaski County, Arkansas 

San Antonio, Texas 

Syracuse, New York 

Tucson, Arizona 

Yonkers, New York 

Round III Rural EZs (2) 

Aroostook County, Maine 

FUTURO, Texas 

Urban RCs (28) 

Atlanta, Georgia 

Buffalo-Lackawanna, New York 

Camden, New Jersey 

Charleston, South Carolina 

Chattanooga, Tennessee 

Chicago, Illinois 

Corpus Christi, Texas 

Detroit, Michigan 

Flint, Michigan 

Hamilton, Ohio 

Lawrence, Massachusetts 

Los Angeles, California 

Lowell, Massachusetts 

Memphis, Tennessee 

Milwaukee, Wisconsin 
Appendix II: List of Designated Communities 

Page 60 GAO-04-306 Community Development 

Mobile, Alabama 

New Orleans, Louisiana 

Newark, New Jersey 

Niagara Falls, New York 

Ouachita Parish, Louisiana 

Philadelphia, Pennsylvania 

Rochester, New York 

San Diego, California 

San Francisco, California 

Schenectady, New York 

Tacoma, Washington 

Yakima, Washington 

Youngstown, Ohio 

Rural RCs (12) 

Burlington, Vermont 

Central Louisiana, Louisiana 

Eastern Kentucky, Kentucky 

El Paso County, Texas 

Greene-Sumter, Alabama 

Jamestown, New York 

Northern Louisiana, Louisiana 

Orange Cove, California 

Parlier, California 

Southern Alabama, Alabama 

Turtle Mountain Band of Chippewa, North Dakota 

West-Central Mississippi, Mississippi 

Source: HUD and USDA. 

a

Later received RC designation. 

b

During Round I, these communities were also designated as Round I ECs. 

c

These communities received Round I EZ status on January 1, 2000. 
Appendix III: Federal Benefits Available to 

EZs, ECs, and RCs at the Time of Designation 

and as of September 30, 2003 

Page 61 GAO-04-306 Community Development 

The authorizing legislation for the EZ/EC and RC programs provided 

participants with grant and/or tax benefits. A prominent feature of the 

EZ/EC program—the Social Services Block Grant—was only offered to 

Round I EZ and EC participants. However, Round II EZs and ECs received 

grant funds from HUD’s and USDA’s annual appropriations. In addition, 

the number of tax benefits increased over the course of the three rounds 

of the EZ/EC program and was the main benefit available to RCs. (See 

table 14.) 

Table 14: Summary of Benefits Provided to EZs, ECs, and RCs at the Time of Designation and as of September 30, 2003 

 At time of designation As of September 30, 2003b

Round I EZs 

1994 

• EZ/EC Social Services Block Grants 

• EZ Employment Credit 

• Increased Section 179 Deduction 

• Enterprise Zone Facility Bonds 

• Regulatory waiversa

• Preference points for other federal programs 

• Earmarked grants and loans 

• EZ/EC Social Services Block Grants 

• EZ Employment Credit 

• Increased Section 179 Deduction 

• Enterprise Zone Facility Bonds 

• EZ Facility Bonds 

• Nonrecognition of Gains on the Sale of EZ Assets 

• Partial Exclusion of Gain on the Sale of EZ Stock 

• Preference points for other federal programs 

• Earmarked grants and loans 

Round I ECs 

1994 

• EZ/EC Social Services Block Grants 

• Enterprise Zone Facility Bonds 

• Regulatory waiversa

• Preference points for other federal programs 

• Earmarked grants and loans 

• Economic Development Initiative Grants 

(Supplemental Empowerment Zones and Enhanced 

Enterprise Communities) 

• Section 108 Loan Guarantees (Supplemental 

Empowerment Zones and Enhanced Enterprise 

Communities)c

• EZ/EC Social Services Block Grants 

• Enterprise Zone Facility Bonds 

• Preference points for other federal programs 

• Earmarked grants and loans 

• Economic Development Initiative Grants 

(Supplemental Empowerment Zones and Enhanced 

Enterprise Communities) 

• Section 108 Loan Guarantees (Supplemental 

Empowerment Zones and Enhanced Enterprise 

Communities) 

Round II EZs 

1998 

• Increased Section 179 Deduction 

• Enterprise Zone Facility Bonds 

• EZ Facility Bonds 

• Preference points for other federal programs 

• Earmarked grants and loans 

• Annual Appropriations, Fiscal Years 1999-2004 

• EZ Employment Credit 

• Increased Section 179 Deduction 

• Enterprise Zone Facility Bonds 

• EZ Facility Bonds 

• Nonrecognition of Gains on the Sale of EZ Assets 

• Partial Exclusion of Gain on the Sale of EZ Stock 

• Preference points for other federal programs 

• Earmarked grants and loans 

Appendix III: Federal Benefits Available to 

EZs, ECs, and RCs at the Time of Designation 

and as of September 30, 2003 
Appendix III: Federal Benefits Available to 

EZs, ECs, and RCs at the Time of Designation 

and as of September 30, 2003 

Page 62 GAO-04-306 Community Development 

 At time of designation As of September 30, 2003b

Round II ECs 

1998 

• Preference points for other federal programs 

• Earmarked grants and loans 

• Annual Appropriations, Fiscal Years 1999-2004 

• Preference points for other federal programs 

• Earmarked grants and loans 

Round III EZs 

2002 

• EZ Employment Credit 

• Increased Section 179 Deduction 

• Enterprise Zone Facility Bonds 

• EZ Facility Bonds 

• Nonrecognition of Gains on the Sale of EZ Assets 

• Partial Exclusion of Gain on the Sale of EZ Stock 

• Preference points for other federal programs 

• Earmarked grants and loans 

• EZ Employment Credit 

• Increased Section 179 Deduction 

• Enterprise Zone Facility Bonds 

• EZ Facility Bonds 

• Nonrecognition of Gains on the Sale of EZ Assets 

• Partial Exclusion of Gain on the Sale of EZ Stock 

• Preference points for other federal programs 

• Earmarked grants and loans 

• Annual Appropriations, Fiscal Year 2004 (rural only) 

RCs 

2002 

• Increased Section 179 Deduction 

• RC Employment Credit 

• Commercial Revitalization Deduction 

• Zero Percent Capital Gains Rate for RC Assets 

• Preference points for other federal programs 

• Increased Section 179 Deduction 

• RC Employment Credit 

• Commercial Revitalization Deduction 

• Zero Percent Capital Gains Rate for RC Assets 

• Preference points for other federal programs 

Source: GAO summary of HUD and USDA program documents. 

a

Following Round I, the EZ/EC program de-emphasized the waiver feature, but communities could 

still request waivers on a more informal basis. 

b

Some new benefits provided to later rounds of designation were also provided to earlier designees. 

Thus, in some instances, the number of benefits as of September 30, 2003, exceeds the number of 

benefits for which a community was originally eligible. 

c

According to a HUD official, these Section 108 Loan Guarantees were awarded between May and 

July, 1995. 
Appendix IV: Other Tax Benefits Available to 

Businesses Serving Distressed Communities 

and Low-Income Individuals 

Page 63 GAO-04-306 Community Development 

In addition to federal tax benefits that have been specifically available for 

businesses in EZs, ECs, and RCs, taxpayers who engage in business in 

these communities are typically eligible for other federal tax benefits not 

specifically designed for such communities. These benefits include tax 

credits and deductions intended to encourage taxpayers to invest in 

distressed communities, employ low-income people, and provide housing 

for low-income people. (Table 15 provides a list of other federal tax 

benefits intended to assist distressed communities.) 

Table 15: Other Tax Benefits Available to Businesses Serving Distressed Communities and Low-Income Individuals 

Tax benefit 

Effective 

year 

Expiration 

year Provisions 

Low Income Housing Tax 

Credit 

1987 none Owners of newly constructed or renovated rental housing who set aside a 

specified percentage or units for low-income persons for a minimum of 15 

years are eligible for a tax credit over a 10-year period. The taxpayer must 

receive an allocation of these credits from a state agency to qualify. 

Indian Employment Credit 1994 2004 Businesses that hire certain individuals who live on or near an Indian 

reservation may be eligible for a credit of 20 percent on certain wages and 

benefits paid to qualified employees. 

Depreciation of Property 

Used on Indian 

Reservations 

1994 2004 Businesses can use shorter recovery periods to depreciate certain qualified 

property that is used predominantly in the active conduct of a trade or 

business on an Indian reservation. 

Work Opportunity Tax 

Credit 

1996 2003a Businesses can claim up to $2,400 in tax credits for first-year wages paid to 

targeted employees, such as ex-felons, food stamp recipients, and 

employees between 18 and 24 who live in an EZ, EC or RC. 

Environmental Cleanup 

Cost Deduction 

1997 2003 Businesses that clean up certain sites contaminated with hazardous 

substances can deduct their cleanup costs in the year that the businesses 

incur those costs. Businesses may deduct these costs in 1 year instead of 

taking depreciation deductions over a specified period of time. 

Welfare-to-Work Tax 

Credit 

1998 2003a Businesses can claim credits for wages paid to long-term family assistance 

recipients in the first 2 years of employment. The allowable credit limit is 

$3,500 for wages paid in the first year and $5,000 for wages paid in the 

second. 

Qualified Zone Academy 

Bonds 

1998 2003b State and local governments can issue bonds at a zero-percent interest 

rate to finance certain public school programs, such as building renovation, 

teacher training, and educational materials and equipment. Certain 

businesses, such as banks and insurance companies, that purchase these 

bonds are eligible for tax credits equal to the market taxable interest rate in 

lieu of interest payments. Schools that benefit from these bonds must be 

located in an EZ or EC, or have at least 35 percent of their students eligible 

for free or reduced cost lunches. 

New Markets Tax Credit 2001 2007c Investors in qualified Community Development Entities can claim tax 

credits over a 7-year period. The credit is 5 percent in the first 3 years of 

the investment, and 6 percent for the remaining 4 years, for a total of 39 

percent. The Community Development Entitity must receive an allocation of 

credits through the Treasury Department for investors to be eligible. 

Source: GAO summary of HUD and IRS publications; P.L. 99-514, P.L. 103-66, P.L. 104-188, P.L. 105-34, P.L. 106-554, and P.L. 107-147. 

Appendix IV: Other Tax Benefits Available to 

Businesses Serving Distressed Communities 

and Low-Income Individuals 
Appendix IV: Other Tax Benefits Available to 

Businesses Serving Distressed Communities 

and Low-Income Individuals 

Page 64 GAO-04-306 Community Development 

a

Expires for individuals who begin work after December 31, 2003. 

b

No new credits are authorized after 2003. However, unused credits may be carried forward through 

2006. 

c

Congress authorized $15 billion in New Markets Tax Credits and provided a schedule limiting the 

amount of allocations for each calendar year beginning in 2001 through 2007. Congress also allowed 

for a carryover of unused credits to the next calendar year, increasing the amount of credits available 

by that amount; however, no amount may be carried to any calendar year after 2014. 
Appendix V: Other Benefits Available to 

Certain Designees 

Page 65 GAO-04-306 Community Development 

In addition to grants and federal tax benefits, EZs, ECs, and RCs were 

eligible to seek waivers from federal programmatic, statutory, or 

regulatory requirements to facilitate their revitalization efforts. However, 

nominees made limited use of the waiver initiative and, although still 

available to designees, it is no longer considered a primary feature. Also, 

communities designated by HUD as Supplemental Empowerment Zones or 

Enhanced Enterprise Communities were provided with Section 108 Loan 

Guarantees to provide security for loans that finance economic 

development and revitalization projects. Finally, in some cases, EZs, ECs, 

and RCs received a preference in receiving assistance under a variety of 

federal programs. However, the extent to which communities have 

received these preferences is unknown. 

In Round I of the EZ/EC program, both HUD and USDA guidance invited 

nominees to request, as an addendum to their applications, waivers from 

federal programmatic, statutory, or regulatory requirements to facilitate 

their ability to conduct revitalization efforts. This feature was not 

established in the EZ/EC program legislation or regulations; rather, it was 

an administrative initiative. In response to a request, HUD and USDA 

would offer to work with the communities to seek statutory authority for 

broader flexibility of federal programs. For example, nominees could ask 

for exemptions, increased flexibilities, or changes in eligibility 

requirements for other federal programs. 

Available data indicate that Round I designees made limited use of the 

available waivers from programmatic and regulatory requirements to 

facilitate their ability to conduct revitalization efforts. Program officials 

said that many of the nominees requested waivers of statutory 

requirements, which HUD and USDA could not provide. The HUD Interim 

Assessment examined 244 waiver requests made by 18 urban Round I 

EZ/ECs. The HUD Interim Assessment found that the most commonly 

requested waivers included requests such as exemption from Davis-Bacon 

Act requirements; flexibility in using block grant funds; and changes in 

eligibility for federal programs, such as Aid to Families with Dependent 

Children, Food Stamps, and Medicaid. The report found that federal 

agencies fully or partially approved 5 percent of the requests and denied 

33 percent of the requests either because the agencies lacked the authority 

to grant them or for other reasons. In addition, 21 percent of the waiver 

requests asked for flexibilities that already existed, and the remaining 

requests either required more information or the agency reached some 

other disposition. Although USDA officials did not quantify the disposition 

Appendix V: Other Benefits Available to 

Certain Designees 

Round I EZs and ECs Made 

Limited Use of the Waiver 

Initiative 
Appendix V: Other Benefits Available to 

Certain Designees 

Page 66 GAO-04-306 Community Development 

of waiver requests through an independent study, a USDA official 

estimated that fewer than 10 waiver requests had been approved annually. 

Because of the Round I experience, both HUD and USDA de-emphasized 

the waiver initiative. In the application materials for HUD Round II and III, 

and for the RCs, no mention is made of encouraging requests for waivers. 

In the USDA Round II application materials, the waiver request initiative is 

retained, but in the Round III application, no mention is made of the 

opportunity for nominees to request waivers. HUD and USDA officials told 

us that designees could still request waivers, but that there was no longer a 

formal initiative such as was used in Round I. 

After HUD designated the Supplemental Empowerment Zones and 

Enhanced Enterprise Communities in Round I, the agency provided them 

with a total of $653 million in Section 108 Loan Guarantees (See table 16).64

Like the Economic Development Initiative Grants also offered to these 

designees, these loan guarantees are to provide security for loans that 

finance economic development and revitalization projects. A Section 108 

loan guarantee allows local governments to obtain loans for economic 

development projects that (1) benefit low and moderate income families; 

(2) prevent or eliminate slums or blight; or (3) meet other urgent 

community development needs. These loans are secured by a community’s 

current and future Community Development Block Grant allocations for 

up to five years and carry the full faith and credit of the U.S. government in 

the event of a default. This benefit allows a local government entity to 

reduce its borrowing costs. The local government entities can also provide 

additional security for their section 108 loan repayments or enhance the 

feasibility of certain projects by paying directly for certain project 

expenses with its Economic Development Initiative grants. 

 64HUD awarded separate Section 108 Loan Guarantees to overlapping or adjacent 

government entities in the city and county of Los Angeles, California, and in Kansas City, 

Missouri and Kansas City, Kansas. 

HUD Designees Have 

Begun to Use Loan 

Guarantees 
Appendix V: Other Benefits Available to 

Certain Designees 

Page 67 GAO-04-306 Community Development 

Table 16: Section 108 Loan Guarantees for Supplemental Empowerment Zones and 

Enhanced Enterprise Communities 

Local government entity 

Amount in allocated Section 108 Loan 

Guarantees

Supplemental Empowerment Zones 

Los Angeles, Calif. (City) 

Los Angeles, Calif. (County) 

$300 million

$25 million

Cleveland, Ohio $87 million

Enhanced Enterprise Communities 

Boston, Mass. $22 million

Oakland, Calif. $22 million

Houston, Tex. $175 million

Kansas City, Mo. 

Kansas City, Kans. 

$14.2 million

$7.8 million

Total $653 million

Source: HUD. 

As of September 30, 2003, the eight local government entities that received 

Section 108 Loan Guarantees as part of the Supplemental Empowerment 

Zone and Enhanced Enterprise Community designations had used about 

36 percent of the loan guarantees that HUD awarded (see table 17). 

Table 17: Amount of Section 108 Loan Guarantees Awarded and Used as of 

September 30, 2003 (Dollars in thousands) 

Amount 

awarded Amount used % Drawn down 

Supplemental Empowerment Zones $241,000 $86,560 35.9% 

Enhanced Enterprise Communities $412,000 $151,741 36.8% 

Total $653,000 $238,301 36.5% 

Source: GAO analysis of HUD data. 

HUD and USDA expect EZs, ECs, and RCs to use their designations to 

attract additional investment. Businesses and community organizations in 

these communities can seek grants and loans from for-profit corporations, 

nonprofit entities, foundations, state and local governments, and other 

federal agencies. For example, a bank might help capitalize a community 

lending institution or a private foundation might contribute to a 

recreational facility for youths. In some cases, organizations or individuals 

Designees’ Use of 

Competitive Preferences Is 

Unknown 
Appendix V: Other Benefits Available to 

Certain Designees 

Page 68 GAO-04-306 Community Development 

operating or residing in EZs, ECs, or RCs receive competitive priority for 

federal grants, loans, or technical assistance based solely on their EZ, EC, 

or RC designations. HUD and USDA officials said that during Round I of 

the EZ/EC program the Community Empowerment Board encouraged 

federal agencies to provide preferences to applicants from EZs or ECs in 

competition for federal funds. For example, communities designated as 

federal EZs, ECs, or RCs could receive a competitive preference for the 

Environmental Protection Agency’s 2003 National Brownfields 

Assessment, Revolving Loan Fund, and Cleanup Grants.65 In addition, in 

2003, the U.S. Department of Education’s Teacher Quality Enhancement 

Grants program provided a competitive priority to applicants who 

proposed to carry out activities in EZs or ECs.66 In addition, Congress has 

regularly earmarked federal funds, such as grants for low-income housing 

repair or direct loans for rural development projects, to projects located in 

EZs and ECs. 

The extent to which EZs, ECs, and RCs have taken advantage of 

competitive preferences is not known. Although HUD and USDA maintain 

data in their performance management systems on EZs’, ECs’, and RCs’, 

use of other sources of funding, these systems do not differentiate whether 

the funding source included a preference for applicants located in EZs, 

ECs, or RCs. However, officials from HUD and USDA told us that their 

perception was that many federal agencies that provided competitive 

preferences to applicants located in EZ/ECs in Round I no longer offer 

these preferences. For example, one HUD official told us that the 

Department of Justice’s Weed and Seed program, which provides 

assistance to communities for reducing crime and drug abuse and bringing 

in human services, no longer offers bonus points to applicants located in 

EZs, ECs, or RCs. One HUD official noted that the number of preferences 

offered might have decreased because the Community Empowerment 

Board disbanded.

 65This program is intended to help recipients clean up brownfield sites. 

66This program provides grants to promote improvements in the quality of new teachers 

with the ultimate goal of increasing student achievement in the nation’s classrooms. 
Appendix V: Other Benefits Available to 

Certain Designees 

Page 69 GAO-04-306 Community Development 

[This Page Is Intentionally Left Blank] 
Appendix VI: Summary of Evaluations of the 

EZ/EC Program 

Page 70 GAO-04-306 Community Development 

Author/Title Purpose and scope Primary methods and data used 

Aigner, Stephen M., Cornelia B. Flora, 

and Juan M. Hernandez. 

“The Premise and Promise of 

Citizenship and Civil Society for 

Renewing Democracies and 

Empowering Sustainable 

Communities.” 

Sociological Inquiry 71, no. 4 (2001): 

493-507. 

• To investigate the usefulness of 

several concepts (e.g., 

empowerment paradigm, citizen 

participation, and inclusion, civil 

society) in local sites’ ability to 

leverage dollars for sustainable 

development. 

• 33 Round I rural EZ/ECs 

• Collected data through existing data sources (e.g., 

educational and banking administrations) and 

USDA performance management system data 

• Performed descriptive statistical analysis 

Chaskin, Robert J. and Clark M. Peters. 

Governance in Empowerment Zone 

Communities: A Preliminary 

Examination of Governance in Fifteen 

Empowerment Zone Communities. 

Chicago, IL: University of Chicago, 

Chapin Hall Center for Children, 1997. 

• To examine the engagement of 

local actors in a process of 

planning and governance, and 

their place within the broader 

governance structure in the 

EZ/EC program 

• Round I urban, rural, EZs, ECs, 

Supplemental Empowerment 

Zones, and Enhanced Enterprise 

Communities 

• Collected data through open-ended interviews and 

document reviews 

• Prepared case studies 

Community Partnership Center. 

Rural Empowerment Zones/Enterprise 

Communities: Lessons from the 

Learning Initiative. Findings and 

Recommendations of the Community 

Partnership Center EZ/EC Learning 

Initiative. 

Knoxville, TN: Community Partnership 

Center, University of Tennessee, 1998. 

• To assess, primarily from the 

perspective of local residents, 

how effectively the EZ/EC 

Program is carrying out the key 

principles 

• Round I rural EZ and ECs 

• Collected data through participant observation of 

Learning Initiative Team workshops and document 

reviews of 1996 Annual Reports and executive 

summaries 

Gittell, Marilyn, Kathe Newman, and 

Francois Pierre-Louis. 

Empowerment Zones: An Opportunity

Missed: A Six City Comparative Study. 

New York, NY: The City University of 

New York, The Howard Samuels State 

Management and Policy Center, 2001. 

• To determine the extent to which 

the EZ program achieved its 

goal of increased citizen 

participation through community 

organization 

• Round I urban EZs 

• Collected data through open-ended interviews and 

document reviews 

• Prepared case studies 

Gittell, Marilyn, and others. 

“Expanding Civic Opportunity: Urban 

Empowerment Zones.” 

Urban Affairs Review 33, no. 4 (1998): 

530-58. 

• To assess the degree to which 

the participation of communitybased organizations in the EZ 

strategic planning process has 

expanded community capacity 

• Round I urban EZs 

• Collected data through open-ended interviews and 

document reviews 

• Prepared case studies 

Appendix VI: Summary of Evaluations of the 

EZ/EC Program 
Appendix VI: Summary of Evaluations of the 

EZ/EC Program 

Page 71 GAO-04-306 Community Development 

Major findings Major limitations 

• As the percent of individual citizens involved on a governing 

board increased, so did the number of women board members 

(in this study, women served as a proxy for how “inclusive” 

boards were in representing diverse groups). 

• Findings related to dollars leveraged relied heavily on the USDA 

performance management system data. 

• The study findings are not generalizable outside of the 

sample studied. 

• Reviews by USDA’s Inspector General stated that they had 

little confidence in the accuracy of the performance data. 

Therefore, such findings are not reported here. 

• Community participation in governance structures was greater 

during the planning phase than during the implementation 

phase, because of difficulties of implementing projects in 

reasonable time frames. 

• The study examined only the first year of the functioning of 

the EZs. 

• All but one of the rural sites had made progress on at least 

some of their benchmark activities. 

• Citizen participation was identified as the most important aspect 

of the EZ/EC Program; however, recruiting and sustaining 

citizen participation over the long term is an on-going challenge 

in rural communities. 

• Sustained community participation seems to be influenced by 

the capacity of existing community-based organizations. 

• Effective EZ/EC boards are those that represent low-income 

communities and lessen the role of typical political players. 

• Findings are not generalizable to other EZ/EC rural or urban 

sites. 

• Annual report and executive summary data were selfreported and were not independently verified. A lack of 

consistency across sites was observed. 

• Although the EZ program was specifically designed to support 

the participation of local groups, that process was enforced only 

in the initial planning phase of the program. 

• During the implementation of the EZ program in designated 

cities, federal supervision diminished and local elites asserted 

their control. 

• Time frames of the study are not completely clear. 

• Community groups were underrepresented in EZ governance 

structures. 

• One year into the EZ process, there was little evidence that the 

program had contributed significantly to the development of 

community capacity. 

• The study examined only the first year of the functioning of 

the EZs. 
Appendix VI: Summary of Evaluations of the 

EZ/EC Program 

Page 72 GAO-04-306 Community Development 

Author/Title Purpose and scope Primary methods and data used 

Hebert, Scott, and others. 

Interim Assessment of the 

Empowerment Zones and 

Enterprise Communities (EZ/EC) 

Program: A Progress Report. 

Prepared for the U.S. Department 

of Housing and Urban 

Development Washington, D.C.: 

November 2001. 

• To present an initial assessment of how 

the four EZ/EC principles have been 

interpreted and implemented and how the 

application of these principles may be 

contributing to the revitalization of the 

targeted communitiesa

• Round I urban EZ/ECs 

• Acquired commercially provided employment 

data 

• Performed longitudinal analysis of employment 

data during the 5 years before and the 5 years 

after designation 

• Collected data on business employment levels 

and attitudes toward the tax incentives through 

a telephone survey of zone businesses 

• Performed multiple regression models on 

survey data to determine whether use of the 

zone’s financial incentives was associated with 

change in resident employment 

• Collected data using document reviews, openended interviewing, and comparative analysis 

to determine site resident participation in 

program governance, reinvention of 

government, and diversity of partnerships 

• Used agency performance management 

system data 

• Performed descriptive statistical analysis on 

performance data to examine the programs 

and activities that sites used to address 

physical and human development 

Nathan, Richard P., and others. 

Investing in a New Future: Special 

Report on Community 

Development Financing in 

Selected Empowerment 

Zone/Enterprise Community Sites. 

Albany, NY: The Nelson A. 

Rockefeller Institute of 

Government, 1997. 

• To compare commercial and residential 

lending activities and characteristics of 

these lending activities with respect to the 

Metropolitan Statistical Areas where the 

sites are located 

• 18 Round I urban EZs, ECs, Supplemental 

Empowerment Zones, and Enhanced 

Enterprise Communities 

• Used loan data constructed by aggregating 

1995 Home Mortgage Disclosure Act census 

tract-level data into 18 EZ/EC geographic 

areas 

• Conducted and analysis of residential lending 

activities 

• Used Small Business Administration data on 

commercial loans, which were constructed by 

apportioning and summing all the zip-code 

level data into 18 EZ/ECs and their respective 

geographical areas 

• Conducted and analysis of commercial lending 

activities 

• To determine the character of community 

input and governance in EZ/EC-funded 

community development activities 

• 18 Round I urban EZs, ECs, Supplemental 

Empowerment Zones, and Enhanced 

Enterprise Communities 

• Collected data through document reviews 

• Prepared case studies 
Appendix VI: Summary of Evaluations of the 

EZ/EC Program 

Page 73 GAO-04-306 Community Development 

Major findings Major limitations 

• Between 1995 and 2000, employment of EZ residents grew 

faster in zones than in demographically similar neighborhoods in 

four of the six cities and in the six-city total. 

• Larger business establishments reported using tax incentives 

more frequently than smaller businesses. 

• Many small businesses were not aware of the tax incentives. 

• The number of business establishments owned by zone 

residents increased. 

• Both zone-resident owned businesses and small businesses 

located in zones were more likely to hire local zone residents. 

• There was a significant relationship between use of the EZ Wage 

Tax Credit and Section 179 Expensing Provision and the 

percentage change in the number of residents employed. 

• Local attention to building the capacity of zone residents to 

participate in zone governance has been extremely uneven. 

• Residents and community-based organization representatives 

combined constitute typically 50 percent of board memberships.

• Program partnerships took many forms from temporary, looselyorganized associations, to long-term formalized alliances.

• Reported findings on program activities relied entirely on the 

HUD performance management system data. 

• It is not possible to determine whether zone designation 

caused employment rates to increase or whether rates 

increased for other reasons, such as general economic 

conditions or local initiatives. 

• Because of the low response rate, survey responses might 

be biased toward firms that favor the EZ. 

• Because the survey found that most small zone 

businesses were unaware of financial incentives, it is not 

plausible that these businesses could have been motivated 

by the financial incentives of which they were not aware. 

• Findings regarding ECs are based on a nonprobability 

sample and cannot be generalized to ECs that were not 

studied. 

• Particular cases in the analysis are identified as successes 

or failures, but the criteria for determining success or 

failure are not specified. 

• Zone governance was difficult to monitor. 

• Reviews by HUD’s Inspector General stated that they had 

little confidence in the accuracy of the performance data. 

Therefore, such findings are not reported here.

• Home loans, measured as the loan activities per 1000 dwellings, 

were almost half as prevalent in the 18 EZs/ECs as in their 

corresponding Metropolitan Statistical Areas. 

• No discussion of Home Mortgage Disclosure Act reliability 

was included in the report; however, GAO work has found 

these data to be sufficiently reliable for similar purposes.b

• Report findings on commercial lending relied on Small 

Business Administration data, for which there is no 

knowledge about the reliability of the data. Therefore, 

such findings are not reported here. 

• The researchers did not control for other factors influencing 

the differences in lending activities in the 18 EZ/ECs when 

comparing with corresponding Metropolitan Statistical 

Areas. 

• Findings regarding ECs are based on a nonprobability 

sample and cannot be generalized to ECs that were not 

studied. 

• Citizens in most communities were able to play a moderate to 

substantial role in the governance of their community’s EZ/EC 

Initiative.

• In all 18 study cities, citizens had some opportunity to advise 

local EZ/EC governing bodies and community development 

finance entities. 

• Because the study covered only the years 1994-1997, 

insufficient time had passed when the study was published 

to draw definitive conclusions. 
Appendix VI: Summary of Evaluations of the 

EZ/EC Program 

Page 74 GAO-04-306 Community Development 

Author/Title Purpose and scope Primary methods and data used 

(Continued from last page) 

Nathan, Richard P., and others. 

Empowerment Zone Initiative: Building a 

Community Plan for Strategic Change. 

Findings from the First Round 

Assessment of the Empowerment 

Zone/Enterprise Community Initiative. 

Albany, NY: The Nelson A. Rockefeller 

Institute of Government, 1997. 

• To summarize community participation 

in the strategic planning, governance, 

and benchmarking processes for the 

beginning of the program 

• 18 Round I urban EZs, ECs, 

Supplemental Empowerment Zones, and 

Enhanced Enterprise Communities 

• Collected data through document reviews 

of site descriptions of the strategic 

planning 

• Performed a comparative analysis of types 

of program strategies across sites 

Reid, J. Norman and Karen Savoie 

Murray. 

“Empowering Rural Communities: A 

Perspective at the Five-Year Point.” 

Paper presented at the annual meeting 

of the Rural Sociological Society, 

Washington, D.C., August 2000. 

• To make a preliminary exploration of 

performance data on program 

implementation 

• Round I and Round II rural EZ/ECs 

• Collected data through document reviews 

and site visits 

• Used USDA performance data 

• Performed descriptive statistical analysis of 

data 

U.S. General Accounting Office. 

Community Development: Businesses’ 

Use of Empowerment Zone Tax 

Incentives. 

GAO/RCED-99-253, (Washington, D.C.: 

September 30, 1999). 

• To examine the extent to which 

businesses used the program’s three 

initial tax incentives and other tax 

incentives, and determine reasons why 

in some cases the incentives were not 

used 

• Round I urban and rural EZs 

• Surveyed 2,380 businesses located in nine 

federal designated EZs. Surveys were 

mailed to 513 large businesses and 744 

small businesses in urban EZs, and 1,123 

to businesses in rural EZs 

• Analyzed the results of the surveys 

 
Appendix VI: Summary of Evaluations of the 

EZ/EC Program 

Page 75 GAO-04-306 Community Development 

Major findings Major limitations 

• In 11 of the study cities, including all six EZs, citizens were 

provided with some means of citizen participation and 

involvement in the governance of various community 

development initiatives. 

• There were few instances in which zone residents and 

stakeholders actually controlled the allocation of EZ/EC 

resources. 

• The strategic planning process often began as a citygovernment process and evolved into a more communitydirected process headed by steering committees of 20 to100 

members. 

• The most common governance structure was at least 

moderately integrated into the city government and used one 

central structure to oversee the Initiative. 

• Cities with considerable community control over plan 

development tended to have an existing citizen participation 

structure that could be used as a foundation to initiate planning 

efforts. 

• Citizen influence was greatest in determining site strategies and 

program activities. 

• Citizen participation decreased as the initiative moved from 

planning to implementation. 

• Citizen participation was reported to be higher in the EZ/EC 

Initiative than in other similar federal initiatives. 

• Most cities did not have grassroots participation. 

• Community participation was greater in the early phases of the 

benchmarking process. 

• Findings regarding ECs are based on a nonprobability sample 

and cannot be generalized to ECs that were not studied. 

• Local sites provided self-reported data to the authors, which 

were not independently verified. 

• Reported findings relied heavily on the USDA performance 

management system data. 

• Reviews by USDA’s Inspector General stated that they had 

little confidence in the accuracy of the performance data. 

Therefore, such findings are not reported here. 

• The employment credit was the most frequently used tax 

incentive, especially by the larger businesses. 

• Businesses that used the employment credit cited it as 

somewhat important in their hiring decisions.

• The most frequently cited reason for not using the credit was 

that their employees lived out of the zones or that they did not 

know about the credit. 

• Because more than half of the large urban businesses and 

rural businesses did not respond to the surveys, the survey 

results only reflect actual usage of the incentives. 

• The estimates based on the surveys might be imprecise 

because of the sampling error associated with estimate. 
Appendix VI: Summary of Evaluations of the 

EZ/EC Program 

Page 76 GAO-04-306 Community Development 

Author/Title Purpose and scope Primary methods and data used 

Fahui Wang and Joseph A. Van Loo. 

“Citizen Participation in the North Delta Mississippi 

Community Development Block Grants, 

Empowerment Zones and Enterprise 

Communities.” 

Planning Practice and Research 13, no. 4 (1998): 

443-51. 

• To examine citizen participation in 

the EC catchment area compared 

with the community development 

block grant catchment area 

• North Delta Mississippi EC 

• Collected data through 

participant observation and 

document reviews 
Appendix VI: Summary of Evaluations of the 

EZ/EC Program 

Page 77 GAO-04-306 Community Development 

Major findings Major limitations 

• Citizen participation outreach efforts were more extensive in the 

EC program than in the community development block grant 

program. 

• Citizen involvement was more extensive and more meaningful 

(i.e., participation in strategic planning and decision making) in 

the EC program than in the community development block grant 

program. 

• The findings are specific to this EC site and cannot be 

generalized to ECs that were not studied. 

• The authors could not determine to what extent citizen 

participants in each program were representative of the larger 

population living in the target areas, and therefore, to what 

extent key factors, such as socioeconomic status, might have 

influenced citizen participation. 

a

The four key principles of the EZ/EC program are strategic vision, economic opportunity, communitybased partnerships, and sustainable community development. 

 bU.S. General Accounting Office, Public Housing: HOPE VI Resident Issues and Changes in 

Neighborhoods Surrounding Grant Sites, GAO-04-109, (Washington, D.C.: November 2003). 
Appendix VII: Comments from the Department of Housing and Urban Development 

Page 78 GAO-04-306 Community Development 

Appendix VII: Comments from the 

Department of Housing and Urban 

Development 
Appendix VII: Comments from the Department of Housing and Urban Development 

Page 79 GAO-04-306 Community Development 
Appendix VIII: Comments from the Internal 

Revenue Service 

Page 80 GAO-04-306 Community Development 

Appendix VIII: Comments from the Internal 

Revenue Service 
Appendix IX: Comments from the U.S. 

Department of Agriculture 

Page 81 GAO-04-306 Community Development 

Appendix IX: Comments from the U.S. 

Department of Agriculture 
Appendix IX: Comments from the U.S. 

Department of Agriculture 

Page 82 GAO-04-306 Community Development 
Appendix IX: Comments from the U.S. 

Department of Agriculture 

Page 83 GAO-04-306 Community Development 
Appendix X: Comments from the Department of Health and Human Services 

Page 84 GAO-04-306 Community Development 

Appendix X: Comments from the Department 

of Health and Human Services 
Appendix X: Comments from the Department of Health and Human Services 

Page 85 GAO-04-306 Community Development 
Appendix XI: GAO Contacts and Staff Acknowledgments 

Page 86 GAO-04-306 Community Development 

William Shear (202) 512-8678 

Charles Wilson, Jr. (202) 512-6891 

In addition to those individuals named above, Jonathan Altshul, Susan 

Baker, Daniel Blair, Mark Braza, Emily Chalmers, Patricia Farrell 

Donahue, David Dornisch, DuEwa Kamara, Terence Lam, Alison Martin, 

Grant Mallie, John McGrail, John Mingus, Marc Molino, Gretchen Maier 

Pattison, Minette Richardson, and Michael Simon made key contributions 

to this report. 

Appendix XI: GAO Contacts and Staff 

Acknowledgments 

GAO Contacts 

Acknowledgments 
Page 87 GAO-04-306 Community Development 

Aigner, Stephen M., Cornelia B. Flora, and Juan M. Hernandez. “The 

Premise and Promise of Citizenship and Civil Society for Renewing 

Democracies and Empowering Sustainable Communities.” Sociological 

Inquiry 71, no. 4 (2001): 493-507. 

Chaskin, Robert J. and Clark M. Peters. Governance in Empowerment 

Zone Communities: A Preliminary Examination of Governance in 

Fifteen Empowerment Zone Communities. (Chicago, IL: University of 

Chicago, Chapin Hall Center for Children, 1997). 

Community Partnership Center. Rural Empowerment Zones/Enterprise

Communities: Lessons from the Learning Initiative. Findings and 

Recommendations of the Community Partnership Center EZ/EC 

Learning Initiative. (Knoxville, TN: Community Partnership Center, 

University of Tennessee, 1998). 

Gittell, Marilyn, and others. “Expanding Civic Opportunity: Urban 

Empowerment Zones.” Urban Affairs Review 33 no. 4 (1998): 530-58. 

Gittell, Marilyn, Kathe Newman, and Francois Pierre-Louis. Empowerment 

Zones: An Opportunity Missed: A Six City Comparative Study. (New 

York, NY: The City University of New York, The Howard Samuels State 

Management and Policy Center, 2001). 

Hebert, Scott and others. Interim Assessment of the Empowerment Zones 

and Enterprise Communities (EZ/EC) Program: A Progress Report, 

prepared for the U.S. Department of Housing and Urban Development. 

(Washington, D.C.: November 2001). 

Nathan, Richard P. and others. Investing in a New Future: Special Report 

on Community Development Financing in Selected Empowerment 

Zone/Enterprise Community Sites. (Albany, NY: The Nelson A. 

Rockefeller Institute of Government, 1997). 

——Empowerment Zone Initiative: Building a Community Plan for 

Strategic Change: Findings from the First Round of Assessment. 

(Albany, NY: State University of New York, The Nelson A. Rockefeller 

Institute of Government, 1997). 

Reid, J. Norman and Karen Savoie Murray. “Empowering Rural 

Communities: A Perspective at the Five-Year Point.” Paper presented at 

the annual meeting of the Rural Sociological Society, Washington, D.C., 

August 2000. 

Bibliography 
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U.S. General Accounting Office. Community Development: Businesses’ 

Use of Empowerment Zone Tax Incentives. GAO/RCED-99-253. 

(Washington, D.C.: September 30, 1999). 

Wang, Fahui, and Joseph A. Van Loo. “Citizen Participation in the North 

Delta Mississippi Community Development Block Grants, Empowerment 

Zones and Enterprise Communities.” Planning Practice and Research 13, 

no. 4 (1998): 443-51. 
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Community Development: Businesses’ Use of Empowerment Zone Tax 

Incentives. GAO/RCED-99-253 (Washington, D.C.: September 1999). 

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Varies Among the Empowerment Zones. GAO/RCED-99-29 (Washington, 

D.C.: November 1998). 

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