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[House Hearing, 107 Congress]
[From the U.S. Government Publishing Office]

 
                       TAX INCENTIVES FOR RENEWAL
=======================================================================

                                HEARING

                               before the

                       SUBCOMMITTEE ON OVERSIGHT

                                 of the

                      COMMITTEE ON WAYS AND MEANS
                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED SEVENTH CONGRESS

                             SECOND SESSION

                               __________

                              MAY 21, 2002

                               __________

                           Serial No. 107-91

                               __________

         Printed for the use of the Committee on Ways and Means

                          U.S. GOVERNMENT PRINTING OFFICE
84-501                         WASHINGTON : 2002
___________________________________________________________________________
For Sale by the Superintendent of Documents, U.S. Government Printing Office
Internet: bookstore.gpo.gov  Phone: toll free (866) 512-1800; (202) 512-1800  
Fax: (202) 512-2250 Mail: Stop SSOP, Washington, DC 20402-0001

                      COMMITTEE ON WAYS AND MEANS

                   BILL THOMAS, California, Chairman

PHILIP M. CRANE, Illinois            CHARLES B. RANGEL, New York
E. CLAY SHAW, Jr., Florida           FORTNEY PETE STARK, California
NANCY L. JOHNSON, Connecticut        ROBERT T. MATSUI, California
AMO HOUGHTON, New York               WILLIAM J. COYNE, Pennsylvania
WALLY HERGER, California             SANDER M. LEVIN, Michigan
JIM McCRERY, Louisiana               BENJAMIN L. CARDIN, Maryland
DAVE CAMP, Michigan                  JIM McDERMOTT, Washington
JIM RAMSTAD, Minnesota               GERALD D. KLECZKA, Wisconsin
JIM NUSSLE, Iowa                     JOHN LEWIS, Georgia
SAM JOHNSON, Texas                   RICHARD E. NEAL, Massachusetts
JENNIFER DUNN, Washington            MICHAEL R. McNULTY, New York
MAC COLLINS, Georgia                 WILLIAM J. JEFFERSON, Louisiana
ROB PORTMAN, Ohio                    JOHN S. TANNER, Tennessee
PHIL ENGLISH, Pennsylvania           XAVIER BECERRA, California
WES WATKINS, Oklahoma                KAREN L. THURMAN, Florida
J.D. HAYWORTH, Arizona               LLOYD DOGGETT, Texas
JERRY WELLER, Illinois               EARL POMEROY, North Dakota
KENNY C. HULSHOF, Missouri
SCOTT McINNIS, Colorado
RON LEWIS, Kentucky
MARK FOLEY, Florida
KEVIN BRADY, Texas
PAUL RYAN, Wisconsin

                     Allison Giles, Chief of Staff
                  Janice Mays, Minority Chief Counsel

                                 ______

                       Subcommittee on Oversight

                    AMO HOUGHTON, New York, Chairman

ROB PORTMAN, Ohio                    WILLIAM J. COYNE, Pennsylvania
JERRY WELLER, Illinois               MICHAEL R. McNULTY, New York
KENNY C. HULSHOF, Missouri           JOHN LEWIS, Georgia
SCOTT McINNIS, Colorado              KAREN L. THURMAN, Florida
MARK FOLEY, Florida                  EARL POMEROY, North Dakota
SAM JOHNSON, Texas
JENNIFER DUNN, Washington

Pursuant to clause 2(e)(4) of Rule XI of the Rules of the House, public 
hearing records of the Committee on Ways and Means are also published 
in electronic form. The printed hearing record remains the official 
version. Because electronic submissions are used to prepare both 
printed and electronic versions of the hearing record, the process of 
converting between various electronic formats may introduce 
unintentional errors or omissions. Such occurrences are inherent in the 
current publication process and should diminish as the process is 
further refined.

                           C O N T E N T S

                               __________
                                                                   Page
Advisory of May 14, 2002, announcing the hearing.................     2

                               WITNESSES

U.S. Department of Housing and Urban Development, Roy Bernardi, 
  Assistant Secretary for Community Planning and Development; 
  accompanied by Donald Mains, Deputy Assistant Secretary for 
  Economic Development...........................................    11
U.S. Department of the Treasury, Eric Solomon, Deputy Assistant 
  Secretary for Regulatory Affairs...............................    13

                                 ______

Booneville/Owsley County Industrial Authority, Susan Ramos.......    43
Davis, Hon. Danny K., a Representative in Congress from the State 
  of Illinois....................................................     9
Jamestown, City of, New York, Steven Centi.......................    33
Louisiana Department of Economic Development, Eric A. Johnson....    39
Memphis, City of, Tennessee, Hon. Willie W. Herenton, Mayor......    48
Turtle Mountain Manufacturing Company, Dale Nadeau...............    47
Watts, Hon. J.C., a Representative in Congress from the State of 
  Oklahoma.......................................................     6

                       SUBMISSIONS FOR THE RECORD

Empower Baltimore Management Corporation, Baltimore, MD, Diane 
  Bell, statement................................................    56
Los Angeles, CA, Hon. James K. Hahn, Mayor, statement............    60
Meehan, Hon. Martin T., a Representative in Congress from the 
  State of Massachusetts, statement..............................    61
Philip Cohn Group, East St. Louis, IL, Phil Cohn, statement......    62

                       TAX INCENTIVES FOR RENEWAL

                              ----------                              

                         TUESDAY, MAY 21, 2002

                  House of Representatives,
                       Committee on Ways and Means,
                                 Subcommittee on Oversight,
                                                    Washington, DC.

    The Subcommittee met, pursuant to notice, at 2:37 p.m., in 
room 1100 Longworth House Office Building, Hon. Amo Houghton 
(Chairman of the Subcommittee) presiding.
    [The advisory announcing the hearing follows:]

ADVISORY

FROM THE 
COMMITTEE
 ON WAYS 
AND 
MEANS

                       SUBCOMMITTEE ON OVERSIGHT

                                                CONTACT: (202) 225-7601
FOR IMMEDIATE RELEASE
May 14, 2002
No. OV-13

                     Houghton Announces Hearing on

                 Tax Incentives for Renewal Communities

    Congressman Amo Houghton (R-NY), Chairman, Subcommittee on 
Oversight of the Committee on Ways and Means, today announced that the 
Subcommittee will hold a hearing on the tax relief incentives of 
Renewal Communities. The hearing will take place on Tuesday, May 21, 
2002, in 1100 Longworth House Office Building, beginning at 2:00 p.m.

    In view of the limited time available to hear witnesses, oral 
testimony at this hearing will be from invited witnesses only. However, 
any individual or organization not scheduled for an oral appearance may 
submit a written statement for consideration by the Committee and for 
inclusion in the printed record of the hearing.

BACKGROUND:

    Renewal Communities represent a major new economic development 
initiative designed to attract businesses and investment to distressed 
urban and rural areas across the Nation. The concept was originally 
proposed in ``The Community Renewal Act of 1996'' and became law in 
December 2000 (P.L. 106-554). In January 2002, 40 competitively 
selected communities--28 urban and 12 rural--received Renewal Community 
designations accompanied by incentives to encourage business investment 
and the creation of jobs in these areas.

    In order to assist Renewal Communities, as well as the Nation's 40 
Empowerment Zones who also received new incentives as a result of this 
legislation, the U.S. Department of Housing and Urban Development is 
hosting a Community Renewal Implementation Conference in Washington, 
D.C., from May 19 to 23, 2002. The purpose of the conference is to 
equip community leaders with the necessary tools to attract businesses 
and investment to their communities, and successfully achieve 
revitalization. As Renewal Communities begin this process, Congress 
will review this program through the objectives of these communities.

    In announcing the hearing, Chairman Houghton stated: ``These 
Renewal Communities are important. In a word, they help. They help 
distressed urban and rural areas achieve real renewal. So as we 
revitalize these communities, it creates an environment where 
individuals can lift themselves and their families to a new level of 
security.''

FOCUS OF THE HEARING:

    The hearing will focus on how the newly designated Renewal 
Communities plan to use available incentives to attract business 
investment to their communities, and highlight potentially useful 
models from Empowerment Zone activities.

DETAILS FOR SUBMISSION OF WRITTEN COMMENTS:

    Please Note: Due to the change in House mail policy, any person or 
organization wishing to submit a written statement for the printed 
record of the hearing should send it electronically to 
[email protected], along with a fax copy to 
(202) 225-2610, by the close of business, Tuesday, June 4, 2002. Those 
filing written statements who wish to have their statements distributed 
to the press and interested public at the hearing should deliver their 
200 copies to the Subcommittee on Oversight in room 1136 Longworth 
House Office Building, in an open and searchable package 48 hours 
before the hearing. The U.S. Capitol Police will refuse sealed-packaged 
deliveries to all House Office Buildings.

FORMATTING REQUIREMENTS:

    Each statement presented for printing to the Committee by a 
witness, any written statement or exhibit submitted for the printed 
record or any written comments in response to a request for written 
comments must conform to the guidelines listed below. Any statement or 
exhibit not in compliance with these guidelines will not be printed, 
but will be maintained in the Committee files for review and use by the 
Committee.

    1. Due to the change in House mail policy, all statements and any 
accompanying exhibits for printing must be submitted electronically to 
[email protected], along with a fax copy to 
(202) 225-2610, in Word Perfect or MS Word format and MUST NOT exceed a 
total of 10 pages including attachments. Witnesses are advised that the 
Committee will rely on electronic submissions for printing the official 
hearing record.

    2. Copies of whole documents submitted as exhibit material will not 
be accepted for printing. Instead, exhibit material should be 
referenced and quoted or paraphrased. All exhibit material not meeting 
these specifications will be maintained in the Committee files for 
review and use by the Committee.

    3. Any statements must include a list of all clients, persons, or 
organizations on whose behalf the witness appears. A supplemental sheet 
must accompany each statement listing the name, company, address, 
telephone and fax numbers of each witness.

    Note: All Committee advisories and news releases are available on 
the World Wide Web at http://waysandmeans.house.gov.

    The Committee seeks to make its facilities accessible to persons 
with disabilities. If you are in need of special accommodations, please 
call (202) 225-1721 or (202) 226-3411 TTD/TTY in advance of the event 
(four business days notice is requested). Questions with regard to 
special accommodation needs in general (including availability of 
Committee materials in alternative formats) may be directed to the 
Committee as noted above.

                               

    Chairman HOUGHTON. Good afternoon, ladies and gentlemen. 
Mr. Watts and Mr. Davis, we are delighted to have you here. The 
hearing will commence. I would like to make a few comments, and 
then I will turn the mike over to my associate, Mr. Coyne.
    We are here today, as most of you know, to talk about a 
major development initiative for distressed areas, the Renewal 
Communities. As a bit of background, Congress passed 
legislation in the year 2000, first spearheaded by these two 
gentleman in front of us, Representatives J.C. Watts and Danny 
Davis, to create 40 renewable communities around the Nation. 
These communities, 28 urban and 12 rural, are eligible for tax 
incentives to stimulate economic development and job growth.
    We are going to be hearing also from the U.S. Department of 
Housing and Urban Development (HUD) and the U.S. Department of 
the Treasury about these initiatives in the next panel. So, 
today, is a third day of a HUD conference here in Washington 
designed to inform Renewal Community leaders about ways to 
attract business development and capital to their communities. 
We are going to be hearing from several of these leaders on the 
third panel. Other Renewal Community leaders are joining us 
here today are in the audience, and we welcome you 
particularly. We are delighted to have you here.
    I am pleased that a town in our district--I have to be a 
little provincial here--Jamestown, New York, was selected as 
one of the rural Renewal Communities. I can't think of a 
community better suited--will the Jamestown people around here 
listen to me when I say this--to take advantage of this program 
than Jamestown. As with many cities in upstate New York, 
Jamestown has experienced some really rough times in the recent 
years, and many manufacturers have moved to the South and West 
and dragging down an already marginal economy.
    The greatest asset of our district is its people, and 
Jamestown is living proof that the State, county, and local 
governments, and industries and charitable foundations have all 
pulled together in an exciting way. Just to continue for a 
minute longer on this, this city is on the brink of an economic 
revival with, for example, construction of a $12-million 
skating arena in the heart of the city. Already, independent 
developers are presenting plans to construct hotels and 
restaurants in the downtown area. The opportunities offered by 
the Community Renewal Program will allow this city to develop 
even more the employment opportunities in it, and I'm sure it 
is the same way for many of the other communities which you 
represent out here.
    So, the timing of this legislation couldn't be better, and 
we also couldn't find a better man to lead our efforts than a 
fellow called Steve Centi. We will talk more about Steve at the 
start of the third panel, but I want to welcome Steve, as well 
as Bob Kenyon, Sally Martinez, Kay Sibley from my district that 
is at this hearing, and welcome and thank you for your 
contribution. Jamestown is also fortunate to have Mayor Sam 
Teresi. He served as Director of Development and has done a 
great job in that area.
    So, what I would like to do now is to yield to our Ranking 
Democrat, Mr. Coyne.
    [The opening statement of Chairman Houghton follows:]
    Opening Statement of the Hon. Amo Houghton, a Representative in 
  Congress from the State of New York, and Chairman, Subcommittee on 
                               Oversight
    Good afternoon. Voluntary compliance is the foundation of our tax 
system, and I can't tell you how troubled I am about recent reports 
that show an erosion of trust in its fairness. This apparent erosion 
coincides with a persistent decline in enforcement statistics; the 
percentage of taxpayers who are audited has declined, and some tax 
professionals say they can no longer convince clients to fear the IRS. 
One tax advisor has taken to posting a depiction of heaven and hell on 
her wall to supply the fortitude that fear of an IRS audit once 
supplied.
    I don't want to add to this problem by failing to observe that the 
vast majority of taxpayers are indeed honest and comply faithfully and 
with great integrity, but we need to address the problem. I will ask 
each of our witnesses today what we can do to turn this situation 
around.
    Our witnesses have specific knowledge or experience with different 
aspects of IRS operations. In addition to sharing their views on tax 
compliance, they will focus on the 2002 filing season, the President's 
budget request, and current developments at the IRS.
    Despite the progress the IRS is making in customer service, as 
highlighted in the Commissioner's testimony, there are still troubling 
reports that IRS performance is lagging in some areas. For example, 
taxpayers continue to complain about various aspects of the offer in 
compromise program, and independent reviewers have expressed concerns 
about the quality of telephone assistance and walk-in assistance to 
taxpayers. On the other hand, the IRS appears to be doing better this 
year to encourage electronic filing.
    On Wednesday, the House is scheduled to consider the Taxpayer 
Protection and IRS Accountability Act of 2002, legislation that I 
sponsored. Commissioner Rossotti played an important role in advocating 
the modification we are making to the so-called ``Ten Deadly Sins'' 
provision of the 1998 IRS Restructuring Act, and the President, in his 
budget request, proposed a 15 day extension for electronic filers that 
we are adopting. I hope that the 15 day extension further accelerates 
the pace of electronic filing, and that the change to the Ten Deadly 
Sins improves morale at the IRS while continuing to protect taxpayers 
from arbitrary and unlawful conduct.
    Additionally, I note that the Administration will be submitting to 
Congress a series of recommendations on individual tax simplification 
in the next several weeks. I look forward to reviewing those 
recommendations, and I hope we can act on them in the near future.
    During his tenure, Commissioner Rossotti has transformed the IRS 
from an outdated structure, based on geography, into a modern, 
customer-focused agency organized around the tax needs of American 
citizens. He has also laid the groundwork for technological changes 
that will carry the IRS far into the 21st century. We are just 
beginning to see the fruits of those innovations today, for example, in 
the Electronic Funds Transfer Payment System that has greatly 
simplified the remittance of payroll taxes. I understand your term will 
expire in November and that you have announced your intention to move 
back to the private sector. Thank you, Commissioner, for your exemplary 
public service, and I wish you success in your future endeavors.
    I am pleased to yield to our ranking Democrat, Mr. Coyne.

                               

    Mr. COYNE. Thank you, Mr. Chairman.
    The hearing today of the Subcommittee on Oversight will 
have an opportunity to discuss the tax benefits available to 
recently designated Renewal Communities. These 40 urban and 
rural areas will provide for economic development and 
employment in some of the most depressed of the United States. 
The Renewal Communities' legislation was signed into law by 
President Clinton by the end of the year 2000. This legislation 
also included tax provisions to provide for new markets credit, 
also to expand Empowerment Zones (EZs), to expand the low-
income housing tax credit and private activity tax-exempt bonds 
and to extend brownfields tax incentives.
    The Renewal Communities' tax provisions build on the 
Empowerment Zone model of economic development that was 
championed by Representatives Rangel and Watts and former HUD 
Secretary Kemp, along with Representative Davis. The Community 
Renewal Act of 1996 was the catalyst for this Committee's 
discussion of how we might provide tax incentives to attract 
investment, stimulate job growth, and create affordable housing 
in our most distressed urban and rural areas.
    I want to thank all of the witnesses for attending the 
Subcommittee's hearing. The testimony of officials from areas 
recently designated as Renewal Communities will allow us to 
begin our oversight of the program. I commend our Subcommittee 
Chairman, Mr. Houghton, for scheduling this very important 
hearing.
    Thank you very much.
    [The opening statement of Mr. Coyne follows:]
  Opening Statement of the Hon. William J. Coyne, a Representative in 
                Congress from the State of Pennsylvania
    At today's hearing the Oversight Subcommittee will have an 
opportunity to discuss the tax benefits available to recently-
designated ``Renewal Communities.''
    These forty urban and rural areas will provide for economic 
development and employment in some of the most depressed areas in our 
country.
    The ``Renewal Communities'' legislation was signed into law by 
President Clinton at the end of 2000. This legislation also included 
tax provisions to provide for a ``new markets'' credit, to expand 
empowerment zones, to expand the low-income housing tax credit and 
private activity tax-exempt bonds, and to extend brownfields tax 
incentives.
    The ``Renewal Communities'' tax provisions build on the empowerment 
zone model of economic development championed by Congressmen Charlie 
Rangel, Danny Davis, and J.C. Watts, and former HUD Secretary Jack 
Kemp.
    The ``Community Renewal Act of 1996'' was the catalyst for this 
Committee's discussion of how we might provide tax incentives to 
attract investment, stimulate job growth, and create affordable housing 
in our most distressed urban and rural areas.
    I want to thank all the witnesses for attending the Subcommittee's 
hearing. The testimony of officials from areas recently designated as 
``Renewal Communities'' will allow us to begin our oversight of the 
program. I commend Subcommittee Chairman Houghton for scheduling this 
important hearing.
    Thank you very much.

                               

    Chairman HOUGHTON. Thank you, Mr. Coyne. Would any other 
Members like to make an opening statement?
    Mr. Jefferson, would you?
    Mr. JEFFERSON. Thank you, Mr. Chairman.
    I think, Mr. Chairman, over the last few years little 
legislation has been more important to urban communities than 
what we did with new markets and with the Renewal Communities 
joining them together. I am hopeful that in the very near 
future we can see the benefits of that hard work that was 
started by J.C., Danny, and so many other people and on which 
I, and other Members of this Committee, had a great hand in 
seeing through.
    They are people from all over the country who have come to 
Washington to try and find out how to make this legislation 
work for them and for their communities. There are many here 
from my own home area, as I am sure there are from yours, and I 
will acknowledge them a little later when I get a chance to ask 
a few questions of the panel. So, I just wanted to congratulate 
all of them who have been successful in getting the 
applications through, getting their programs approved, and I 
look forward to working with them as this Subcommittee examines 
the oversight issues related to the Renewal Communities.
    Chairman HOUGHTON. Thank you very much. Mr. Hulshof, have 
you got any comments?
    Mr. HULSHOF. No.
    Chairman HOUGHTON. Mr. Pomeroy.
    Mr. POMEROY. No.
    Chairman HOUGHTON. No comments.
    Well, we are pleased to have two of the original sponsors 
of the legislation that created the Renewal Communities with us 
today on our first panel.
    Suffice it to say that without their work and diligence, we 
would not be discussing the benefits that Renewal Communities 
provide. So, it is my pleasure to introduce the Honorable J.C. 
Watts, Member of the House of Representatives and the Honorable 
Danny K. Davis, also a Member of the House of Representatives.
    J.C., why don't you begin.

STATEMENT OF THE HON. J.C. WATTS, A REPRESENTATIVE IN CONGRESS 
                   FROM THE STATE OF OKLAHOMA

    Mr. WATTS. Mr. Chairman, thank you very much.
    Mr. Coyne mentioned Jack Kemp in his opening remarks, and I 
cannot help but sing the praises of Jack Kemp. Jack got me 
involved in this effort in targeting underserved communities 
when I was in State government back in 1990, and we talked 
policy and talked about helping underserved communities over 
the last 10 years. I know that Jack would appreciate the fact 
that you recognized him this afternoon.
    Again, thank you, Mr. Chairman, and other Members of the 
Subcommittee not only for inviting me to this hearing today, 
but for your interest in community renewal and offering tax 
incentives for economic development. I also want to thank my 
colleague, Congressman Davis, for his leadership, his tireless 
effort, and continued interest in community renewal. This 
really has been a bipartisan initiative in the truest sense of 
the words.
    Today's hearing on community renewal coincides with an 
excellent conference organized by HUD and Secretary Mel 
Martinez. It is extremely encouraging to see Congress and the 
Administration working closely toward renewing communities and 
strengthening our neighborhoods.
    Back in 1995, some of us here in Congress had a vision for 
communities across the country. We saw poverty and hopelessness 
in some parts of cities, towns, and rural communities--some 
that were once vibrant and some that never seem to achieve the 
level of prosperity by many neighborhoods or that many 
neighborhoods enjoy. Members from both sides of the aisle made 
the case for new and much-needed tools to build environments of 
hope to replace communities of despair.
    Along with Congressman Jim Talent, Republican of Missouri, 
and Congressman Floyd Flake, Democrat of New York, I introduced 
a bill called the Community Renewal Act to foster economic 
development to distressed urban and rural areas. After 
Congressman Flake retired, I approached Congressman Davis and 
asked him to assist me in this effort. He graciously joined and 
has been the consummate team player and partner since then.
    Logic was very simple behind this legislation. When private 
industry flourishes in communities, it affects people's lives. 
It creates jobs for residents. It provides services for 
neighbors. It improves the community by providing opportunity. 
It was a long road traveled, but my colleagues back then and I 
communicated the many benefits of community renewal until the 
concept was signed into law in December 2000 by then-President 
Clinton.
    In January of this year, HUD finished a nomination and 
selection process, choosing 40 Renewal Communities--28 urban 
and 12 rural. These cities, towns, and counties were made 
eligible for a series of economic growth incentives: Capital 
gains rate reduction for business and Renewal Communities, wage 
credit for eligible employees, more deductions on capital 
expenditures, and a commercial revitalization tax deduction to 
promote commercial development.
    Communities are the fabric of our society. They define who 
we are as a people and who we are as a Nation. The Federal 
Government should not get involved in the day-to-day management 
of State and local affairs, but we can give them a helping hand 
by providing incentives to better their communities. Through 
the Community Renewal Act, we have done that. Now, with the 
leadership of HUD, Secretary Martinez and many others, the task 
at hand is to educate administrators in the heartland about 
each and every incentive that is public law in order to create 
jobs in America's poorest communities.
    Turning vacant lots into thriving businesses empowers 
communities. Converting abandoned buildings into affordable 
housing renews communities. Creating support services and 
improving education and health care strengthens communities. 
These goals are attainable. The groundwork has been 
established. Through public and private partnerships, from the 
Federal Government to the faith-based community. Lives can be 
changed and our neighborhoods can be renewed.
    I thank the people in this hearing room who have come to 
Washington to learn how to attract business and capital into 
their localities. I thank the Subcommittee for allowing me to 
speak on such an important subject. The difference community 
renewal will make--will change the lives of not only the 
citizens of today, but the children of tomorrow.
    With that, Mr. Chairman, I thank you very much for this 
time and thank you very much for conducting this hearing.
    [The prepared statement of Mr. Watts follows:]
  Statement of the Hon. J.C. Watts, Jr., a Representative in Congress 
                       from the State of Oklahoma
    Thank you, Mr. Chairman, not only for inviting me to this hearing 
today, but for your interest in community renewal and offering tax 
incentives for economic development. I also thank my colleague, 
Congressman Danny Davis, for his leadership, tireless effort and 
continued interest in community renewal. This is a bipartisan 
initiative in the truest sense of the words.
    Today's hearing on community renewal coincides with an excellent 
conference organized by the Department of Housing and Urban 
Development. It is extremely encouraging to see Congress and the 
Administration working closely toward renewing communities and 
strengthening neighborhoods.
    Back in 1995, some of us in Congress had a vision for communities 
across the country. We saw poverty and hopelessness in cities, towns 
and rural communities--some that were once vibrant, and some that never 
seemed to achieve the level of prosperity that many neighborhoods 
enjoy. Members from both sides of the aisle made the case for new and 
needed tools to build environments of hope to replace communities of 
despair.
    Along with Congressmen Jim Talent of Missouri and Floyd Flake of 
New York, I introduced a bill called the Community Renewal Act to 
foster economic development to distressed urban and rural areas. The 
logic was very simple: when private industry flourishes in communities, 
it affects people's lives. It creates jobs for residents. It provides 
services for neighbors. It improves the community by providing 
opportunity.
    It was a long road traveled, but my colleagues back then and I 
communicated the many benefits of community renewal until the concept 
was signed into law in December 2000.
    In January of this year, HUD finished a nomination and selection 
process, choosing forty renewal communities--twenty-eight urban and 
twelve rural. These cities, towns and counties were made eligible for a 
series of economic growth incentives: capital gains rate reduction for 
businesses in renewal communities, wage credits for eligible employees, 
more deductions on capital expenditures and a commercial revitalization 
tax deduction to promote commercial development.
    Communities are the fabric of our society. They define who we are 
as a people--who we are as a nation.
    The Federal Government should not get involved in the day-to-day 
management of state and local affairs. But we can give them a helping 
hand by providing incentives to better their communities. Through the 
Community Renewal Act, we have. Now, with the leadership of HUD 
Secretary Mel Martinez and many others, the task at hand is to educate 
administrators in the heartland about each and every incentive that is 
public law in order to create jobs in America's poorest communities.
    Turning vacant lots into thriving businesses empowers communities. 
Converting abandoned buildings into affordable housing renews 
communities. Creating support services and improving education and 
health care strengthens communities.
    These goals are attainable. The groundwork has been established.
    Through public and private partnerships, from everyone like the 
government to the faith-based community, lives can be changed and our 
neighborhoods can be renewed.
    Community renewal is a wonderful thing when it works. I thank the 
people in this hearing room who have come to Washington to learn how to 
attract business and capital into their localities. And I thank this 
Subcommittee for allowing me to speak on such an important subject. The 
difference community renewal will make will change the lives of not 
only the citizens of today, but the children of tomorrow. With that, 
Mr. Chairman, I thank you for the time.

                               

    Chairman HOUGHTON. Well, thank you, Mr. Watts. Thank you 
very much for your leadership. As you know, we wouldn't be here 
if it weren't for you.
    Now, Mr. Davis, we are honored to have you here.

   STATEMENT OF THE HON. DANNY K. DAVIS, A REPRESENTATIVE IN 
              CONGRESS FROM THE STATE OF ILLINOIS

    Mr. DAVIS. Thank you very much, Mr. Chairman, 
Representative Houghton, Ranking Member Coyne, and Members of 
the Subcommittee.
    First of all, I want to thank you for having this important 
hearing, and I am indeed pleased and delighted to appear here 
with my colleague, Congressman J.C. Watts, who has provided 
sterling leadership on finding relief for distressed 
communities. J.C., I commend you for all of your efforts, and 
it has indeed been a pleasure to work with you.
    I am also pleased and would like to acknowledge the 
presence of Mr. Henry Wilson, who is Chairman of the Englewood 
Conservation Council in Chicago, an area that has been 
designated as one of the zones in a Renewal Community.
    On February 24, 1999, my colleagues, Representatives J.C. 
Watts and Jim Talent, and I introduced H.R. 815, the American 
Community Renewal Act of 1999 in the U.S. House of 
Representatives. This legislation amends the Internal Revenue 
Code of 1986 to provide for the designation of Renewal 
Communities and to encourage local and State governments to 
reduce taxes and regulatory requirements for companies 
operating in designated urban and rural renewal areas.
    On December 15, 2000, Congress passed the Community Renewal 
Tax Relief Act of 2000 (CRTR), H.R. 5662, as part of the 
consolidated Appropriations Act of 2001. President Clinton 
signed this legislation on December 21, 2000.
    Many of our cities are deeply troubled places. At the root 
of the problem are the massive economic shifts that have marked 
the last three-and-a-half decades in our cities. Hundreds of 
thousands of industrial jobs have disappeared or moved away 
from the central cities and its neighborhoods. However, new 
jobs that have appeared are different from those that once 
sustained those areas.
    The Renewal Communities Initiative is designed to encourage 
public-private collaboration to generate economic development 
in 40 distressed communities. These newly designated Renewal 
Communities can take advantage of Federal wage credits, tax 
deductions, capital gains exclusions, and bond financing to 
stimulate economic development, job growth, and affordable 
housing in our poorest communities.
    This program is very important to our Nation because one of 
its tax credit components will allow welfare-to-work credits 
for Renewal Community businesses. This provides a 2-year 
Federal tax credit of up to $3,500 for the first year and 
$5,000 for the second year for each newly hired, long-term 
welfare recipient.
    Also, the Renewal Communities Initiative provides 
businesses work opportunity credits equaling up to $2,400 
against their Federal tax liability for each employee hired 
from these groups with traditionally high unemployment rates. 
Moreover, this program provides an incentive for wage credits 
that would help businesses grow and expand their work forces. 
These initiatives provide a zero capital gains rate for small 
businesses, low-income housing tax credits to build better 
rental housing for low-income individuals, and bond financing 
for public school renovations and programs.
    We estimated, Mr. Chairman, that the Renewal Communities 
Initiative could provide an estimated $17 billion in tax 
incentives to create jobs for the needy, to promote economic 
development, and to create affordable housing for the poor. 
This infusion would help change communities that have remained 
consistently distressed and disenfranchised for the past 30 
years.
    Again, I want to thank you and Members of the Subcommittee 
for the opportunity to be here, and commend, again, my 
colleague, Congressman J.C. Watts. I thank you so much and 
yield back the balance of my time.
    [The prepared statement of Mr. Davis follows:]
Statement of the Hon. Danny K. Davis, a Representative in Congress from 
                         the State of Illinois
    Mr. Chairman, Ranking Member, and Members of the Subcommittee, I 
thank you for having this important hearing. Also, I want to honor the 
presence of Mr. Henry Wilson, Chairman of the Conservation Council. I 
am very pleased to appear before this Subcommittee to address the 
Renewal Communities (RC) Initiative--a landmark measure to help our 
communities and the people who live in them. On February 24, 1999, my 
colleagues, Congressmen J.C. Watts and Jim Talent, and I introduced 
H.R. 815, ``The American Community Renewal Act of 1999,'' in the U.S. 
House of Representatives. This legislation amends the Internal Revenue 
Code of 1986 to provide for the designation of renewal communities and 
to encourage local and state governments to reduce taxes and regulatory 
requirements for companies operating in designated urban and rural 
renewal areas. On December 15, 2000, Congress passed the Community 
Renewal Tax Relief Act of 2000 (H.R. 5662) as part of the Consolidated 
Appropriations Act of 2001. President Clinton signed this legislation 
on December 21, 2000.
    Many of our cities are deeply troubled places. At the root of the 
problem are the massive economic shifts that have marked the last three 
decades in our cities. Hundreds of thousands of industrial jobs have 
disappeared or moved away from the central city and its neighborhoods. 
However, new jobs that have appeared are different from those that once 
sustained our neighborhoods.
    The Renewal Communities Initiative is designed to encourage public-
private collaboration to generate economic development in 40 distressed 
communities. These newly designated RCs can take advantage of Federal 
wage credits, tax deductions, capital gains exclusions and bond 
financing to stimulate economic development, job growth, and affordable 
housing in our poorest communities. This program is very important to 
our Nation because one of its tax credit components will allow welfare-
to-work credits for Renewal Community businesses. This provides a two-
year Federal tax credit of up to $3,500 for the first year, and $5,000 
for the second year, for each newly hired long-term welfare recipient. 
Also, the Renewal Communities initiative provides businesses work 
opportunity credits equaling up to $2,400 against their Federal tax 
liability for each employee hired from groups with traditionally high 
unemployment rates or other special employment needs. Moreover, this 
program provides an incentive for wage credits that will help 
businesses grow and expand their workforces. These initiatives provide 
a zero capital gains rates for small businesses, low-income housing tax 
credits to build better rental housing for low-income individuals, and 
bond financing for public school renovations and programs.
    The Renewal Communities Initiative will provide an estimated $17 
billion in tax incentives to create jobs for the needy, to promote 
economic development, and to create affordable housing for the poor. 
This infusion will help change communities that have remained 
consistently distressed and disenfranchised for the past 30 years.
    I look forward to answering your questions. Thank you!

                               

    Chairman HOUGHTON. Thank you, Mr. Davis. I want to thank 
you again, and also Mr. Watts, for what you have done. The 
symbolism, the activity, the fact that we have started 
something that I hope will sweep across the country. So, once 
again, on behalf of all of us, we really appreciate your being 
here. Thank you.
    Now, I would like to call the second panel, the Honorable 
Roy Bernardi, Assistant Secretary for Community Planning and 
Development, the U.S. Department of Housing and Urban 
Development, and also Eric Solomon, who is the Deputy Assistant 
Secretary for Regulatory Affairs, U.S. Department of the 
Treasury.
    Mr. Mains, I am sorry I did not introduce you. Mr. Donald 
Mains is Deputy Assistant Secretary of Economic Development, 
the U.S. Department of Housing and Urban Development. Thank you 
very much for being here.
    Mr. Bernardi, would you start your testimony.

  STATEMENT OF THE HON. ROY BERNARDI, ASSISTANT SECRETARY FOR 
COMMUNITY PLANNING AND DEVELOPMENT, U.S. DEPARTMENT OF HOUSING 
  AND URBAN DEVELOPMENT; ACCOMPANIED BY DONALD MAINS, DEPUTY 
          ASSISTANT SECRETARY FOR ECONOMIC DEVELOPMENT

    Mr. BERNARDI. Good afternoon, Chairman Houghton, Ranking 
Member Coyne, distinguished Members of the Subcommittee. My 
name is Roy Bernardi. I am the Assistant Secretary for 
Community Planning and Development at the U.S. Department of 
Housing and Urban Development.
    The Department is pleased that this hearing is occurring in 
conjunction with the Community Renewal Implementation 
Conference. While we are here, over in the Rayburn Building, 
there is a tax incentive seminar that is going on. As you can 
see behind me and in front of you, many of the 400 
representatives of the designated communities are here today. 
They include tax law specialists, executive directors, planning 
coordinators, city managers, mayors, and residents. They have 
gathered to learn how Federal tax incentives and community 
partnerships can encourage economic development in the 
Empowerment Zones and the Renewal Communities.
    The Department's most recent information shows that 
businesses and EZs have made only a modest use of the Federal 
tax incentives. This conference is just the beginning of HUD's 
aggressive and comprehensive campaign to market the existing 
tax incentives to businesses and individuals in the 30 
Empowerment Zones and 40 Renewal Communities that HUD has 
designated.
    The Community Renewal Tax Relief Act of 2000 provided for 
12 rural and 28 urban Renewal Communities and set forth 2 rural 
and 7 urban Round III Empowerment Zones. The new legislation 
provided for measures that included a $22-billion package of 
tax incentives, of which $11 billion is unique to the EZ/
Renewal Communities.
    In the fall 2001, HUD received over 100 Renewal Community 
applications from 35 States. Our eligibility and completeness 
review yielded 77 qualified applications. The enthusiasm for 
this program is evidence that our neighbors from coast-to-coast 
are anxious to reduce poverty and provide opportunity through 
tax incentives.
    In January, Secretary Martinez was able to announce 40 
Renewal Communities with the most severe economic distress, 20 
of which were Enterprise Communities that chose to become 
Renewal Communities. Unlike many grant competitions, Congress 
mandated that the applications be judged strictly by objective 
criteria. At a minimum, the applicants needed to have set 
continuous census tracts with at least 20-percent poverty and 
9.4-percent average unemployment. The 40 Renewal Communities 
selected had an average poverty rate of 40 percent and an 
average unemployment rate of over 17 percent.
    Unlike many Federal programs which provide cash grants for 
narrowly defined projects, HUD requires Renewal Communities to 
adhere to four of six required goals to promote economic growth 
at the local level. Renewal Communities commit to a combination 
of reducing local taxes, improving local services, reducing 
crime, reducing local government requirements, involving 
community partners, and soliciting in-kind donations. In 
return, the Treasury Department agrees to reduce the Federal 
tax burden through the Renewal Community Employment Credit, 
Commercial Revitalization Deduction, Zero Percent Capital Gains 
Rate, and Increased Section 179 Deduction for Renewal Community 
businesses.
    The tax incentives are the beginning of the strategic 
alliances that are being formed among the private, public, and 
nonprofit sectors in our 40 Renewal Communities. Ultimately, 
the success of Renewal Communities and EZs will stem from 
grassroots implementation in our respective communities.
    Presently, we are aware of the efforts being made by 
several Renewal Communities and Empowerment Zones to market 
their tax incentives to potential business partners. In Eastern 
Kentucky, Renewal Community staff is going door-to-door with 
tax publications, raising the enthusiasm in the business 
community. In Memphis, Tennessee, the Mayor has brought 
together representatives from nonprofit, for-profit, and other 
levels of government to help target tax incentive outreach 
strategies. Nissan has expressed interest in the rural 
Mississippi Renewal Community because of the new tax 
incentives. A business in Burlington, Vermont, is considering 
using the Renewal Community tax savings to have more full-time, 
rather than part-time, employees.
    I will defer to other witnesses and let them share with the 
Subcommittee their accomplishments in detail.
    New Empowerment Zones are also enthusiastic about tax 
incentives. Tucson, Arizona, has launched an Empowerment Zone 
tax incentive website that has already received over 2,500 hits 
since the 1st of March. Finally, in my hometown of Syracuse, 
New York, developers will use the tax-exempt EZ facility bond 
to help build Destiny USA, a 65-acre lake-front recreation, 
commercial, and retail center that will include a replica of 
Erie Canal, rock climbing, hotels, and a monorail link to the 
airport and the convention center.
    In closing, the Department believes tax incentives should 
be at the center of its job creation efforts by helping small 
businesses grow, creating an entrepreneurial environment, and 
showing the large corporations that these economically 
distressed areas represent opportunities with great hope.
    Mr. Chairman and Members of the Subcommittee, thank you for 
the opportunity to be here.
    [The prepraed statement of Mr. Bernardi follows:]
    Chairman HOUGHTON. Thank you, Mr. Bernardi. Mr. Mains, are 
you going to testify?
    Mr. MAINS. No, sir, I am with the Assistant Secretary.
    Chairman HOUGHTON. Okay, good.
    Mr. Solomon.

   STATEMENT OF ERIC SOLOMON, DEPUTY ASSISTANT SECRETARY FOR 
      REGULATORY AFFAIRS, U.S. DEPARTMENT OF THE TREASURY

    Mr. SOLOMON. Mr. Chairman, Mr. Coyne, and Members of the 
Subcommittee, I appreciate the opportunity to discuss with you 
today tax incentives designed to foster the revitalization of 
economically disadvantaged communities.
    I would like to start by thanking the Chairman and the 
Subcommittee for holding a hearing on this important issue. 
With your permission, I would like to submit a full written 
statement for the record.
    Seeing no objection, thank you.
    The Administration is firmly committed to helping Americans 
in economically distressed communities. As there are limits on 
what the Federal Government alone can accomplish, a more 
comprehensive approach is necessary. This approach calls for 
initiatives to encourage further involvement by individuals, 
businesses, and charitable organizations in working to 
eliminate conditions of economic distress in our country.
    Thanks, in large part, to the leadership shown by the 
Committee on Ways and Means, many of the Administration's tax 
proposals in this area have been enacted. The Administration's 
tax proposals benefiting distressed communities or low-income 
individuals that have been enacted include the following: 
Extension of the work opportunity tax credit through 2003; 
extension of the welfare-to-work credit through 2003; extension 
of authority to issue qualified zone academy bonds through 
2003; authorization of tax-exempt private activity bonds to 
finance reconstruction in the area around the World Trade 
Center in New York City; creation of a new 10-percent income 
tax bracket; and doubling the child tax credit to $1,000.
    The President's budget for fiscal year 2003 contains 
additional proposals to help distressed communities and low-
income individuals. The tax proposals include creation of a new 
single-family housing tax credit, similar in design to the low-
income housing tax credit, to expand the possibility of 
homeownership for low-income families.
    The President's budget proposals also include the creation 
of individual development accounts, increased incentives for 
charitable giving, and a refundable tax credit for the purchase 
of health insurance.
    The Internal Revenue Code currently includes numerous 
incentives to encourage the development of economically 
distressed areas. They include tax incentives for businesses 
located in Empowerment Zones, Enterprise Communities and 
Renewal Communities, the new markets tax credit, qualified zone 
academy bonds, certain categories of tax-exempt bonds, special 
incentives for investment and employment on Indian 
reservations, the low-income housing tax credit, the work 
opportunity tax credit, and the deductibility of brownfields 
remediation costs. In the brief time that I have, I would like 
to highlight a few of these tax incentives, particularly those 
for Renewal Communities.
    We wish to commend Congressman Watts for his leadership in 
the enactment of the Community Renewal Tax Relief Act of 2000. 
The Act authorized 40 Renewal Communities, 28 in urban areas, 
and 12 in rural areas. The 40 communities were designated by 
HUD at the beginning of this year.
    Taxpayers may utilize the Renewal Communities tax benefits 
beginning this year. These benefits include the following: A 
15-percent wage credit for qualifying wages, additional 
expensing for qualified property, a commercial real estate 
revitalization deduction, and an exclusion for capital gains on 
qualified community assets held more than 5 years.
    The commercial real estate revitalization incentive allows 
accelerated recovery of costs to build or rehabilitate 
buildings in Renewal Communities. The capital gains exclusion 
for qualified community assets held more than 5 years applies 
to stock or a partnership interest in a Renewal Community 
business and certain tangible property used in a Renewal 
Community business.
    I would now very briefly like to mention Empowerment Zones, 
the new markets tax credit, and the New York Liberty Zone.
    There are 40 Empowerment Zones in the United States. Tax 
benefits for qualifying businesses in Empowerment Zones 
include: A 20-percent wage credit for qualifying wages, 
additional expensing for qualified property, and tax-exempt 
financing for certain qualifying zone facilities. In addition, 
there are capital gains incentives for certain assets.
    The new markets tax credit provides a tax credit to 
investors who make qualified equity investments in privately 
managed investment vehicles called Community Development 
Entities (CDEs). The CDEs are required to invest substantially 
all of the proceeds of the qualified equity investments in low-
income communities.
    The Treasury Department's Community Development Financial 
Institutions (CDFI) fund will allocate credit authority among 
CDEs based on a competitive application process. The CDFI fund 
expects to issue a notice soon seeking applications from CDEs 
for credit authority.
    Finally, I would like to mention the New York Liberty Zone. 
While the area around the World Trade Center would not have 
been described as economically distressed prior to September 
11, the destruction there prompted both the Administration and 
the Congress to support tax incentives to help New York City 
recover. We commend you, Mr. Chairman, and other Members of the 
Committee on Ways and Means for your leadership in helping to 
enact the Job Creation and Worker Assistance Act of 2002.
    In conclusion, I would like to thank you, Mr. Chairman, Mr. 
Coyne, and the Members of the Subcommittee for providing the 
opportunity today to discuss these important issues. I hope 
that working together we can ensure that all Americans share in 
our country's prosperity.
    This concludes my prepared testimony. I would be pleased to 
respond to any questions.
    [The prepared statement of Mr. Solomon follows:]
 Statement of Eric Solomon, Deputy Assistant Secretary for Regulatory 
                Affairs, U.S. Department of the Treasury
    Mr. Chairman, Mr. Coyne, and Members of the Subcommittee:
    I appreciate the opportunity to discuss with you today tax 
incentives designed to foster the revitalization of economically 
disadvantaged communities. I would like to start by thanking the 
Chairman and the Subcommittee for holding a hearing on this important 
issue.
    The Administration is firmly committed to helping Americans in 
economically distressed communities. However, because there are limits 
on what the Federal Government alone can accomplish, a more 
comprehensive approach is necessary. This approach calls for 
initiatives to encourage further involvement by individuals, 
businesses, and community-based and faith-based organizations in 
working to eliminate conditions of economic distress in this country.
    Thanks in large part to the leadership shown by the Ways and Means 
Committee, many of the Administration's tax proposals in this area have 
already been enacted. Administration tax proposals benefiting low-
income individuals or distressed communities that have already been 
enacted include the following: (1) extension of the work opportunity 
tax credit through 2003; (2) extension of the welfare to work credit 
through 2003; (3) extension of authority to issue qualified zone 
academy bonds through 2003; (4) authorization of tax-exempt private 
activity bonds to finance reconstruction in the area surrounding the 
World Trade Center in New York City devastated by the September 11, 
2001 terrorist attacks; (5) creation of a new 10 percent income tax 
bracket; and (6) doubling of the child tax credit to $1,000.
    The President's Budget for FY 2003 contains additional proposals on 
both the spending and tax side. The tax proposals include creation of a 
new tax credit, similar in design to the low-income housing tax credit, 
for developers of affordable single-family housing, and making the 
brownfields tax incentive permanent. These will be discussed in more 
detail below.
    We look forward to working with this Subcommittee as it considers 
the remainder of the Administration's initiatives related to 
encouraging community renewal.
    The remainder of my testimony will provide a more detailed 
discussion of current law and the Administration's budget proposals.
                 INCENTIVES FOR DISTRESSED COMMUNITIES

Current Law Tax Incentives for Distressed Communities

    The Internal Revenue Code of 1986 currently includes numerous 
incentives to encourage the development of economically distressed 
areas. They include tax incentives for businesses located in 
empowerment zones, enterprise communities and renewal communities, the 
new markets tax credit, qualified zone academy bonds, certain 
categories of tax-exempt bonds, special incentives for investment and 
employment on Indian reservations, the low-income housing tax credit, 
the work opportunity tax credit, and the deductibility of brownfields 
remediation costs.

Empowerment Zones

    The Omnibus Budget Reconciliation Act of 1993 (OBRA 93) authorized 
a project under which nine empowerment zones, six in urban areas and 
three in rural areas, were designated through a competitive application 
process. State and local governments nominated distressed geographic 
areas, which were selected on the strength of their strategic plans for 
economic and social revitalization. The urban areas were designated by 
the Secretary of the Department of Housing and Urban Development. The 
rural areas were designated by the Secretary of the Department of 
Agriculture. The Taxpayer Relief Act of 1997 added two urban Round I 
zones and authorized 20 Round II zones (15 urban and five rural). The 
Community Renewal Tax Relief Act of 2000 authorized nine Round III 
zones (seven urban and two rural). There are currently 30 urban zones 
and 10 rural zones. Designation of Round I, Round II or Round III 
status generally will apply until December 31, 2009.
    Qualifying businesses in empowerment zones are eligible for certain 
tax benefits. These benefits include the following: (1) a 20-percent 
wage credit for qualifying wages; (2) additional expensing for 
qualified zone property; and (3) tax-exempt financing for certain 
qualifying zone facilities. In addition, taxpayers may elect to defer 
capital gains from certain sales and re-investments in qualified 
empowerment zone assets. Taxpayers may also exclude certain gain from 
the sale of qualifying empowerment zone stock that is held for more 
than five years.
    The wage credit provides a 20 percent subsidy on the first $15,000 
of annual wages paid to residents of empowerment zones by businesses 
located in these communities, if substantially all of the employee's 
services are performed within the zone. By lowering the cost of labor, 
the wage credit encourages new businesses to locate in zones, and 
encourages those businesses already there to expand, providing jobs and 
opportunities for self-sufficiency for zone residents.
    Enterprise zone businesses are allowed to expense the cost of 
certain property up to an additional $35,000 above the amounts 
generally available under section 179 of the Internal Revenue Code. In 
addition, only 50 percent of the cost of such property counts toward 
the aggregate annual limit on section 179 expensing. This incentive is 
designed to increase investment in machines, computers and other 
tangible business property within empowerment zones by small 
businesses.
    Enterprise zone businesses are also permitted access to a special 
class of tax-exempt private activity bonds. Limits are placed on the 
amount of such financing available to each zone. Rural zones are 
allowed $60 million of such financing, urban zones with less than 
100,000 residents are allowed $130 million of such financing and urban 
zones with at least 100,000 residents are allowed $230 million of such 
financing. These bonds are not subject to the State's volume cap on 
private activity bonds.
    The Community Renewal Tax Relief Act of 2000 added two provisions 
to limit capital gains taxation on certain investments within 
empowerment zones to encourage greater private investment in the zones. 
Taxpayers are allowed to roll over the capital gain from the sale of 
qualified empowerment zone assets held more than one year, if a 
replacement qualified empowerment zone asset is purchased in the same 
zone as the asset sold. Qualified empowerment zone assets include 
certain stock and partnership interests in an enterprise zone business 
and certain tangible property used in an enterprise zone business. This 
provision applies to assets acquired after December 21, 2000.
    In addition, taxpayers other than corporations are allowed to 
exclude 60 percent of the gain on the sale or trade of qualified small 
business stock held more than 5 years, if the business also qualifies 
as an enterprise zone business. Taxpayers are normally allowed to 
exclude 50 percent of the gain on the sale of qualified small business 
stock. This provision applies to stock acquired after December 21, 
2000.

Enterprise Communities

    In addition to empowerment zones, OBRA 93 provided for the 
designation of 95 enterprise communities, 65 in urban areas and 30 in 
rural areas. Qualified businesses in these communities are entitled to 
the same favorable tax-exempt financing benefits as those in 
empowerment zones. Many of these enterprise communities have 
subsequently been re-designated as part of an empowerment zone or a 
renewal community and are no longer designated as an enterprise 
community. Currently, 66 enterprise communities qualify for tax-exempt 
financing, 40 in urban areas and 26 in rural areas. A second round of 
rural enterprise communities were authorized under the Food and Drug 
Administration and Related Agencies Appropriations Act, 1999 
(Agriculture Appropriations Act 1999), but this second round of rural 
enterprise communities were not entitled to the tax-exempt financing 
benefits.

Renewal Communities

    The Community Renewal Tax Relief Act of 2000 authorized 40 renewal 
communities, at least 12 of which must be in rural areas. The renewal 
communities were chosen through a competitive application process 
similar to that used for empowerment zones. The 40 communities were 
designated by the Department of Housing and Urban Development at the 
beginning of this year and that designation continues through 2009.
    Taxpayers may utilize the renewal community tax benefits beginning 
this year. These benefits include the following: (1) a 15-percent wage 
credit for qualifying wages; (2) additional section 179 expensing for 
qualified renewal property; (3) a commercial revitalization deduction; 
and (4) an exclusion for capital gains on qualified community assets 
held more than 5 years.
    The wage credit and increased section 179 expensing operate in a 
similar fashion as in empowerment zones. The primary difference is that 
the wage credit is smaller, equal to 15 percent for the first $10,000 
of wages.
    The commercial revitalization deduction is designed to foster the 
development or rehabilitation of commercial real estate in renewal 
communities. This deduction is applicable to certain nonresidential 
real property or other property functionally related to nonresidential 
real property. A taxpayer may elect to either: (1) deduct one-half of 
any qualified revitalization expenditures that would otherwise be 
capitalized for any qualified revitalization building in the tax year 
the building is placed in service, or (2) amortize all such 
expenditures over a 120-month period beginning with the month the 
building is placed in service. A qualified revitalization building is 
any building and its structural components placed in service by the 
taxpayer in a renewal community. If the building is new, the original 
use of the building must begin with the taxpayer. If the building is 
not new, the taxpayer must substantially rehabilitate the building and 
then place it in service. The total amount of qualified revitalization 
expenditures for any building cannot be more than the smaller of $10 
million or the amount allocated to the building by the commercial 
revitalization agency for the state in which the building is located. A 
$12 million dollar cap on allowed commercial revitalization 
expenditures is placed on each renewal community annually.
    In order to help stimulate private investment in renewal 
communities, qualified capital gain earned on qualified community 
assets is excluded from gross income. A qualified community asset 
includes stock or a partnership interest in a qualified renewal 
community business and certain tangible property used in a renewal 
community business. To qualify for the capital gain exclusion, the 
asset must be purchased after December 31, 2001 and before January 1, 
2010, and it must be held for at least five years.

District of Columbia Incentives

    A special set of incentives was enacted in 1997 to help redevelop 
the District of Columbia. The Taxpayer Relief Act of 1997 included tax 
incentives for both residents and businesses to locate in the District 
of Columbia. A $5,000 income tax credit for first-time home purchasers 
was designed to attract new homeowners to the District. A second set of 
incentives, similar to those provided in empowerment zones, was 
intended to encourage the establishment of new businesses in the 
District as well as new investment in existing enterprises.
    Subject to certain income restrictions, the $5,000 credit is 
available to first-time purchasers of a principal residence in the 
District of Columbia who have not owned houses in the District during 
the year preceding the purchase. Although the credit was initially 
available for property purchased through the end of 2000, subsequent 
legislation extended the incentive through the end of 2003.
    Other tax incentives offer a range of economic inducements to 
businesses operating in the more economically disadvantaged parts of 
the District. With the exception of a provision related to the sale of 
capital assets, these incentives are available only to businesses 
located either within the boundaries of the D.C. Enterprise Community, 
or located in census tracts elsewhere in the District where the poverty 
rate exceeds 20 percent. These areas are collectively known as the DC 
Zone. With certain minor adjustments, businesses in the DC Zone may 
claim the same wage credit, expensing of certain capital investment, 
and tax exempt bond financing as businesses in an empowerment zone. In 
addition, as in renewal communities, capital gains realized from the 
sale of certain assets are excludable from the income of the seller. 
For the purposes of this provision alone, the DC Zone is expanded to 
include all census tracts in the District in which the poverty rate 
exceeds 10 percent.

New York Liberty Zone

    While the area around the World Trade Center in New York City would 
not have been described as an economically distressed community prior 
to the extraordinary events of September 11, 2001, the horrible 
destruction of life and property in that area due to the terrorist 
attacks prompted both the Administration and the Congress to support 
tax incentives targeted to helping New York City recover economically. 
I commend you, Mr. Chairman, and other Members of the Ways and Means 
Committee for the leadership you exhibited in helping to enact the Job 
Creation and Worker Assistance Act of 2002.
    Some of the tax incentives provided in the New York Liberty Zone 
are similar to the tax incentives offered in empowerment zones, while 
others were designed to meet the unique challenges facing New York City 
in the aftermath of the September 11 terrorist attacks. As in 
empowerment zones, qualified businesses are allowed a wage credit, 
increased section 179 expensing, and access to tax-exempt financing. 
Provisions specific to the New York Liberty Zone include 30 percent 
expensing of certain property, accelerated depreciation of qualified 
leasehold improvement property, extension of the replacement period for 
certain property involuntarily converted, and an additional advance 
refunding of bonds for facilities located in New York City.
    The wage credit is allowed for certain employees who work in New 
York City through an extension of the work opportunity tax credit 
(WOTC). The new targeted group for the WOTC includes employees of 
businesses located in the New York Liberty Zone if substantially all of 
the employee's services for the business are performed within the New 
York Liberty Zone. In addition, the new targeted group includes 
employees of businesses that relocated from the New York Liberty Zone 
due to the physical destruction or damage of their workplaces by the 
September 11, 2001 terrorist attacks to another location within New 
York City, provided that substantially all of the employee's services 
are performed within New York City. Only businesses with an average of 
200 or less employees during the taxable year are eligible for the 
credit. The credit is effective for wages paid or incurred for work 
performed during calendar year 2002 or 2003.
    An increase in section 179 expensing of $35,000 is allowed for 
property placed in service by taxpayers after September 10, 2001, and 
before January 1, 2007, if the original use of the property in the New 
York Liberty Zone commences with the taxpayer after September 10, 2001 
and substantially all of the use of the property is in the New York 
Liberty Zone. As in empowerment zones and renewal communities, only 50 
percent of the value of such property counts toward the aggregate 
annual limit on section 179 expensing.
    The Governor of New York State and the Mayor of New York City are 
each given an allowance to issue up to $4 billion of tax-exempt private 
activity bonds before January 1, 2005. The bonds may be used to finance 
the acquisition, construction, rehabilitation and renovation of 
nonresidential real property, residential rental real property, and 
public utility property in the New York Liberty Zone. The Governor and 
the Mayor may each designate up to $1 billion of such bonds for the 
acquisition, construction, rehabilitation and renovation of certain 
commercial real property located outside the New York Liberty Zone and 
within New York City. These bonds are not subject to the State's volume 
cap on private activity bonds.
    A taxpayer is allowed an additional first-year depreciation 
deduction equal to 30 percent of the adjusted basis of qualified New 
York Liberty Zone property. In order to qualify for this partial 
expensing, the property must be (1) a property with a MACRS recovery 
period of 20 years or less, (2) computer software other than computer 
software covered by section 197, (3) water utility property, or (4) 
certain nonresidential real property and residential rental property. 
Nonresidential real property and residential rental property is 
eligible for the partial expensing only to the extent such property 
rehabilitates real property damaged, or replaces real property 
destroyed or condemned, as a result of the terrorist attacks of 
September 11, 2001. This provision applies neither to property that 
would otherwise qualify for 30 percent expensing under section 168(k), 
nor to qualified New York Liberty Zone leasehold improvement property. 
Furthermore, to qualify for the partial expensing, substantially all of 
the use of the property must be in the New York Liberty Zone and the 
original use of the property in the New York Liberty Zone must commence 
with the taxpayer after September 10, 2001 (except for certain leased 
property). Finally, qualified property must be purchased by the 
taxpayer after September 10, 2001, and placed in service before January 
1, 2007, or for nonresidential property and residential rental 
property, January 1, 2009.
    Qualified New York Liberty Zone leasehold improvement property 
placed in service after September 10, 2001 and before January 1, 2007 
is treated as 5-year property for the purposes of section 168 
depreciation rules, with deductions taken using the straight-line 
method. Under the alternative depreciation system (section 168(g)), 
such property has a class life of 9 years. Qualified New York Liberty 
Zone leasehold improvement property is qualified leasehold improvement 
property as defined in section 168(e)(6) that is placed in service in 
the New York Liberty Zone.
    When property used in a trade or business is damaged or destroyed, 
the taxpayer may deduct any loss sustained to the extent that the loss 
is not compensated by insurance or otherwise. When insurance or other 
compensation results in a gain from the damage or destruction of 
property, then the taxpayer may elect to reduce the current recognition 
of gain by purchasing a replacement property within a specific time 
period which is similar or related in use to the damaged or destroyed 
property (section 1033(a)). For property in the New York Liberty Zone 
that was involuntarily converted as a result of the terrorist attacks 
on September 11, 2001, the replacement period is extended from 2 years 
to 5 years if substantially all of the use of the replacement property 
is in New York City.
    Finally, certain bonds for facilities located in New York City are 
given one additional advance refunding. There is an aggregate limit of 
$9 billion advance refunding bonds that may be issued before January 1, 
2005.

New Markets Tax Credit

    The new markets tax credit was created by the Community Renewal Tax 
Relief Act of 2000 to encourage capital investments in businesses that 
are located in low-income communities. The new markets tax credit 
provides a tax credit to investors who make ``qualified equity 
investments'' in privately-managed investment vehicles called 
``community development entities,'' or ``CDEs.'' The CDEs are required 
to invest substantially all of the proceeds of the qualified equity 
investments in low-income communities. For example, CDEs may make loans 
or capital investments in companies that operate in low-income 
communities.\1\
---------------------------------------------------------------------------
    \1\ For these purposes, ``low-income community'' is defined as any 
population census tract if (1) the poverty rate for the tract is at 
least 20 percent, or (2) the median family income for the tract does 
not exceed 80 percent of statewide median family income (or, in the 
case of metropolitan areas, metropolitan area median family income, if 
greater).
---------------------------------------------------------------------------
    Eligible investors in a CDE are entitled to claim tax credits over 
a seven-year period beginning on the date of the initial investment. 
The value of the credits to investors will be about 30 percent of the 
amount of the qualified equity investment on a present value basis.
    In order for an entity to qualify as a CDE, it must meet three 
requirements. First, the primary mission of the entity must be to serve 
or provide investment capital for low-income communities or low-income 
persons. Second, the entity must maintain accountability to residents 
of low-income communities through their representation on the entity's 
governing or advisory board. Third, the entity must be certified as a 
CDE by the Treasury Department's Community Development Financial 
Institutions Fund (CDFI Fund).
    In order for a CDE to issue qualified equity investments with 
respect to which new markets tax credits may be claimed, the CDE must 
apply for and receive from the CDFI Fund an allocation of credit 
authority for those investments. A total of $15 billion of equity 
investments will be able to qualify for this authority on a phased-in 
basis between 2001 and 2007. The CDFI Fund will allocate this authority 
among CDEs based on a competitive application process. In making these 
allocations, the CDFI Fund is required to give priority to any entity 
(1) with a record of having successfully provided capital or technical 
assistance to disadvantaged businesses or communities, or (2) which 
intends to invest substantially all of the proceeds of the qualified 
equity investments in one or more businesses in which persons unrelated 
to the entity hold the majority equity interest.
    The Treasury Department has issued temporary and proposed tax 
regulations regarding the new markets tax credit and is currently 
accepting and reviewing comments on the regulations.

Qualified Zone Academy Bonds

    State and local governments can issue qualified zone academy bonds 
(QZABs) to fund the improvement of certain eligible public schools. 
Instead of receiving interest payments, an eligible holder of a QZAB 
receives annual Federal income tax credits. These annual credits 
compensate the holder for lending money and, therefore, are treated 
like taxable interest payments for Federal tax purposes. Eligible 
holders are banks, insurance companies, and corporations actively 
engaged in the business of lending money. The credit rate for a QZAB is 
set on its day of sale by reference to credit rates established by the 
Department of the Treasury. The maximum term of a QZAB issued during 
any month is determined by reference to the adjusted applicable Federal 
rate (AFR) published by the Internal Revenue Service for the month in 
which the bond is issued.
    This provision was enacted in the Taxpayer Relief Act of 1997, 
which established authority to issue $400 million of QZABs per year for 
1998 and 1999. This authority was extended to 2000 and 2001 by the 
Ticket to Work and Work Incentives Improvement Act of 1999. The 
Administration proposed that this authority be extended through 2003, 
which was accomplished in the recently enacted Job Creation and Worker 
Assistance Act of 2002. The annual cap is allocated among the States in 
proportion to their respective populations of individuals with incomes 
below the poverty line. Unused authority to issue QZABs may be carried 
forward for two years (three years for authority arising in 1998 and 
1999) after the year for which the authority was established.
    A number of requirements must be met for a bond to be treated as a 
QZAB. First, the bond must be issued pursuant to an allocation of bond 
authority from the issuer's State educational agency. Second, at least 
95 percent of the bond proceeds must be used for an eligible purpose at 
a qualified zone academy. Eligible purposes include rehabilitating 
school facilities, acquiring equipment, developing course materials, or 
training teachers. A qualified zone academy is a public school (or an 
academic program within a public school) that is designed in 
cooperation with business and is either (1) located in an empowerment 
zone or enterprise community, or (2) attended by students at least 35 
percent of whom are estimated to be eligible for free or reduced-cost 
lunches under the Richard B. Russell National School Lunch Act. Third, 
private entities must have promised to contribute to the qualified zone 
academy certain property or services with a present value equal to at 
least 10 percent of the bond proceeds.

Tax-exempt Bonds

    States and local governments may issue tax-exempt bonds to 
revitalize economically disadvantaged communities so long as: (1) no 
more than ten percent of the bond proceeds is used by private entities 
in a trade or business if payments or security associated with that use 
are available to pay principal or interest on the bonds; and (2) no 
more than five percent of the bond proceeds is loaned to private 
businesses or individuals. If these private activity requirements are 
not met, the following types of tax-exempt private activity bonds may 
nonetheless be issued, subject to per-State volume limits, for 
revitalization purposes: mortgage revenue bonds (``MRBs''), bonds for 
qualified residential rental projects, and qualified redevelopment 
bonds.
    MRBs may be issued to finance the purchase, or qualifying 
rehabilitation or improvement, of single-family, owner-occupied homes 
located within the jurisdiction of the issuer of the bonds. Interest on 
MRBs is excluded from gross income if they meet the requirements for 
``qualified mortgage bonds'' or ``qualified veterans' mortgage bonds.'' 
In addition, in some circumstances, ``mortgage credit certificates'' 
may be issued as an alternative to qualified mortgage bonds.
    In general, qualified mortgage bonds must finance residences for 
first-time home buyers; the purchase price of the residence may not 
exceed certain amounts; and the purchaser must satisfy certain income 
limitations. In addition, certain special rules apply with respect to 
``targeted areas.'' A targeted area is defined as (1) a census tract in 
which 70 percent or more of the families have incomes that are 80 
percent or less of the Statewide median family income, or (2) an area 
of chronic economic distress designated by the State and approved by 
the Secretary of the Treasury and the Secretary of Housing and Urban 
Development.
    Exempt facility bonds may be used to fund qualified residential 
rental projects, if at least 95 percent of the net bond proceeds are 
used to provide a qualified residential rental project. A qualified 
residential rental project is a multifamily rental project in which one 
of the following two requirements is met at all times during the 
qualified project period: (1) 20 percent or more of the residential 
units in such project are occupied by individuals whose income is 50 
percent or less of area median gross income; or (2) 40 percent or more 
of the residential units in such project are occupied by individuals 
whose income is 60 percent or less of area median gross income.
    Qualified redevelopment bonds are bonds for which at least 95 
percent of the net bond proceeds are used for redevelopment purposes in 
a locally designated blighted area. The payment of principal and 
interest must be primarily secured by taxes of general applicability 
imposed by a general purpose government, or by incremental property tax 
revenues that are reserved exclusively for debt service on such issue 
(and similar issues). Blighted areas are designated by a local 
governing body based on the substantial presence of factors such as 
excessive vacant land on which structures were previously located, 
abandoned or vacant buildings, substandard structures, vacancies, and 
delinquencies in payment of real property taxes.
    The volume of certain tax-exempt private activity bonds, including 
qualified mortgage bonds, bonds for qualified residential rental 
projects, and qualified redevelopment bonds, that States and local 
governments may issue in each calendar year is limited by State-wide 
volume limits. The current annual volume limits are $75 per resident of 
the State or $225 million if greater. These dollar limits are indexed 
for inflation for years after 2002.

Indian Employment Credit

    Unfortunately, many residents of Native American communities 
continue to struggle economically. The Indian Employment Credit 
provides an incentive for job growth in these communities. Employers 
may claim an Indian Employment Credit on the qualified wages and 
employee health insurance costs paid to an enrolled member of an Indian 
tribe in compensation for services performed on or near a reservation. 
The credit amount is equal to 20 percent of the excess of the 
employer's current year qualified wages and employee health insurance 
costs over the sum of the corresponding amounts paid or incurred by the 
employer during calendar year 1993. The aggregate amount of qualified 
wages and health insurance costs may not exceed $20,000 per person per 
year. This incentive was due to expire at the end of 2003, but has been 
extended through 2004 by the recently enacted Job Creation and Worker 
Assistance Act of 2002.

Depreciation of Property Used on Indian Reservations

    Another tax incentive that encourages economic development on 
Indian reservations is the accelerated depreciation of qualified Indian 
reservation property. This accelerated depreciation is accomplished 
through the use of shorter recovery periods for certain property. In 
order to qualify for this provision, a property must (1) be used by the 
taxpayer predominantly in the active conduct of a trade or business 
within an Indian reservation, (2) not be used outside the Indian 
reservation on a regular basis, (3) not be acquired from a person 
related to the taxpayer, and (4) not be used for the purpose of certain 
gaming activities. In addition, property for which the alternative 
depreciation system is applied is not eligible for this provision. This 
provision was scheduled to expire for property placed in service after 
2003, but was extended through 2004 by the recently enacted Job 
Creation and Worker Assistance Act of 2002.

Low-income Housing Tax Credit

    Taxpayers who invest in qualified low-income rental units are 
eligible for the low-income housing tax credit (LIHTC). The LIHTC may 
be claimed over a 10-year period for a portion of the cost of rental 
housing occupied by tenants having incomes below specified levels. The 
credit percentage for newly constructed housing that is not federally 
subsidized is adjusted monthly by the Internal Revenue Service so that 
generally the 10 annual credit amounts have a present value of 70 
percent of qualified basis. The credit percentage for new buildings 
that are federally subsidized and for existing buildings is calculated 
to have a present value of 30 percent of qualified basis. In general, 
the aggregate first-year credit authority allocated to each State is 
$1.75 per capita in 2002 and will be indexed for inflation in following 
years. Tax credits are allocated to particular projects by State or 
local housing agencies pursuant to publicly announced plans for 
allocation. Authority to allocate credits may be carried forward by 
agencies to the following calendar year. Unused credit allocations may 
be returned to an agency for reallocation. Credit allocations may 
revert to the agency if less than 10 percent of the taxpayer's 
reasonably expected qualifying basis is expended within 6 months after 
receiving the allocation. Authority not used in a timely manner reverts 
to a national pool for distribution to States requesting additional 
authority. Generally, a qualifying building must be placed in service 
in the year the credit is allocated unless at least 10 percent of the 
taxpayer's reasonably expected basis in the property is expended in the 
year of allocation or within 6 months after the allocation date. Rules 
are provided for the allocation of costs to individual units in multi-
unit projects and to property that is part of a project but used for 
purposes other than rental housing. The tax credit period begins with 
the taxable year in which a qualified building is placed in service 
(or, in certain circumstances, the succeeding taxable year). Credits 
are recaptured if the required number of units is not rented to 
qualifying tenants for a period of 15 years.
    In certain geographic areas designated by the Secretary of Housing 
and Urban Development, LIHTC amounts awarded to projects may be 
increased by up to 30 percent. These areas are: Difficult Development 
Areas, defined as metropolitan areas and nonmetropolitan counties where 
development costs are high relative to area incomes (limited to 20 
percent of U.S. metropolitan and nonmetropolitan populations); and 
Qualified Census Tracts, census tracts, containing not more than 20 
percent of their metropolitan area or State nonmetropolitan 
populations, where either at least 50 percent of households have 
incomes below 60 percent of area median income, or the poverty rate is 
at least 25 percent.

Work Opportunity Tax Credit

    Employers are generally entitled to the work opportunity tax credit 
(WOTC) for the first $6,000 of wages paid to several targeted groups of 
economically disadvantaged workers or workers with disabilities. For 
workers employed between 120 and 400 hours per year, the credit rate is 
25 percent of qualified wages. For workers employed over 400 hours per 
year, the credit rate is 40 percent. Employers must reduce their 
deduction for wages paid by the amount of the credit claimed. Current 
WOTC target groups include qualified: (1) recipients of Temporary 
Assistance to Needy Families; (2) veterans; (3) ex-felons; (4) high-
risk youth; (5) participants in State-sponsored vocational 
rehabilitation programs; (6) summer youth; (7) food stamp recipients; 
and (8) Supplemental Security Income recipients.
    A qualified high-risk youth employee listed above is an individual 
at least 18 years old but less than 25, who lives within an empowerment 
zone, enterprise community, or renewal community. A qualified summer 
youth employee works for the employer between May 1 and September 15, 
is 16 or 17 years old, and resides within an empowerment zone, 
enterprise community, or renewal community. The limit on the wages of a 
summer youth employee that qualify for the credit is reduced to $3,000.
    At the time the Administration proposed the FY 2003 budget, the 
WOTC was scheduled to expire at the end of 2001. The Administration 
proposed that the WOTC be extended through 2003. This was accomplished 
by the Job Creation and Worker Assistance Act of 2002.
    The House is considering the Encouraging Work and Supporting 
Marriage Act of 2002. The bill would combine the WOTC and the welfare 
to work (WTW) credit by making persons eligible for WTW a WOTC target 
group with special rules. The WTW credit enables employers to claim a 
tax credit for eligible wages paid to certain long-term welfare 
recipients. The changes contained in the House bill will simplify the 
computation of the credit for employers that hire members of the 
economically disadvantaged targeted groups. We commend the proposed tax 
simplification.

Brownfields Remediation Costs

    A brownfield site is real property, the expansion, redevelopment, 
or reuse of which may be complicated by the presence or potential 
presence of a hazardous substance, pollutant, or contaminant. Because 
lenders, investors, and developers fear the high and uncertain costs of 
cleanup, they avoid developing contaminated sites. Blighted areas of 
brownfields hinder the redevelopment of affected communities and create 
safety and health risks for residents. The obstacles in cleaning these 
sites, such as regulatory barriers, lack of private investment, and 
contamination and remediation issues, are being addressed through a 
wide range of Federal programs, including the tax incentive for 
brownfields remediation.
    To encourage the cleanup of contaminated sites, the brownfields tax 
incentive permits the current deduction of certain environmental 
remediation costs. Environmental remediation costs qualify for current 
deduction if the expenditures would otherwise be capitalized (generally 
costs incurred to clean up land and groundwater that increase the value 
of the property) and are paid or incurred in connection with the 
abatement or control of hazardous substances at a qualified 
contaminated site. A qualified contaminated site generally is any 
property (1) that is held for use in a trade or business, for the 
production of income, or as inventory; (2) at or on which there has 
been a release, threat of release, or disposal of a hazardous 
substance; and (3) that is certified by the appropriate State 
environmental agency as to the release, threat of release, or disposal 
of a hazardous substance. Sites that are identified on the national 
priorities list under the Comprehensive Environmental Response, 
Compensation, and Liability Act of 1980 (CERCLA) do not qualify as 
qualified contaminated sites. The brownfields tax incentive applies to 
expenditures paid or incurred before January 1, 2004.

Administration Budget Proposals

    The President's Budget for FY 2003 includes two proposals to 
improve upon these tax incentives and further encourage development in 
economically distressed communities. In addition, there are other 
Administration proposals that would help low-income individuals, such 
as the creation of Individual Development Accounts, increased 
incentives for charitable giving, and a refundable tax credit for the 
purchase of health insurance, which are not discussed in this 
testimony.

Single-Family Housing Tax Credit

    The Administration believes that quality of life in distressed 
neighborhoods can be improved by increasing home ownership. Existing 
buildings in these neighborhoods often need extensive renovation. 
Renovation may not occur because the costs involved exceed the prices 
at which the housing units could be sold. Similarly, the costs of new 
construction may exceed their market value. Properties will sit vacant 
and neighborhoods will remain blighted unless the gap between 
development costs and market prices can be filled. The Administration 
has proposed the creation of a single-family housing tax credit (SFHTC) 
to expand the possibility of home ownership for low-income families.
    First-year credit authority of $1.75 per resident would be made 
available annually to States (including U.S. possessions) beginning in 
calendar year 2003. The per capita amount would be indexed for 
inflation beginning in 2004. Pursuant to a plan of allocation, State or 
local housing credit agencies would award first-year credits to housing 
units comprising a project for the development of single-family housing 
in certain low-income census tracts. Rules similar to the current law 
rules for the LIHTC would apply regarding carry forward and return of 
unused credits and a national pool for unused credits. Units in 
condominiums and cooperatives could qualify as single-family housing. 
Credits would be awarded as a fixed amount for individual units 
comprising a project. The present value of the credits with respect to 
a unit could not exceed 50 percent of the qualifying costs of the unit. 
For these purposes, present value would be determined based on the mid-
term Applicable Federal Rate in effect for the date the agency 
allocated credits to the project. Rules similar to the current law 
rules for the LIHTC would apply to determine eligible costs of 
individual units. The Treasury Department would have the authority to 
promulgate necessary reporting requirements.
    The taxpayer (developer or investor partnership) owning the housing 
unit immediately prior to the date of sale to a qualified buyer would 
be eligible to claim SFHTCs over a 5-year credit period beginning on 
that date. No credits with respect to a housing unit would be available 
unless the unit was sold within a 1-year period after the construction 
or rehabilitation was completed.
    Eligible homebuyers would have incomes at 80 percent (70 percent 
for families with less than 3 members) or less of applicable median 
family income. They would not have to be first-time homebuyers. 
Homebuyers would be subject to recapture provisions in certain 
circumstances. In particular, recapture rules would apply if the 
homebuyer (or a subsequent buyer) sold the property to a nonqualified 
buyer within 3 years after the date of initial sale of the unit. No 
recapture provision would apply to taxpayers eligible to claim SFHTCs. 
If a housing unit for which any credit is claimed were converted to 
rental property by the initial homebuyer within the first 3 years 
following the purchase, expenses relating to the unit would not be 
allowed as a deduction with respect to that unit during that time 
period.
    The proposal would be effective beginning with first-year credit 
allocations for calendar year 2003. The revenue cost of this proposal 
is expected to be $2.4 billion over FY 2003-2007.

Brownfields Remediation Costs

    The Administration believes that encouraging environmental 
remediation is an important national goal. The brownfields provision 
encourages the cleanup of contaminated brownfields, thereby enabling 
them to be brought into productive use in the economy and mitigating 
potential harms to public health. The current-law incentive was made 
temporary to encourage faster cleanup of brownfields. Experience has 
shown, however, that many taxpayers are unable to take advantage of the 
incentive because environmental remediation often extends over a number 
of years. For that reason, the President's budget proposed a permanent 
extension of the brownfields tax incentive. Extending the special 
treatment accorded to brownfields on a permanent basis would remove 
doubt among taxpayers as to the future deductibility of remediation 
expenditures and would promote the goal of encouraging environmental 
remediation. The Administration's brownfields proposal was introduced 
by Mr. Coyne and Mr. Weller as H.R. 1439.
    The revenue cost of the proposal is estimated to be $1.1 billion 
over FY 2003-2007. Treasury estimates that the proposal, at a $300 
million annual cost, will leverage approximately $2 billion per year in 
private investment.
                               Conclusion
    I would like to thank you, Mr. Chairman, Mr. Coyne and the Members 
of the Subcommittee for providing the chance today to discuss these 
important issues. I hope that, working together, we can ensure that all 
Americans share in our country's prosperity and have even greater 
opportunity in the future. While this concludes my prepared testimony, 
I would be pleased to respond to your questions.

                               

    Chairman HOUGHTON. Thanks very much, Mr. Solomon.
    I think we will go to the questions. I want to ask a very 
brief question, and it is sort of a generic question which you 
may be able to answer. I am sure you have the answer right on 
the tip of your tongue.
    As you know, most of us here are big supporters of the work 
opportunity tax credit, but the question is, is it a good 
incentive for business? Does it work? Is it the right thing? 
Are we doing the right thing?
    Mr. SOLOMON. Certainly, I believe that the work opportunity 
tax credit does the right thing. Providing tax incentives to 
help employers provide opportunities for employees is very 
important.
    Chairman HOUGHTON. Thank you.
    Mr. BERNARDI. I would just like to add that this is the 
other way of looking at it, as opposed to grants to providing 
this opportunity to a businessperson. As a former mayor in our 
center city, there were many areas that were neglected for a 
number of years. This kind of an incentive package allows a 
businessperson to come into that area and utilize those wage 
credits--if it is a Renewal Community that is $1,500 per 
employee, if it is an Empowerment Zone, it is $3,000. I believe 
one of the Congressmen mentioned the welfare-to-work benefit of 
$3,500 the first year, $5,000 the second year for individuals 
that were long-term welfare recipients.
    It comes down to the bottom line. If a businessperson is 
going to be able to save money on their taxes, they are going 
to be able to invest in areas that have been basically 
neglected for years.
    On the selection process, the communities that were 
selected were the communities that were most in need. In 
traveling the country and making many of the announcements 
myself, I can see the enthusiasm and the opportunity. People 
filled with hope that they would have something that they would 
be able to do at the local level without government 
interference, if you will, and have the opportunity to create 
jobs and give a better quality of life to their people.
    During the Renewal Community announcements, Mr. Chairman, I 
was doing those in New York, as you recall, and could not land 
in the great City of Jamestown because of the cloud cover. I 
think that is the last time we spoke.
    Chairman HOUGHTON. I had to give your speech for you.
    [Laughter.]
    Mr. BERNARDI. Jamestown, along with the other 39 
recipients, feel very energized by the Implementation 
Conference that is taking place today. We have the CPAs, the 
tax experts, the Treasury Department, the people who understand 
the advantages that the business communities can access to 
create businesses, to create jobs.
    Chairman HOUGHTON. Thanks very much. I really appreciate 
that.
    Mr. Coyne.
    Mr. COYNE. Thank you, Mr. Chairman.
    Mr. Bernardi, are the businesses that are eligible to claim 
Renewal Community tax incentives, are they largely new business 
moving into the depressed area or are they existing businesses 
planning to expand or improve their operation?
    Mr. BERNARDI. Mr. Coyne, it can be both. It depends on the 
marketing of the Renewal Communities. Tucson, Arizona, has a 
website where they are available to all of the existing 
businesses that are in the Empower Zone and census tracts. They 
will be given an opportunity to participate, but at the same 
time you want to bring new business in. So the answer would be 
both.
    Mr. COYNE. So, to the extent that existing businesses might 
take advantage of the opportunity, it can be used to attract 
new businesses into the community.
    Mr. BERNARDI. Yes, it can.
    Mr. COYNE. What are some of the unique plans that are 
underway in using Renewal Community tax incentives? Can you 
tell us about some of the more unique and innovative plans?
    Mr. BERNARDI. Well, the wage credits, the work opportunity 
tax credit are examples. This is a tax credit where an 
individual that is difficult to employ, usually a younger 
person between the ages of 18 and 24, perhaps not educated, 
having difficulty, there is a tax credit of $2,400 a year that 
can be provided in addition to the Renewal Community wage 
credit of $1,500 a year. There is the welfare-to-work credit. 
There is the increase section 179 deduction on certain 
depreciable property, such as equipment and machinery. These 
are some of the myriad of incentives that are available for the 
communities to take advantage of.
    Mr. COYNE. Anyone else want to comment?
    Mr. SOLOMON. No.
    Mr. COYNE. Thank you.
    Chairman HOUGHTON. Mr. Hulshof.
    Mr. HULSHOF. Thank you, Mr. Chairman.
    Welcome, gentlemen. It is good to have you here in front of 
the Oversight Subcommittee. I really wanted to focus a little 
bit about some of the applications. As you know, Congress, when 
we set upon this number of 40 Renewal Communities and we 
designated 28 urban and then 12 rural settings, I also--Mr. 
Bernardi, you mentioned over 100 applications. I think the 
actual number was around 103. What percentage, roughly--I am 
not asking for a specific percentage--what percentage of those 
103 applications were from the urban communities vis-a-vis the 
rural communities? Were they 50-50, were most of them urban 
or--Mr. Solomon, maybe, do you have that information, or----
    Mr. BERNARDI. There were 103 applications, 77 that were 
eligible, of that 40 received the designation. They were mostly 
urban, I have been told.
    Mr. HULSHOF. The objective criteria--it is, again, my 
understanding that--and of the 77 that you found to be 
qualified, were you able to immediately write off those, for 
instance, that did not have this pervasive poverty level or 
unemployment levels? Is that what disqualified the first 28 or 
so?
    Mr. BERNARDI. Yes. For the most part. If they didn't--if 
they weren't able in an objective way to have the poverty level 
or the unemployment level, they were disqualified.
    Mr. HULSHOF. The census tract requirements. Was that 1990 
census data or 2000 census data, or maybe a combination?
    Mr. BERNARDI. It was 1990 census data for the requirements 
on population unemployment and poverty, because we won't have 
the complete census numbers until perhaps the fall of this 
year.
    Mr. HULSHOF. What, if anything, Mr. Bernardi, did HUD do to 
help applicants improve their chances of being selected?
    Mr. BERNARDI. Well, we had five regional workshops in June 
2001. We sent out kits, which were available through the Web, 
we had telephone conversations, and through our regional 
offices, we made sure that everyone could participate in the 
process and understand the process. Quite candidly, we need to 
always do a better job of informing all of the communities what 
is available. That is why I am just so pleased with this 
conference that is taking place right now. All of the 
information that anyone would want is here, so they will be 
able to access those tax incentives to help their communities.
    Mr. HULSHOF. You mentioned the conference. Is there a 
strong interest for additional communities at this time, or do 
you think that this number is an adequate number?
    Mr. BERNARDI. Well, this was the number that was 
designated, and I feel strongly that it will let us see some 
performance as we go down the road and see how this conference 
culminates. We don't want to stop here. We want to do some 
regional conferences, we want to make sure that everyone that 
is in this room and is attending this conference has an 
opportunity to follow up with us. We must continue to provide 
the assistance so that the enthusiasm and the willingness to 
create these economic opportunities for people continues.
    Mr. HULSHOF. Mr. Solomon, let me ask you just a couple of 
questions as well. Mr. Bernardi was talking about wage credits. 
Perhaps as a predicate to this question, my congressional 
district in Missouri is predominantly rural. I think one of the 
communities that actually submitted an application did not meet 
that objective criteria of unemployment--which is good for the 
local community because their unemployment was not as 
pervasive.
    Yet, it is my sense that a lot of small businesses, Mr. 
Solomon, may not qualify because I think family members, the 
wage credits for family members are excluded. Is that true?
    Mr. SOLOMON. That is correct with respect to the wage 
credit. You don't get a wage credit for compensation paid to 
family members.
    Mr. HULSHOF. As a result, then, a small business can 
actually be excluded because family members who may be part of 
the business, this wage credit is in that calculation?
    Mr. SOLOMON. Well, it may not be excluded. That is, it may 
generally qualify for various benefits under the Renewal 
Communities tax incentives. Nevertheless, for the wage credit, 
it may not get a wage credit with respect to compensation paid 
to family members.
    Mr. HULSHOF. What is the policy reason for that 
determination?
    Mr. SOLOMON. This provision comes from the Empowerment Zone 
legislation from 1993, and there really is nothing in the 
legislative history or the statute that explains it. The best 
one might infer is that there was some concern about a lack of 
arm's length dealing in certain situations in dealing with 
family members. So that is perhaps the best inference that I 
can make from the statute and legislative history.
    Mr. HULSHOF. So if congressional intent were to be 
otherwise, or additional legislation, follow-up legislation--I 
mean, you were making your determination based upon your best 
inference of congressional intent?
    Mr. SOLOMON. Solely from the statute and the legislative 
history.
    Mr. HULSHOF. Thank you, all.
    Chairman HOUGHTON. Thanks very much, Mr. Hulshof.
    Mr. Jefferson.
    Mr. JEFFERSON. Thank you, Mr. Chairman.
    I want to ask kind of a technical question. We were 
fortunate to receive a Renewal Community designation in New 
Orleans. We are already looking at little areas that were left 
out close to the area that was approved, and there is talk 
about seeking post-application approval of some of these areas 
into which we would like to expand.
    Have you looked at this issue of changing the Renewal 
Community boundaries post-application approval? If so, what 
does that process entail?
    Mr. SOLOMON. I am sorry, could you repeat the question?
    Mr. JEFFERSON. Yes. In our city, for instance, there has 
been an application approval for a Renewal Community. There is 
some discussion now about expanding the boundaries of it or 
having it extend to some particular area because it might 
facilitate the location of a business or whatever. My question 
is, is there a process established--is it possible to change 
the boundaries post-application approval, and if it is, what is 
the process, or have you thought about that?
    Mr. BERNARDI. The census tracts that are in place, 
obviously, once the designation is made is the census tracts 
that the application was approved, but Empowerment Zones do 
have an opportunity, if they want, to make an amendment to 
that, and to appeal to HUD. Obviously, the criteria to do that 
is that the poverty numbers and the unemployment numbers 
couldn't fluctuate; they would have to be eligible in all other 
criteria. Right now, I don't believe, we are that amenable to 
making those kinds of changes unless, quite candidly, there is 
a compelling reason or reasons to do so. We would look at that.
    I think there is one instance where we have already had 
that kind of an inquiry, to modify a Renewal Community 
boundary, and I believe we are in the process of taking a look 
as to whether or not it can be done.
    Mr. JEFFERSON. As we are looking at this issue of the CRAs, 
or the coordinating responsible authorities that are being put 
together back home, there are some questions as to whether HUD 
ought to provide some tax utilization planning money or market 
tax incentives money to local businesses and prospective 
business entrants. There is no funding provided for that now.
    Has this cropped up in your office as a real issue? If so, 
are the thinking about addressing it in any way?
    Mr. BERNARDI. Well, the conference that is taking place 
right now, obviously, is providing technical assistance and 
information that the communities are going to need to make the 
decisions as to how they want to utilize these tax incentives. 
Also, the designated communities have the opportunity to use 
their CDBG money, for example, the Community Development Block 
Grant money. Some of those, I believe, do that to provide 
additional technical assistance.
    As I said earlier, I believe we are planning to do 
regional--we have done regional conference prior to the 
application process. We are looking forward to going out into 
the country in various regions and continue to conduct 
workshops, to deal with all of the designees from our regional 
offices as well as headquarters.
    Mr. JEFFERSON. I was intrigued with the comments someone 
made about single-family housing tax credits being included in 
the President's budget. Jennifer Dunn and I were working some 
time ago to have the historic tax credits applied to single-
family housing. Do you remember that, Jennifer? It is very 
important to old cities.
    Does this initiative the President has in his budget for 
single-family housing tax credits also apply to the--would it 
cover the historic tax credit issues for single-family housing 
development?
    Mr. SOLOMON. In general, there is a separate rehabilitation 
tax credit, but I don't think that is applicable to what you 
are describing. This particular budget proposal is not keyed to 
whether or not the building is a historic building.
    Mr. JEFFERSON. Just for single-family--it doesn't matter 
whether--it could be or could not be?
    Mr. SOLOMON. It could be a historic building, but it might 
not be a historic building. It applies to both new construction 
and for rehabilitation of previously constructed buildings. It 
could be a historic building; it might not be, but it does 
cover both new construction and rehabilitation.
    Mr. JEFFERSON. Okay, thank you. Thank you, Mr. Chairman.
    Chairman HOUGHTON. Thanks very much.
    Ms. Dunn.
    Ms. DUNN. Thank you very much, Mr. Chairman. I find it very 
exciting to hear about this program. We have talked about it 
for decades. I remember, particularly in the eighties, hearing 
about economic Empowerment Zones and that sort of thing. So, I 
am delighted to see this in action.
    Mr. Chairman, I think I am going to hold my questions, 
because what I really want to hear are the examples from the 
folks who are among these--citizens of these cities. I want to 
know what their plans are, and what they have in mind as they 
have been accepted to be on of these 40 cities.
    I might just ask you one question, and that is did you need 
to market this opportunity to people, or did you find that you 
were breaking down your door? Did people have a clear idea of 
what was expected from them in qualifying, and also a clear 
plan for what they intended to do with all the various credits 
and so forth after they were selected?
    Mr. BERNARDI. There is a great deal of enthusiasm, 
obviously, by the recipients. We find that in the Empowerment 
Zones, the applications and comprehensive plans that they put 
together are a little bit different than the Renewal Community. 
We are very, very excited about working together. This 
conference has shown the enthusiasm. There are representatives 
here, I believe, from just about every one of the 40 Renewal 
Communities. All of the experts are here to answer all of the 
questions regarding the tax benefits that accrues to the 
communities, and with over 100 applications, there is a 
significant amount of interest.
    Mr. SOLOMON. I would say particularly on the tax side, 
education and outreach are very important to explain the tax 
benefits that are available to businesses in Renewal 
Communities. There are many people who may not know exactly the 
extent of the tax incentives that are available, how they work, 
and how they apply to their particular business. So, education 
and outreach are very important.
    Ms. DUNN. I suppose there is one other point that I would 
like to clarify, because I think it is an important part of 
this whole experimental program that I hope someday we will 
broaden. Though the revenues from taxes will fall as a result 
of the credits that are allowed and the tax benefits that are 
allowed to the companies and others who do business in the 
areas, I think it is important for you to make the point that 
there will be more businesses moving into these areas and that 
there will in the long run be more employment and probably 
additional revenues. I am not sure how it is scored, Mr. 
Chairman. Could you comment on that, please?
    Mr. BERNARDI. Obviously, the goal is to create more jobs, 
have more businesses start up, and businesses expand. With 
that, the natural progression would be that there would be more 
tax dollars available after we see the successes.
    Chairman HOUGHTON. Mr. Pomeroy. Oh, Mr. Pomeroy is not 
here. Mr. Ford, have you got a question you would like to ask? 
All right. Then we will go to Mr. Foley.
    Mr. FOLEY. Thank you very much, Mr. Chairman, for holding 
the hearing.
    Mr. Bernardi, four communities within my State of Florida--
Miami, Fort Myers, West Palm, and Riviera--applied to be 
Renewal Communities. None made it. I know these communities and 
I know their needs, so I am curious about how the 40 winners 
selected for the Renewal Community status were picked. If you 
could elaborate a little bit more on this.
    Mr. BERNARDI. Sir, the statute enacted by Congress, the 
CRTR Act of 2000, specified the geographic and demographic 
eligibility criteria and the State and local commitments, of 
which the nominating governments must choose at least 8 of 11 
specified goals and strategies. Then we had an interagency team 
of specialists review the applications and make a determination 
as to whether or not that criteria was met, and that resulted 
in the designations of the 40 communities. If anyone would like 
to look at the individual applications of any community, that 
has been done. We have done that with applicants.
    Mr. FOLEY. Okay, let me give you Riviera, because that is 
not my congressional district. It is in the county, and it is 
represented by Alcee Hastings. It is very poor and has high 
unemployment. In fact, within the Renewal Community, more than 
71 percent of the households are low-income and more than 12 
percent of its residents are unemployed. Burlington, Vermont, 
its unemployment stood at 10 percent. So, is unemployment not 
the sole factor? Are there other mitigating factors that may 
have caused----
    Mr. BERNARDI. Unemployment and poverty are the main 
factors. There are other factors that enter into the scoring 
process.
    Mr. FOLEY. A question I always have, and it is difficult 
for some communities to access grants. How much help do you 
provide through HUD in getting these communities up and 
running? I know some communities always get every grant, 
because they have grant writers, they hire the best, they have 
computer technology. Some communities, like Riviera, are 
struggling to pay their bills. So for them to hire someone 
specifically to try and pursue grants would probably be outside 
their norm.
    Is there programmatic help within HUD to bootstrap some of 
these more impoverished communities?
    Mr. BERNARDI. There is. We do it from headquarters and from 
the regional offices. As I indicated earlier, there were five 
conferences that were held in the month of June around the 
country, prospective grantees to come in and receive as much 
information as they possibly could as to how to access the 
system, and how to be successful in their application.
    Of course, once HUD receives the applications, we are 
prohibited from having any further discussions. We understand 
exactly what you're talking about, the smaller communities that 
don't have the capacity or the wherewithal. At the regional 
office level, that is what our teams are there to do, they go 
out and provide as much pre-information as they possibly can so 
that everyone has, as best as they possibly can, a level 
playing field.
    Mr. FOLEY. Let me ask you this. If the communities that are 
already designated as enterprise zones get special treatment or 
favorability, doesn't that significantly lower the chances that 
other communities that are not enterprise zones would be able 
to participate in a similar program?
    Mr. BERNARDI. No. The 20 enterprise zones, obviously, were 
the first 20 that were selected in the Renewal Community. The 
21st qualified without being an enterprise community.
    Mr. FOLEY. Is there anything Congress needs to do 
additionally to help with these programs, because I see real 
potential here? I am not trying to pick on you because none of 
the four cities in my State got approved. It is not the purpose 
of the inquiry. I will pick on you later, in private.
    Mr. BERNARDI. We designated Jacksonville as an Empowerment 
Zone.
    Mr. FOLEY. Great. Are there other things that we should be 
helpful on as well, because I think it is a two-way street? We 
have to also, legislatively or appropriations-wise, provide the 
impetus to help these communities. I see it as a magnificent--I 
am sure that is why Mr. Ford is here. Memphis, I think, is 
significant in its applications, and others. So, we all want to 
be part of this positive progress for communities that are 
struggling on the margins and open before them those same 
economic opportunities.
    Mr. BERNARDI. Well, I think any time we can improve upon a 
program that we have in place or that we are proposing, we 
would be happy to work with you and members of your staff. We 
welcome any ideas or suggestions that you have where we can 
make it more attractive, more competitive, and include more 
people.
    Mr. FOLEY. Great. Mr. Solomon, I see you nodding your head. 
Did you want to add to the record at all?
    Mr. SOLOMON. No, I did not.
    Mr. FOLEY. Okay, thank you. Thank you, Mr. Chairman.
    Chairman HOUGHTON. Thank you. Any other questions? If not, 
thank you, gentlemen, very much for your participation here.
    Now I would like to call the next panel. Steven Centi, 
Director of Development of Jamestown; Eric Johnson, who is the 
Economic Grants Services Director in Baton Rouge, Louisiana; 
Susan Ramos, the Director of Owsley County Industrial 
Authority, Booneville, Kentucky; Dale Nadeau, Chairman and 
President of Industrial and Business Development in Belcourt, 
North Dakota; and the Honorable Willie Herenton, the Mayor of 
Memphis, Tennessee.
    What I thought I would do, Harold, is I would introduce 
Steven Centi, and you might want to do the same thing for Mayor 
Herenton. If Earl Pomeroy comes along, he can say something 
about Dale Nadeau.
    Well, Mr. Centi, we are delighted to have you here and as 
prerogative of the Chairman to have you speak first. Mr. Centi 
is the Director of Development in Jamestown, New York, and a 
participating Renewal Community Member in my district. You have 
done a magnificent job. We thank you very much for being here. 
We also thank again Bob Kenyon, Sally Martinez, and Kay Sibley 
for being with you.
    Also, I would like to make mention of Sam Teresi. Sam 
Teresi is the Mayor of Jamestown and was the Director of 
Development for many years. He really laid the groundwork for a 
lot of the things which we are doing. So, we thank you very 
much for being here.
    Now, Mr. Ford, would you like to introduce your----
    Mr. FORD. Yes. Yes, sir. Thank you, Chairman. Thank you, 
equally important, all of my friends on the Subcommittee for 
allowing me to sit here on the Subcommittee. As you know, for 
some time, I have expressed to Mr. Coyne and Mr. Jefferson a 
desire to serve on this Committee. My dad served on it for 22 
years, and just a little taste of it is always good, Mr. 
Jefferson and Mr. Houghton. So, I appreciate your letting me 
sit here.
    I am delighted to have before the Subcommittee and to have 
before the Congress, and particularly this Committee, the Mayor 
of my city, Mayor W.W. Herenton. He is now in the middle of his 
third term as our Mayor and has overseen a great growth and 
revitalization in many parts of our city, particularly the 
downtown part of our area.
    This piece of legislation, or this initiative, I applaud 
this Subcommittee and certainly the many in the Congress who 
played a big role in making it happen. One of the first times 
we are attempting, I think, at the Federal level to apply some 
of the same principles that work in the private sector and the 
market principles that have allowed certain communities to 
grow--poor and depressed communities that have been slow to 
enjoy the kind of growth the Nation has enjoyed over the years.
    There are three things that I think distinguish, Mr. 
Chairman, this Renewal Community from some of the other efforts 
on the part of the Congress or other Federal efforts as a 
whole. First is that this Renewal Community project recognizes 
that revitalization at the local level must start at the ground 
up. Two, I think it recognizes that the private sector, the 
only way you can ensure sustainable economic growth is to 
involve the private sector in meaningful ways. Three, we 
recognize that many of our urban centers in rural areas 
represent probably the greatest untapped resources in this 
Nation.
    For that matter, when you consider world markets as to 
urban centers and rural centers in America that, quite frankly, 
are so underutilized. The second component to this program is 
it recognizes, against the wishes of perhaps some in State 
government and even at the Federal level, that the Federal 
Government and government as a whole can play a role in 
catalyzing investment and growth in many of these areas.
    Just to follow up to my friend Mr. Foley's comment, I think 
one of the things that the Subcommittee should consider in 
addition to maybe expanding the number of cities that can 
participate in this Renewal Community and Empowerment Zone 
program is to look at ways in which we take those communities 
which are middle class and have been slipping over the years. 
The only challenge, the only piece of advice that I would offer 
to this procedures Subcommittee--which always gets it right, I 
might add--is that you look at ways in which to help those 
neighborhoods and communities that, again, over the years have 
seen a slip or decline.
    There is no need to wait for them to fall into that low 
level before we begin to take steps to lift them back up. If 
there is a way in which to track commercial development and 
commercial growth, even provide a new level of incentives or 
tax credits, I think at least you would find the support of 
several Democrats, including me--and I see my friends Mr. 
Jefferson and Mr. Coyne nodding their heads as well--and for 
that matter, the entire Congress, it might allow some of the 
communities that Mr. Foley spoke about. Now that my father is 
no longer a resident in my district--he actually lives in your 
State now--I know he would appreciate that as well, Congressman 
Foley.
    I thank you, Mr. Houghton, for the time. I know if John 
Tanner was here--I know he was here earlier and had kind things 
to say--I know he would also welcome Mayor Herenton to the 
Subcommittee--to his Subcommittee, since he is the Member of 
the Tennessee delegation, and who serves on the Committee.
    With that, I thank you, Mr. Houghton, and yield back the 
balance of my time.
    Chairman HOUGHTON. Thanks, Mr. Ford. Now I would like to 
introduce Mr. Jefferson, who in turn would like to introduce 
Mr. Eric Johnson.
    Mr. JEFFERSON. I thank you, Mr. Chairman.
    Mr. Ford, if this were an audition for membership on the 
Subcommittee, I think you would have landed the part.
    Mr. HULSHOF. Mr. Jefferson, would you yield?
    Mr. JEFFERSON. Yes, sir.
    Mr. HULSHOF. In fact, of course, we--and Mr. Mayor, I have 
great personal regard for your congressman. He is a good friend 
of mine. Mr. Jefferson, I know we had no say into the makeup of 
the Members on your side, but if we could trade somebody from 
your side for Mr. Ford, I would be--I would not tell you who we 
would like to move off the Subcommittee to bring Mr. Ford on. 
Thanks for yielding.
    Mr. JEFFERSON. I have some ideas.
    [Laughter.]
    Mr. JEFFERSON. Mr. Chairman, I thank you for the 
opportunity to present Mr. Eric Johnson to this body. He is the 
Director of Economic Grants Services for the Department of 
Economic Development in our State. He has done an outstanding 
job, evidenced, if nothing else, by what has happened in our 
State with the Renewal Communities. Louisiana submitted six 
Renewal Community applications and successfully received four 
approvals, two urban and two rural. So, Mr. Johnson and his 
staff and that whole department have done an excellent job.
    He will provide us some background on the Renewal Community 
efforts and describe how the Renewal Communities tie into our 
Governor's overall economic development plan for Louisiana, 
Vision 20/20. His testimony will be summarized by him, I am 
sure, but it is attached, and I think it is worth reading in 
full.
    The Governor has announced Vision 20/20 and has put a great 
part of it into effect down in our latest legislative session, 
but a part of it depends on what we do here. I would be 
interested to have this Subcommittee hear Mr. Johnson's 
presentation.
    So, we thank him for coming. We appreciate the work he is 
doing in our State, and congratulate him on what he, Governor 
Foster, and our Secretary of Economic Development, Don 
Hutchinson, have done to bring about the wonderful results we 
have experienced in Louisiana on the Renewal Community 
applications. Thanks a lot.
    Chairman HOUGHTON. Thank you, Mr. Jefferson.
    Now, Mr. Centi.

  STATEMENT OF STEVEN CENTI, DIRECTOR OF DEVELOPMENT, CITY OF 
                      JAMESTOWN, NEW YORK

    Mr. CENTI. Mr. Chairman, I'd like to thank you for this 
opportunity. Mr. Coyne and other Members of the Subcommittee, 
it's a tremendous honor for me to be here representing the City 
of Jamestown, New York. I hope that during the few short 
minutes I have here I can give you an overview of what's going 
on in our city, which I don't--atypical of a lot of the small 
cities around this country.
    The City of Jamestown, for those of you that aren't aware, 
is in the southwest corner of New York State. We're the largest 
city in Chautauqua County. We have a population of a little bit 
over 31,000 people, and we are also within 500 miles of 50 
percent of the population of the United States.
    The City of Jamestown, as Chairman Houghton mentioned 
before, is facing some serious financial issues as are other 
cities, I'm sure. We have about a $1.4 million operating fund 
deficit at this point in time, a B-double-A-3 bond rating, 
which effectively precludes our ability to borrow money. We 
have the lowest per capita income of any New York State 
metropolitan area and also have the highest per capita tax rate 
of any metropolitan area in New York State.
    The city has lost 24 percent of its population since 1960. 
The city has lost over $13 million. The city has lost over $13 
million in taxable assessment since 1990; 66 percent of our 
housing stock was built prior to 1940 and only 3 percent was 
built post-1980.
    The same goes for our industrial building stock. We have a 
lack of developable land in the city. The Renewal Community 
designation is very important because it--actually the former 
county landfill sits right in our Renewal Community area and in 
one of the census tracts which provides us with an opportunity 
through the brownfields credits to help stimulate development 
in that area.
    I don't mean to paint a bleak picture; there is a lot of 
good things happening in the City of Jamestown. Right now, our 
entire downtown is in our Renewal Community census tract. There 
is over $35 million of private investment going on right now in 
our downtown, which is somewhat unprecedented in our community. 
It is spearheaded by a private development effort from a local 
foundation; one of our strong partners. I would like to 
elaborate on that particular aspect of possibly why we were 
chosen as a Renewal Community, why we applied with the fact 
that we also--we currently have a number of strong partnerships 
on the public-private, not-for-profit foundation all working 
together in our community.
    One of our strongest partners is, of course, the Greater 
Jamestown Empire Zone, which is one of our State partners 
providing us with the expertise to use tax credits. They have 
used those effectively, which helps our case in terms of being 
able to utilize the tax credits available at the Federal level.
    Also, the Greater Jamestown Empire Zone has a lending arm, 
which is called the Greater Jamestown Zone Capital Corporation, 
the first Zone Capital Corporation formed in the State of New 
York.
    We have strong county partners. One of our county agencies 
was designated as an Environmental Protection Agency brownfield 
pilot assessment project. The Chautauqua Industrial Development 
Agency is the lending arm that provides tax abatements that can 
help work with the Renewal Community benefits that are 
available.
    On the Federal side, we are also a CDBG, a HUD entitlement 
community for the CDBG program and for the home program. One of 
the aspects of the Renewal Community census tracts is that they 
overlap both our block grant targeted neighborhood programs, 
overlap the Greater Jamestown Economic Zone. Now we have the 
Renewal Community designation to add to the arsenal of tools 
that we have at our disposal to help turn things around in the 
City of Jamestown.
    We have numerous local partners. The city has a revolving 
loan fund that has been in existence since 1981 and has done 
over 200 loans, all low-interest rate loans. It is operated out 
of my department. My previous capacity was as the Director of 
that and Bob Kenyan, who is here with me today, is the Director 
of that right now at this point in time.
    In addition, we are also a federally designated Weed and 
Seed community through the U.S. Department of Justice and that 
was one of the cornerstones of our application for our Renewal 
Community designation.
    I would like to actually mention some of the goals that we 
have here because I think those are important, and they kind of 
address some of the issues that Ms. Dunn brought up before and 
Mr. Foley.
    What we are looking to do in the City of Jamestown through 
this designation is, hopefully, to attract new businesses, to 
utilize underutilized property that we have right now for new 
development opportunities to expand the city's tax base. We are 
looking to increase employment. We are looking to, actually, 
use this program to leverage programs that are already ongoing 
and established through our block grant program with our 
targeted home ownership programs and our targeted neighborhood 
rehabilitation programs.
    We are also looking at reducing crime. In addition to our 
Weed and Seed program, there is a very strong element there 
that is spearheaded by our local police department that handles 
the weeding side of that particular program.
    I mentioned earlier the brownfield credits, which I think 
are very important for us because we do have acres and acres of 
land that currently can't be utilized right now unless we can 
find a way to turn that around. By providing these tax 
incentives to prospective developers, we will have the ability 
to bring those online.
    So, at this point, I would like to thank you for your time, 
thank you for your consideration, and also thank you for your 
confidence in the City of Jamestown.
    [The prepared statement of Mr. Centi follows:]
Statement of Steven Centi, Director of Development, City of Jamestown, 
                                New York
Jamestown, New York: A Snapshot View
    Jamestown, New York is a city of 31,730 people situated in the 
southwest corner of New York State approximately 75 miles southwest of 
Buffalo, New York. As the largest city in Chautauqua County, New York, 
Jamestown serves as the principal urban center for Southwestern New 
York and portions of Northwestern Pennsylvania. Jamestown lies within a 
three-hour drive to Toronto, Canada, Pittsburgh, Pennsylvania, 
Cleveland, Ohio, and Rochester, New York. Within a 500-mile radius of 
the City of Jamestown are over 120 million people representing over 50% 
of the population of the United States.
    Boasting a high quality of life, the Jamestown area is surrounded 
by bountiful recreational amenities such as Chautauqua Lake, Allegheny 
State Park, numerous ski resorts, plentiful golf courses, and the 
nearby Lake Erie. The world famous Chautauqua Institution is only a 
short drive away. The City of Jamestown also maintains over 540 acres 
of City parkland and the City-owned Russell E. Diethrick, Jr. Park is 
the home to the Jamestown Jammers, a Class A New York-Penn League 
professional baseball team.
    Jamestown takes great pride in its hometown heroes of world 
renowned naturalist and ornithologist Roger Tory Peterson; United 
States Supreme Court Justice and Nuremberg lead prosecutor Robert H. 
Jackson; New York State Governor and U.S. Senator Reuben E. Fenton; and 
the first lady of comedy Lucille Ball.
    High quality educational institutions such as the Jamestown Public 
School System, which is the largest in the Southern Tier of New York 
State; Jamestown Community College, New York's first community college; 
and the 115-year-old Jamestown Business College, characterize 
Jamestown. Jamestown residents take particular pride in their Jamestown 
High School Red Raiders football team, which has been the New York 
State Class AA football champions three times over the past eight 
years.
The Questions:
    Why Renewal Community?
    Why Jamestown, New York?
    These interrelated questions revolve around the current problems 
facing Jamestown, New York and similar small cities across the United 
States that did not ride the wave of economic prosperity of the 1990's. 
According to a recent report from the U.S. Bureau of Economic Analysis, 
the City of Jamestown has the lowest per capita income of any Upstate 
New York metropolitan area at $21,208. This compares unfavorably with 
the national average of $29,469. At the same time, Jamestown has the 
highest per capita property tax rate in New York State. In an era of 
declining revenue sources and escalating operating expenses this 
combination is not conducive to attracting new development to our city.
    Jamestown is characterized by aged residential and industrial 
building stock. According to the 1990 census, over 66% of Jamestown's 
residential homes were built prior to 1940 and only about 3% were built 
subsequent to 1980! The same can be said for the antiquated multi-story 
industrial building stock that does not suit the needs of today's 
manufacturers. In addition, it has been the city's experience that the 
demolitions of vacant industrial buildings to make way for new 
development sites has almost inevitably been followed by costly and 
time-consuming environmental remediation efforts.
    Over time, Jamestown has seen an out-migration of higher paying 
manufacturing jobs and their replacement with lower paying service-
related positions. In the wake of the loss of these positions has been 
a general deterioration of the City's neighborhoods as homeowners have 
either moved from the City or can no longer maintain their properties 
as they once could. Jamestown has seen a steady decline in population 
over time as the city has lost over 24% of its residents since 1960. 
Further exacerbating the neighborhood decline has been the general 
aging of the overall population as older homeowners move to more 
convenient subsidized senior units thus leaving their once owner-
occupied properties to absentee landlord investors who have not 
maintained the properties to their previous standards.
    Financially, the City of Jamestown suffers from many of the same 
problems as other Western New York communities. The bottom line is that 
there is too little revenue to cover escalating expenses. During the 
most recent FY 2002 budget process, it was confusing as to whether the 
local media was referring to Jamestown or Buffalo, NY or Rochester, NY 
as the same issues were at the root of all these cities' financial 
woes. Rapidly rising healthcare costs, losses of taxable assessment, 
declining populations leading to smaller shares of sales tax revenues, 
uncertain and less than equitable shares of state supplemental aid, and 
collective bargaining contracts that literally strangle city resources. 
Since 1990 the City of Jamestown has lost over $13 million in taxable 
assessment, a reduction of over 6.5% from the 1990 level of 
$205,562,660. The debilitating effect of this revenue-to-expense 
disparity in Jamestown has been an accumulated operating fund deficit 
of over $1.4 million and the reduction of the City of Jamestown's bond 
rating to baaa3, which effectively eliminates the city's ability to 
borrow money.
    The City of Jamestown's application for the Renewal Community 
designation was predicated on turning around the financial fortunes of 
Jamestown, New York by providing another tool to ``level the playing 
field'' and attracting prospective developers to our city. The Renewal 
Community tax credits will be used in combination with New York State 
tax credits currently available through the Greater Jamestown Empire 
Zone (GJEZ) to offset and overcome the perception that Jamestown is an 
expensive place to develop and own and operate a business. These 
benefits, coupled with Jamestown Board of Public Utilities (BPU) 
electric power rates (which are among the lowest in the nation), will 
serve to make Jamestown much more attractive as a development 
destination.
    In addition to the aforementioned tax and utility benefits, the 
City of Jamestown is well poised to move forward, with a wide array of 
development tools at its disposal. In addition to being designated as 
one of forty (40) new Renewal Communities, Jamestown is also a national 
U.S. Department of Justice Weed and Seed Community, a U.S. Department 
of Housing and Urban Development (HUD) entitlement community for 
Community Development Block Grant (CDBG) and HOME Program funding. 
Locally, low-interest rate development funding is available through the 
Jamestown Local Development Corporation (JLDC), the Greater Jamestown 
Zone Capital Corporation (GJZCC), and the Chautauqua County Industrial 
Development Agency (CCIDA). Upon his election, Jamestown Mayor Samuel 
Teresi re-invigorated the dormant Jamestown Strategic Planning and 
Partnerships Commission that is currently undertaking an aggressive, 
comprehensive, community-based strategic planning initiative to map out 
the City's future.
Jamestown, NY--Renewal Community (RC) Designee: The Future is Brighter
    While the aforementioned financial issues represent a challenge to 
the City of Jamestown, historically the City has shown the resiliency 
to bounce back. There is much encouragement on the horizon primarily 
through effective leadership that is aggressively reducing both the 
size and cost of City and County government as well as an unprecedented 
level of public, private, and not-for-profit collaboration working 
together to turn things around. Jamestown's selection as a Renewal 
Community is a testimony to the confidence the Federal Government has 
in the City's capacity to leverage the RC benefits with other available 
incentives as well as the City's demonstrated ability to work in 
partnership with the following organizations:

         Greater Jamestown Empire Zone (GJEZ)--a cooperative 
        partnership between the City of Jamestown, the Village of 
        Falconer, the Town of Ellicott, and the Town of Busti which 
        utilizes New York State tax credits to leverage job creation 
        and industrial expansion projects.
         Greater Jamestown Zone Capital Corporation (GJZCC)--
        the lending arm of the GJEZ. The first Zone Capital Corporation 
        formed in New York State.
         Jamestown Local Development Corporation (JLDC)--the 
        lending arm of the City of Jamestown. Since 1981, this 
        revolving loan fund has made loans to over 220 Jamestown 
        businesses totaling over $12,500,000, leveraging over 
        $75,500,000 in private investment and creating over 2,000 jobs.
         Jamestown Urban Renewal Agency (JURA)--administers 
        the City of Jamestown's annual Community Development Block 
        Grant (CDBG) and HOME Program entitlements from the U.S. 
        Department of Housing and Urban Development (HUD). Since 1990, 
        JURA has successfully delivered over $20,000,000 worth of CDBG 
        and HOME program projects for economic development, housing 
        rehabilitation, neighborhood revitalization, and Americans With 
        Disabilities Act (ADA) handicapped accessibility improvements 
        to the City.
         Jamestown Weed and Seed Program--this Department of 
        Justice designation for Jamestown has provided funding to 
        reduce crime, eliminate drugs, and promote increased 
        neighborhood involvement and revitalization.
         Neighborhood Watch Coalition--works in conjunction 
        with Weed and Seed to increase neighborhood awareness and 
        involve residents to ``take back their neighborhoods.''
         Downtown Jamestown Development Corporation (DJDC)--a 
        local not-for-profit that advocates for Downtown Jamestown 
        Central Business District revitalization. Currently 
        coordinating a Downtown urban design plan with Dr. Norman Mintz 
        of Corning, NY fame.
         Jamestown Center City Development Corporation 
        (JCCDC)--a local not-for-profit created by the local 
        philanthropic Gebbie Foundation that is constructing a 
        $21,000,000 Downtown Jamestown dual-pad ice arena scheduled to 
        open in August 2002.
         Chautauqua Works, Inc.--coordinated workforce 
        investment board that identifies job skills training and job 
        opportunities for Jamestown area residents.
         Chautauqua County Industrial Development Agency 
        (CCIDA)--a not-for-profit Chautauqua County economic 
        development agency that works in partnership with the City and 
        GJEZ on numerous expansion and new development projects.
         Jamestown Strategic Planning and Partnerships 
        Commission--local commission appointed by the Mayor of 
        Jamestown and ratified by Jamestown City Council that is 
        currently undertaking an aggressive, comprehensive strategic 
        planning initiative to map out the city's future.
     Jamestown Board of Public Utilities (BPU)--Jamestown's 
number one asset. As a municipal power generating utility company the 
BPU offers some of the lowest cost electric power in the United States 
at $.03 per kwh, while also providing water, sewer, and garbage 
services. In recent years, the BPU has developed some spin-off services 
using the by-products of their energy production in the forms of 
District Heating and the newly created District Cooling systems.

    While the above list is not all-inclusive, it represents several of 
the organizations and initiatives that are currently underway and 
active in the Jamestown community. Other partners in these 
collaborative revitalization efforts are the Jamestown Public School 
System, the Arts Council for Chautauqua County, the Manufacturers 
Association of the Jamestown Area, the Chautauqua County Visitors 
Bureau, the Fenton History Center, the Jamestown Area Chamber of 
Commerce, Jobs Chautauqua, the Weed and Seed ``Safe Havens'' at the 
Jamestown YMCA, Love School, and the 2 XL Youth Center, several local 
philanthropic foundations, such as the Gebbie Foundation, the Sheldon 
Foundation, the Chautauqua Region Community Foundation, and the 
Carnahan-Jackson Foundation, as well as many local businesses and 
innumerable local individuals. The collective efforts of all the 
aforementioned have resulted in an unprecedented level of development 
in recent years highlighted by the following ongoing projects:

         $5.5 Million Redevelopment of the Chadakoin Building.

         $21 Million Jamestown Center City Dual-Pad Ice Arena 
        Project.

         Downtown West End Eminent Domain Site Acquisition 
        Activities.

         $2.7 Million Best Western Inns & Suites Hotel 
        Project.

         Potential Redevelopment of Vacant Former Wintergarden 
        Theater.

         National Downtown ``Main Street'' Program in 
        Association with the DJDC.

         PowerNet Global Call Center Expansion Project.

         City's First Street Townscape Program.

         Former Rite-Aid Building Marketing and Redevelopment 
        Activities.

         Civic Center Block Apartments Project for Artisans.

         Proposed $3.5 Million Erie Railroad Station 
        Redevelopment Program.

         Expansion of the Fenton History Center.

         Western New York Historical Railroad Society I-1 
        Steam Locomotive Project.

         Western New York Historical Railroad Society 
        Excursion Trains Project.

         Expansion/Relocation of the Lucille Ball-Desi Arnaz 
        Museum.

         $1 Million Commons Mall/Willow Bay Commerce Center 
        Redevelopment.

         Robert H. Jackson Law Center Project.

         City Sponsored Sale and Subsequent Private 
        Redevelopment of:

         9 West Third Street (New Jamestown Savings Bank 
        Location)

         106-110 East Second Street (New Home of Chautauqua 
        Music)

         2-4 East Second Street (Upgraded Fenton Building)

         City Chadakoin Riverwalk Construction--Phase I--
        Summer 2002.

         Reconstruction of the Cherry Street Parking Ramp.

         Reconstruction of the North Main Street Parking Ramp.

         Development of a City Wide Parks System Strategic 
        Plan.

         Chadakoin Park Skateboard Park Project.

         2 XL Youth Center Project.

         YMCA Teen Center Project.

Jamestown, New York--Renewal Community Goals
    The Federal Renewal Community tax incentives coupled with the New 
York State tax credits and tax abatements offered by the Greater 
Jamestown Empire Zone, low-interest rate loans available through the 
Jamestown Local Development Corporation, Chautauqua County Industrial 
Development Agency, and Greater Jamestown Zone Capital Corporation, as 
well as grants available through the HUD Community Development Block 
Grant program make a potent mixture of project-related incentives to 
promote Jamestown as an attractive City to invest in. Through the 
combined use of this array of incentives our ambitious goals are to 
accomplish the following:

         Continue and expand the redevelopment of Downtown 
        Jamestown's Central Business District that is currently seeing 
        over $35 million of private development activity.
         Increase the City of Jamestown's tax base through new 
        commercial and industrial development.
         Increase sales tax generation through expanded 
        business developments.
         Significantly increase employment opportunities in 
        the City of Jamestown.
         Leverage new commercial development into enhanced and 
        increased development in the RC designated areas.
         Promote new technologies such as fiber optics and the 
        businesses that develop around them.
         Improve residential neighborhoods in RC Census tracts 
        303 and 305 as well as neighborhoods Citywide.
         Reduce crime in Renewal Community neighborhoods and 
        Citywide.
         Redevelop the former Chautauqua County landfill, 
        which is located in the Jamestown Renewal Community area using 
        Brownfield clean-up RC incentives.
         Improve and update the City's aging parking ramp and 
        streetscape infrastructures.

    All of the individuals, organizations, and governmental units who 
are dedicating their time and energy toward the betterment of the 
Jamestown community are looking forward to adding the Renewal Community 
designation and its associated benefits to the other incentives at our 
disposal to ensure a brighter future for all residents of the City of 
Jamestown. Thank you for your consideration and confidence in the City 
of Jamestown, New York.

                               

    Chairman HOUGHTON. Thanks, Mr. Centi, very much. Mr. 
Johnson?

 STATEMENT OF ERIC A. JOHNSON, DIRECTOR, ECONOMIC DEVELOPMENT 
 GRANT SERVICES, LOUISIANA DEPARTMENT OF ECONOMIC DEVELOPMENT, 
                     BATON ROUGE, LOUISIANA

    Mr. JOHNSON. Good afternoon, Mr. Chairman Houghton and 
Members of the Subcommittee. It is a pleasure to appear before 
the Subcommittee today to discuss the Renewal Community 
initiative in Louisiana and how it got started.
    My objective here, today, is to explain how the Renewal 
Community initiative got started and provide you with a brief 
description of the Renewal Communities, their current status, 
how the Renewal Communities are tied into the State's long-
range economic development plan, and where we go from here.
    Through a coordinated effort of the Governor's Office, 
multiple local governments, State agencies, community and 
economic development stakeholders across the State, six 
renewable community applications were prepared and submitted to 
HUD for Renewal Community designation. The challenge in 
submitting six applications were to coordinate the multiple 
governmental entities across six areas.
    The process was started by first identifying the pockets 
around the State with the most entrenched poverty. Some of 
these areas had poverty as high as 90 percent. Six regions were 
identified and a staff member from the Governor's Office was 
assigned to coordinate each region. Through this process, local 
meetings were held throughout the State and a local lead entity 
was identified and local consensus was achieved.
    The course of action was established and an application was 
compiled. The overall objective in the Louisiana Renewal 
Community application process was to include as many contiguous 
distressed census tracts in Renewal Community areas so that the 
benefits of the Renewal Community initiative would cover as 
large an area as possible.
    The regions of the State represented in this process that 
submitted applications were 4 rural areas, which included North 
Louisiana, which is 15 parishes with a population of about 
199,000, a poverty rate of 33 percent and an unemployment rate 
of 12 percent; Central Louisiana, which included 11 parishes 
with a population of 192,000, a poverty rate of 34 percent and 
an unemployment rate of 13 percent; South-central Louisiana, 
which included 8 parishes, a population of 195,000, a poverty 
rate of 32 percent and an unemployment of 12 percent; Southeast 
Louisiana, included 15 parishes, population of about 199,000, a 
poverty rate of 38 percent, and an unemployment rate of 13 
percent; 2 urban applications which included a portion of 
Orleans and Jefferson Parish, which is comprised of 7 census 
tracts in the center of New Orleans and on the edge of 
Jefferson Parish. This area has a poverty rate of 54 percent, a 
population of 26,000, and an unemployment rate of 18 percent. 
Ouachita Parish, which is in Northern Louisiana was comprised 
of 15 census tracts, representing 15 different local 
governments, population of 43,000, a poverty rate of 50 percent 
and an unemployment of 18 percent.
    Of these six severely distressed areas of the state, North 
Louisiana and Central Louisiana were chosen as two rural 
Renewal Communities and Orleans and Jefferson and Ouachita 
Parish were selected as the two urban Renewal Communities.
    In total, the four designations comprised of 29 of 
Louisiana's 64 parishes, include 460,000, have an average 
unemployment rate of 15 percent and an average poverty rate of 
43 percent. Currently, the four Renewal Communities have 
developed their coordinating responsible authorities, have 
begun developing tax utilization plans and are currently 
developing a standardized form.
    The standardized form will be used by the CRAs in all four 
Renewal Communities for potential businesses looking to locate 
and to expand their businesses in the Renewal Community area 
and take advantage of the tax incentives available. More 
importantly, the four Renewal Communities are coordinating 
their strategies and tying into the State's long-range 
strategic plan for economic development, which is called 
Louisiana Vision 20/20.
    The State's new strategic plan, Vision 20/20, is a 
challenge to create a better Louisiana and a guide to economic 
renewal and diversification. Vision 20/20 is built around a 
vision of Louisiana as a place, 18 years from now, with a 
vibrant balanced economy, a well-educated work force, with a 
quality of life that places it among the top 10 States in the 
Nation in which to live, work, and visit, and do business.
    To make this vision a reality, the Louisiana Department of 
Economic Development has adopted economic clustering as an 
economic development strategy, statewide. In fact, we are the 
first State in the Nation to adopt economic clustering as a 
strategy Statewide.
    In partnering with the Louisiana Department of Economic 
Development, the Renewal Communities CRAs will work to 
coordinate business attraction efforts and will focus their 
efforts on growing and expanding businesses that are 
specifically part of nine target cluster industries that have 
been identified by the State to grow its economy for the new 
economy.
    The overall strategy is to attract value-added jobs in the 
Renewal Community regions that will pay wages that can help 
lift families out of poverty. This will be accomplished by the 
CRAs and Louisiana Department of Economic Development cluster 
directors, regional directors, and regional representatives 
working in tandem to attract, market, and educate both existing 
and potential industry about the Renewal Community.
    The Renewal Community initiative is already proving to be a 
valuable tool for Louisiana. For example, a building truss 
manufacturer with 30 new jobs has decided to locate in the 
Northern Renewal Community. Also, a cut-and-sew manufacturer of 
athletic apparel, with 20 jobs has committed to locating in the 
Northern Renewal Community.
    The Louisiana Department of Economic Development is also 
using the Renewal Community tool in discussions with biotech 
companies in the New Orleans area, and a port development 
company in Northern Louisiana to spur job creation and reduce 
poverty. Both, if successful, will bring jobs to the Renewal 
Community and reduce poverty. Moreover, the number of hits to 
the renewallouisiana.com Website, further supports the interest 
in this initiative. This site has been visited over 60,000 
times with each visit lasting over 14 minutes.
    Louisiana is very grateful to have been the recipient of 
four Renewal Community designations. However, many areas of the 
State were not successful and should Congress create additional 
Renewal Communities, these areas would benefit greatly.
    The State of Louisiana looks forward to partnering with 
community leaders, economic development professionals and 
organizations, business, and the Federal Government to make 
this a successful initiative. Thank you.
    [The prepared statement of Mr. Johnson follows:]
  Statement of Eric A. Johnson, Director, Economic Development Grant 
 Services, Louisiana Department of Economic Development, Baton Rouge, 
                               Louisiana
    Good afternoon, Mr. Chairman Houghton and Members of the Committee. 
My name is Eric Johnson. I am Director of Economic Development Grant 
Services for the Louisiana Department of Economic Development. It is a 
pleasure to appear before the Committee today to discuss the Renewal 
Community (RC) initiative in Louisiana. My objective here today is to 
explain how the Louisiana RC initiative got started. I will provide you 
with a brief description of the RC's, their current status, how the 
RC's are tied into the State's long range economic development plan, 
and where we go from here.
    Through a coordinated effort of the Governor's Office, multiple 
local governments, State agencies and community and economic 
development stakeholders across the State, six Renewal Community 
applications were prepared and submitted to the U.S. Department of 
Housing and Urban Development for the RC designation. The challenge in 
submitting six applications were to coordinate the multiple 
governmental and community entities that existed in the six areas. The 
process was started by first identifying the pockets around the State 
with the most entrenched poverty. Some of these areas had poverty rates 
as high as 90%.
    Six regions were identified and a staff member within the 
Governor's Office was assigned to coordinate each region. Through this 
process local meetings were held throughout the State and a local lead 
entity was identified and local consensus was achieved. A course of 
action was established and an application was compiled. The overall 
objective in the Louisiana Renewal Community application process was to 
include as many contiguous distressed census tracts in the RC area so 
that the benefits of the RC initiative would cover as large an area as 
possible.
    The regions of the state represented in this process that submitted 
applications were in the following four rural areas:

         North Louisiana included 15 parishes with a 
        population of 199,000, a poverty rate of 33% and an 
        unemployment rate of 12%.

         Central Louisiana included 11 parishes with a 
        population of 192,000, a poverty rate of 34% and an 
        unemployment rate of 13%.

         South Central Louisiana included 8 parishes, a 
        population of 195,000, and a poverty rate of 32% and an 
        unemployment rate of 12%.

         Southeast Louisiana included 15 parishes, a 
        population of 199,000, a poverty rate of 38%, and an 
        unemployment rate of 13%.

    Two urban applications included:

         A portion of Orleans and Jefferson Parish (which was 
        comprised of seven census tracts in the center of the city of 
        New Orleans and on the edge of Jefferson Parish). This area has 
        a poverty rate of 54%, a population of 26,000, and an 
        unemployment rate of 18%.

         Ouachita Parish (which was comprised of 15 census 
        tracts representing four different local governments). The 
        population of the application area is 43,000 with a poverty 
        rate of 50%, and an unemployment rate of 18%.

    Of these six severely distressed areas of the state, North 
Louisiana and Central Louisiana was chosen as two rural Renewal 
Communities and Orleans/Jefferson and Ouachita Parish were selected as 
two urban RC communities. In total, the four designations are comprised 
of 29 of Louisiana's 64 parishes, include 460,452 people, have an 
average unemployment rate of 15%, and have an average poverty rate of 
43%.
    Currently the four RCs have developed their Coordinating 
Responsible Authorities (CoRAs), have begun developing tax utilization 
plans, and are currently developing a standardized form. This form will 
be used by the CoRAs in all four RCs for potential businesses looking 
to locate and/or expand their businesses in the RC area and take 
advantage of the tax incentives. More importantly, the four RCs are 
coordinating their strategies and tying into the State's long range 
strategic plan for economic development, Louisiana: Vision 2020.
    The State's new strategic plan, Louisiana: Vision 2020 is a 
challenge to create a better Louisiana and a guide to economic renewal 
and diversification. Vision 2020 is built around a vision of Louisiana 
as a place (18 years from now) with a vibrant, balanced economy, a 
well-educated workforce, with a quality of life that places it among 
the top ten States in the Nation in which to live, work, visit and do 
business. To make this vision a reality, the Louisiana Department of 
Economic Development (LED) has adopted economic clustering as an 
economic development strategy statewide. In partnering with LED, the RC 
communities' CoRAs will work to coordinate business attraction efforts 
and will focus their efforts on growing and expanding businesses that 
are specifically a part of the nine targeted industry clusters in which 
the state has identified to grow and expand the economy in Louisiana. 
The overall strategy is to attract value added jobs to the RC regions 
that will pay wages that can help lift families out of poverty. This 
will be accomplished by the CoRAs and LED cluster directors and 
regional representatives working in tandem to attract, market, and 
educate both existing and potential industry about the benefits of the 
RC community.
    The RC initiative is already proving to be a valuable tool for 
Louisiana. For example, a building trust manufacturer with 30 new jobs 
has decided to locate in the Northern RC. Also, a cut and sew 
manufacturer of athletic apparel, with 20 jobs, has committed to 
locating in the Northern RC. LED is also using the RC tool in 
discussions with biotech companies in the New Orleans area, and a port 
development company in North Louisiana to spur job creation and reduce 
poverty. Both, if successful, will bring jobs to the RC community and 
reduce poverty. Moreover, the number of hits to the 
renewallouisiana.com web site furthermore supports the interest in this 
initiative. This site has been visited over 60,000 times with each 
visit lasting over 14 minutes.
    Louisiana is very grateful to have been the recipient of four RC 
designations. However, many areas of the state were not successful in 
either the RC or EC applications. Should Congress create additional 
Renewal Communities, these areas would benefit greatly.
    The State of Louisiana looks forward to partnering with community 
leaders, economic development organizations, businesses, and federal 
and local government officials to make this program a success.
    Thank you.

                               

    Chairman HOUGHTON. Thanks very much, Mr. Johnson. Ms. 
Ramos?

STATEMENT OF SUSAN RAMOS, EXECUTIVE DIRECTOR, BOONEVILLE/OWSLEY 
COUNTY INDUSTRIAL AUTHORITY, BOONEVILLE, KENTUCKY, ON BEHALF OF 
               EASTERN KENTUCKY RENEWAL COMMUNITY

    Ms. RAMOS. Hi, thank you. On behalf of the Eastern Kentucky 
Renewal Community, I want to thank you for allowing us to speak 
today. I want to thank you, Mr. Chairman, and all the other 
Committee Members and other Members of Congress who have worked 
to make this program possible. I especially want to thank our 
Congressional Representative Hal Rogers of the Fifth District 
for everything he does for the Fifth District in helping us to 
increase our economy and make a better quality of life for our 
people.
    You cannot imagine the excitement throughout our 
communities in the State of Kentucky when we were notified that 
we received a Federal Renewal Community designation. We realize 
that true economic development must come from within, and we 
are prepared to carry out the commitments that we made. We have 
thought long and hard about what it is going to take to renew 
our community, and we take seriously the commitment to make our 
Renewal Community a success.
    Our first steps have been taken with much enthusiasm and 
careful consideration. We wanted our existing businesses and 
individual community members to know about this designation 
immediately. In addition to distributing information to 
businesses about the substantial business incentives related to 
the designation, we have made a concerted effort to educate the 
people of our communities about how this designation will 
affect them personally, as well. In addition to the tax 
incentives for business, our local, regional, state, and 
Federal partners have made a commitment to the people of our 
communities to increase the level and efficiency of local 
services, increase crime reduction strategies in order to make 
our communities a safer place to live, increase the economic 
development activities, including access to jobs and job 
training, and to continue to improve industrial property in 
order to attract businesses and create much needed jobs.
    We know that the majority of our business investment as a 
result of the Renewal Community designation will come from our 
existing small businesses. Therefore, our immediate reaction to 
the designation was to begin notifying our businesses about the 
availability of these incentives. We created our own rural 
unique way of getting the word out. We ordered hundreds of 
copies of the Internal Revenue Service Publication 954 and 
several copies of the Tax Incentive Guide for Business. This 
information has been distributed by mail, individually, at 
public meetings, and in local restaurants where many of our 
business people eat lunch every day. This type of interaction 
has caused at least 20 of our existing businesses to begin 
seriously considering how they can expand or how they might 
hire more employees as a result of this designation.
    We are also in the process of creating our Tax Incentive 
Utilization Plan and a creative marketing campaign to attract 
new business and jobs to our areas.
    We are conducting an assessment of buildings that house 
businesses, or could potentially house businesses, and are in 
need of major repair or renovation. We are beginning to contact 
these business owners to discuss with them the possibility of 
taking advantage of the Commercial Revitalization Deduction. 
Not only will the owners benefit, but the community image will 
improve, as well.
    Small business is at the heart of our rural community. We 
are making sure that all of them get information about all of 
the incentives, especially the Renewal Community Wage Credit 
and the Work Opportunity Tax Credit. This incentive, alone, 
will have a major impact on the profitability and 
sustainability of our small businesses. One problem we face is 
that many small businesses, including farms, are family-owned 
and -operated. Therefore, their employees do not qualify for 
these deductions.
    With our Pine Ridge Regional Industrial Authority, we plan 
to use the Increased Section 179 Deduction to attract 
businesses with heavy equipment and machinery needs that will 
rely on access to major, four-lane highways.
    We realize that we are not tax experts and that we have a 
lot to learn about the benefits of this program in order to 
effectively use these incentives to improve our economy. So, 
the University of Kentucky stepped in, along with Moorehead 
State University and the Wolfe County Extension Service to host 
the Eastern Kentucky Renewable Community Tax Incentive Seminar. 
Linda Schakel, a partner with the Ballard, Andrews, and 
Ingersoll law firm in Washington, was the guest speaker. She 
did an outstanding job of teaching us all more about these 
incentives and helping us to stir even more interest from our 
existing businesses.
    The University of Kentucky, through the Smart Business 
Recruitment Program, is working in our Renewal Community to 
help with tourism opportunities and economic development and 
planning. They are about to conduct a targeted industry and 
business analysis, using the tax incentives associated with 
this designation in order to help us create a more effective 
marketing campaign.
    I have described only a few of the first steps we have 
taken as a Renewal Community and have given you a few examples 
of how we are using these incentives to attract business 
investment. We are already experiencing success as a result of 
this designation and are very excited about our future.
    As Chairman Houghton stated in his hearing announcement, 
``These Renewal Communities are important. We are creating an 
environment where individuals can lift themselves and their 
families to a new level of security.'' We have certainly had 
our share of problems over the years, but as Duke Ellington 
said, ``A problem is a chance for you to do your best.'' We are 
certainly doing our best and hope that you are impressed with 
our accomplishments.
    Again, on behalf of everyone in our Eastern Kentucky 
Renewal Community, I want to thank you for the opportunity to 
speak to you today.
    [The prepared statement of Ms. Ramos follows:]
Statement of Susan Ramos, Executive Director, Booneville/Owsley County 
   Industrial Authority, Booneville, Kentucky, on behalf of Eastern 
                       Kentucky Renewal Community
    On behalf of the Eastern Kentucky Renewal Community, I am honored 
to have this opportunity to speak to you concerning our Renewal 
Communities designation and how we plan to use these incentives to 
attract business investment into our community. First, I want to thank 
the Chairman, all other Committee Members, and other Members of 
Congress who have worked to make this program possible. I especially 
want to thank our Congressional Representative, Hal Rogers, for being 
here and introducing me today. We are truly grateful.
    You cannot imagine the excitement throughout our communities and 
the State of Kentucky when we were notified that we were designated a 
Renewal Community. We realize that true economic development must come 
from within and are prepared to carry out the commitments made by the 
Eastern Kentucky Renewal Community. We have thought long and hard about 
what it is going to take to renew our community and we take seriously 
the commitment to make our Renewal Community a success.
    Our first steps have been taken with much enthusiasm and careful 
consideration. We wanted our existing businesses and individual 
community members to know about this designation immediately. In 
addition to distributing information to businesses about the 
substantial business incentives related to the designation, we have 
made a concerted effort to educate the people of our communities about 
how this designation will affect them personally as well. In addition 
to the tax incentives for business, our local, regional, state, and 
Federal partners have made a commitment to the people of our community 
to increase the level and efficiency of local services, increase crime 
reduction strategies in order to make our communities a safer place to 
live, increase the economic development activities including access to 
jobs and job training, and to continue to improve industrial property 
in order to attract businesses and create much needed jobs.
    We know that the majority of our business investment as a result of 
the Renewal Community incentives will come from our existing small 
businesses. Therefore, our immediate reaction to the designation was to 
begin notifying our small businesses about the availability of these 
tax incentives. We created our own unique way of getting the word out. 
We ordered hundreds of copies of the IRS Publication 954 and several 
copies of the Tax Incentive Guide for Business. This information was 
distributed by mail, individually, at public meetings, and in local 
restaurants where many of our business people eat lunch everyday. This 
type of interaction has caused at least twenty of our existing 
businesses to begin seriously considering how they might expand, or how 
they might be able to hire more employees as a result of this 
designation.
    We are also in the process of creating our Tax Incentive 
Utilization Plan and a creative marketing campaign to attract new 
businesses to our community.
    Each county is conducting an assessment of buildings that house 
businesses, or could potentially house businesses, and are in need of 
major renovation or repair. We are beginning to contact those building 
owners to discuss with them the possibilities of taking advantage of 
the Commercial Revitalization Deduction. Not only will the owners 
benefit, but the community image will improve as well.
    Small business is at the heart of our community. We are making sure 
that all of them get information about all of the incentives, 
especially the Renewal Community Wage Credit and the Work Opportunity 
Tax Credit. This incentive alone will have a major impact on the 
profitability and sustainability of our small businesses. One problem 
we are facing is that many small businesses, including farms, are 
family-owned and -operated. Therefore, their employees do not qualify 
for these deductions.
    With our Pine Ridge Regional Industrial Authority, we plan to use 
the Increased Section 179 Deduction to attract businesses with heavy 
equipment and machinery needs that will rely on access to major, four-
lane highways.
    We realize that we are not tax experts and that we have much to 
learn about the benefits of this program in order to effectively use 
the incentives to improve our economy. So, the University of Kentucky 
stepped in, along with Morehead State University and the Wolfe County 
Extension Service, to host the Eastern Kentucky Renewal Community Tax 
Incentive Seminar. Linda Schakel, a partner with the Ballard, Andrews 
and Ingersoll law firm in Washington, was the guest speaker. She did an 
outstanding job of teaching us all more about these incentives and 
helping us to stir even more interest from our existing businesses.
    The University of Kentucky, through the Smart Business Recruitment 
Program, is working in our Renewal Community to help with tourism 
opportunities and economic development and planning. They are about to 
conduct a targeted business/industry analysis, using the tax incentives 
associated with our designation, in order to create a more effective 
marketing effort using the incentives.
    I have described only a few of our first steps as a Renewal 
Community and have given you a few examples of how we are using the 
Renewal Community incentives to attract business investment. We are 
already experiencing success as a result of this designation and are 
excited about our future.
    As Chairman Houghton stated in his hearing announcement, ``These 
Renewal Communities are important. . . . We are creating an environment 
where individuals can lift themselves and their families to a new level 
of security.'' We have certainly had our share of problems over the 
years, but as Duke Ellington said, ``A problem is a chance for you to 
do your best.'' We are certainly doing our best, and hope that you are 
impressed with our achievements.
    Again, on behalf of everyone in our Eastern Kentucky Renewal 
Community, I want to thank you for the opportunity to speak to you 
today.

                               

    Chairman HOUGHTON. Thanks, very much, Ms. Ramos.
    Now, Mr. Pomeroy, would you like to introduce Mr. Nadeau?
    Mr. POMEROY. Thank you, Mr. Chairman. Yes, am I to 
understand that Mr. Nadeau has yet to testify?
    Chairman HOUGHTON. Not yet, we're waiting for you.
    Mr. POMEROY. I thank you for that. I was meeting with the 
Appropriations Subcommittee Ranking Member and that was a very 
important meeting, but I'm pleased to be back.
    Well, I think that when we talk about Renewal Communities, 
we often think about the urban pockets of poverty. Representing 
North Dakota, I'm here to tell you that there are some very 
distinct rural pockets of poverty as well and none more so than 
our Indian Reservations. The community, the Turtle Mountain 
Reservation on which Turtle Mountain Manufacturing is located 
has 42 percent of its population earning less than $25,000, 27 
percent earning less than $10,000 a year. More than 60 percent 
of the single-family households headed by women, live in 
poverty.
    Now, in this challenging and difficult environment, Turtle 
Mountain Manufacturing, a business begun under the Small 
Business Administration 8A Program, has employed as many as 200 
local residents at any given time, sustained a work record, and 
a product quality record that has gained it a really terrific 
reputation.
    What we think this does for our opportunities to grow and 
diversify the economy of Turtle Mountain Indian Reservation is 
attract private investment. So often the tribal government with 
casino revenues is the only game in town in terms of start-up 
capital, which means all new enterprises are, essentially 
tribally-owned enterprises. We want private capital and private 
businesses, divorced from ownership of the tribal council, not 
subject to total upheaval every time there is an election. We 
think that all of this is so important as it applies to a 
Renewal Community application. We are still in the planning 
stages, relative to Turtle Mountain. There is some wonderful 
leadership all around the country, Congressman Ford has told me 
about the tremendously exciting things Memphis has going. I 
think that if we can look at a rural application of what you 
have done in the city, your own leadership will be really 
important to us up in North Dakota--up at the Turtle Mountain 
Indian Reservation.
    With that said, Mr. Chairman, a really talented Chief 
Executive Officer and leader, for rural development, Mr. 
Nadeau.
    Chairman HOUGHTON. Good, thanks very much. That is a 
wonderful build-up for Mr. Nadeau.

STATEMENT OF DALE NADEAU, PRESIDENT AND CHAIRMAN, INDUSTRY AND 
 BUSINESS DEVELOPMENT, TURTLE MOUNTAIN MANUFACTURING COMPANY, 
                     BELCOURT, NORTH DAKOTA

    Mr. NADEAU. Mr. Chairman, Ranking Member Coyne, and Members 
of the Subcommittee on Oversight, good afternoon.
    My name is Dale Nadeau and I am the President and Chairman 
of the Industry and Business Development at Turtle Mountain 
Manufacturing Company in Belcourt, North Dakota. I extend my 
thanks to the Subcommittee for the opportunity to provide 
testimony on the Renewal Community Initiative today.
    The Turtle Mountain Manufacturing Company was founded in 
1979 as a low to medium volume metal fabrication manufacturing 
plant with a variety of production capabilities. Our company 
handles manufacturing, welding, finishing, and generally 
employs 150 to 200 people annually. The cornerstone of Turtle 
Mountain Manufacturing Company is its employees. We view our 
employees as members of a team and strive to create 
opportunities for their education and advancement.
    The Turtle Manufacturing Company is located in Belcourt, 
North Dakota, on the Turtle Mountain Indian Reservation. The 
reservation is home to the Turtle Mountain Band of Chippewa 
Indians and is located in the north-central part of the State, 
near the Canadian border. The Turtle Mountain community 
includes a major health care facility, an educational system 
that includes a federally chartered local community college, a 
federally recognized housing administration, manufacturing, and 
service industries.
    Unfortunately, like so many Indian communities across the 
country, Turtle Mountain has long faced severe economic 
troubles, and to a large extent, these difficulties have only 
worsened in recent years. The Turtle Mountain Reservation today 
struggles with an unemployment rate near 65 percent, with more 
than half the reservation's residents below the poverty line.
    To make matters worse, our community has recently been 
forced to fight a terrible natural disaster. A wet cycle that 
hit the region in the late nineties created soil conditions 
which led to an infestation of black mold in several hundred 
homes on the reservation. The region was included in a 
Presidential disaster declaration issued last year, and many 
families were displaced.
    Despite the economic difficulties Turtle Mountain faces, I 
believe that our community has the ingredients to build a 
better future. The most important of these ingredients is a 
population that is determined to work hard and to do what it 
takes to improve the quality of life on the reservation. I have 
always found my employees to be steady, determined, and highly 
motivated.
    We are grateful for being selected as 1 of the 12 rural 
communities and 40 communities nationwide to participate in the 
Renewal Communities program. Designation as a Renewal Community 
by HUD will help bring Turtle Mountain the economic stimulus it 
needs to revitalize its potential. We gladly accept this 
designation, and the promises and challenges it will bring over 
the next several years.
    As a Renewal Community, we will actively pursue business 
opportunities in industries that will bring economic self-
sufficiency to the Turtle Mountain Reservation. Our primary 
goal will be to provide employment opportunities for the 
citizens of Belcourt and the surrounding areas; a population in 
excess of 17,000 residents.
    I strongly believe that the tax incentives that are part of 
Renewal Community program will provide a great economic 
stimulus to the region. These incentives will not only make it 
possible for existing businesses, such as Turtle Mountain 
Manufacturing Company to expand but, also make the reservation 
an attractive option for new businesses, as well.
    In addition to the tax incentives that make the Renewal 
Communities program so important to our community, this program 
has been designed to combine Federal resources with local 
initiatives to achieve and sustain greater economic 
development. In implementing this program, HUD has truly taken 
an innovative approach to economic revitalization. The Renewal 
Community designation gives us important economic tools to 
attract the investment necessary to sustain economic 
development. However, the program also recognizes that local 
communities, working together, can best identify and develop 
local solutions to the problems they face. Therefore, Turtle 
Mountain and other Renewal Community designees will have a 
great deal of control over how the program is implemented on 
the local level. With this designation comes the challenge of 
utilizing to the best possible interests of the community, and 
Turtle Mountain is determined to do so.
    The Turtle Mountain Reservation has begun the process of 
creating a long-range economic development plan which takes 
full advantage of our Renewal Community designation. This plan 
will detail specific steps that Turtle Mountain will take to 
fully capitalize on the Renewal Community designation. We 
intend to expand businesses, reduce unemployment, and increase 
homeownership. We hope that as a Renewal Community, we can 
begin the economic revitalization of our region and improve our 
quality of life.
    The citizens of Belcourt and the Turtle Mountain 
Reservation are very excited to be part of this program. As 
both a businessman and a community member, I share their 
excitement. This is a valuable program that offers a great deal 
of economic hope to our region. We are grateful to be 
designated as a Renewal Community and confident that this 
designation will help bring a better future to our region.
    Mr. Chairman, and Members of the Subcommittee, on behalf of 
Turtle Mountain Reservation and the Turtle Mountain Band of 
Chippewa Indians, I again thank you for allowing me to testify 
before you today. Thank you.
    Chairman HOUGHTON. Thanks, Mr. Nadeau.
    Mayor Herenton.

    STATEMENT OF THE HON. WILLIE W. HERENTON, PH.D., MAYOR, 
                       MEMPHIS, TENNESSEE

    Dr. HERENTON. Thank you very much, Mr. Chairman. 
Distinguished Members of Congress, and this Subcommittee, I am 
profoundly honored to have the opportunity to come before you 
today to share our plans to implement the Memphis Renewal 
Community. I am also grateful for the appearance of my 
Congressman Hal Ford, Jr., who had to leave for another 
Committee presentation. Over the next 8 years, the impact of 
this designation will touch hundreds of thousands of citizens 
by stimulating the economic engines that allow for the creation 
and expansion of businesses.
    The Memphis Renewal Community is one of the largest urban 
Renewal Communities in the country, both in geographical size 
and the number of residents and businesses that will benefit. 
The 48 census tracts that comprise the area encompass 40 square 
miles with a population of 112,534 residents and an estimated 
5,000 businesses. The Federal tax incentives now available to 
these businesses will promote significant economic development 
and, even more importantly, create jobs and reduce poverty.
    There has been significant economic growth in Memphis in 
the last 10 years. Unfortunately, the benefits of that growth 
have not extended into the entire community. Our Renewal 
Community reflects the areas in Memphis which have the greatest 
need and which offer the best utilization of tax incentives to 
stimulate business growth. The challenges of poverty and 
unemployment that permeate the fabric of Memphis are not easily 
solved. We recognize and acknowledge that there are pervasive 
and longstanding problems that require new and collaborative 
initiatives to address the core problems that allow this life 
cycle of human struggle to continue.
    These solutions will not come without great effort. 
However, our faith sustains us and the human spirit within us 
provides the motivation and a desire to create livable and 
sustainable communities. The Renewal Community we envision will 
accomplish this goal by not only creating economic 
opportunities but, also providing hope to many Memphis 
residents. Along with us on this exciting journey of change are 
both community and private-sector participants. All 
constructing a new paradigm for living, brick-by-brick, 
cemented together by the desire and the will to control their 
own destiny.
    Mr. Chairman, please allow me to take just a few minutes to 
share the significant impact of this program in monetary terms. 
Before we received the designation, we analyzed the potential 
value of each of the tax incentives available. Our estimates 
were conservative, yet staggering.
    The 2000 census indicates that there are approximately 
60,000 people in the Renewal Community between the ages of 18 
and 64 and able to work. If the wage credit is estimated based 
on the presumption that 30 percent of the population will also 
work within the Renewal Community and qualify for the maximum 
credit of $1,500, the annual value of the Renewal Community 
Employment Credit is estimated to be almost $28.6 million. 
Extended over the life of the life of the designation, the 
estimated value of this credit is over $228.7 million.
    With almost 32,000 employees in Shelby County, FedEx is our 
largest employer--22,500 of these employees work in the Memphis 
Renewal Community and approximately 1,300 of those also live 
within the designate area, making them eligible for the 
employment credit. Another one of the major employers, Buckeye 
Technologies, has estimated their annual wage credit of 
$25,000.
    This program will even be more valuable to smaller 
businesses. It looks as if my time is running out.
    Mr. Chairman, and Members of this Subcommittee, let me as 
Mayor of the 18th largest city in America express the very 
emphatic belief that the Congress was right on target in 
creating this initiative. The potentials for yielding 
tremendous economic benefits, job creation, poverty abatement, 
will be enormous and highly beneficial to urban and rural 
communities and Memphis appreciates the opportunity. We feel 
that with marketing and accurate data collection, we will make 
the Congress proud of this designation. Thank you, sir.
    [The prepared statement of Dr. Herenton follows:]
    Statement of the Hon. Willie W. Herenton, Ph.D., Mayor, City of 
                           Memphis, Tennessee
    Mr. Chairman, distinguished Members of Congress and this 
Subcommittee, I am honored to have the opportunity to come before you 
today to share our plans to implement the Memphis Renewal Community. 
Over the next 8 years, the impact of this designation will touch 
hundreds of thousands of citizens by stimulating the economic engines 
that allow for the creation and expansion of businesses.
    The Memphis Renewal Community is one of the largest urban Renewal 
Communities in the country, both in its geographic size and the number 
of residents and businesses that will benefit. The 48 census tracts 
that comprise the area encompass 40 square miles with a population of 
112,534 residents and an estimated 5,000 businesses. The Federal tax 
incentives now available to these businesses will promote significant 
economic development and--even more importantly--create jobs and reduce 
poverty.
    There has been significant economic growth in Memphis in the past 
ten years. Unfortunately the benefits of that growth have not extended 
into the entire community. Our Renewal Community reflects the areas in 
Memphis which have the greatest need and which offer the best 
utilization of tax incentives to stimulate business growth. The 
challenges of poverty and unemployment that permeate the fabric of 
Memphis are not easily solved. We recognize and acknowledge that there 
are pervasive and long-standing problems that require new and 
collaborative initiatives to address the core problems that allow this 
life cycle of human struggle to continue.
    These solutions will not come without great effort. However, our 
faith sustains us and the human spirit within us provides the 
motivation and the desire to create livable and sustainable 
communities. The Renewal Community we envision will accomplish this 
goal by not only creating economic opportunities but also providing 
hope to many Memphis residents. Along with us on this exciting journey 
of change are both community and private sector participants all 
constructing a new paradigm for living, brick-by-brick, cemented 
together by the desire and the will to control their own destiny.
    Mr. Chairman, please allow me to take a few minutes to share the 
significant impact of this program in monetary terms. Before we 
received the designation we analyzed the potential value of each of the 
tax incentives available. Our estimates were conservative, yet 
staggering.
    The 2000 Census indicates that there are approximately 60,000 
people in the Renewal Community between the ages of 18 and 64 and able 
to work. If the wage credit is estimated based on the presumption that 
30% of the population will also work within the Renewal Community and 
qualify for the maximum credit of $1,500, the annual value of the 
Renewal Community Employment Credit is estimated to be almost $28.6 
million. Extended over the life of the designation, the estimated value 
of this credit is over $228.7 million.
    With almost 32,000 employees in Shelby County, FedEx is our largest 
employer. 22,500 of these employees work in the Memphis Renewal 
Community and approximately 1,300 of those also live within the 
designated area, making them eligible for the employment credit. 
Another one of our major employers, Buckeye Technologies, has estimated 
their annual wage credit at $25,000.
    But this program will be even more valuable to smaller businesses. 
Congress created the Small Business Administration in 1953 to ``aid, 
counsel, assist and protect, insofar as is possible, the interests of 
small business concerns.'' These economic development tools and tax 
incentives will be crucial to the well-being and survival of small 
businesses within the Renewal Community.
    We have done an analysis for each of the Renewal Community tax 
incentives and have estimated that the total impact to our community 
will be in excess of $300 million dollars over the 8-year designation!
    Successful implementation of our Renewal Community Tax Incentive 
Utilization Plan is our next critical step in this process. 
Collaboration was the key to our successful application and will be a 
major emphasis for successful implementation. We have already begun by 
creating a Renewal Community Advisory Board.
    This Advisory Board will lead the city's efforts, including 
oversight of statutory requirements related to the Course of Action, 
development of the Tax Incentive Utilization Plan to ensure maximum use 
of available tax incentives, promotion of the incentives in conjunction 
with other Federal, State and local incentives, and the development of 
systems to track and report usage of all available incentives.
    Membership on this board consists of representatives from public 
and private entities including residents from the RC, businesses, 
banks, the Workforce Development Agency, Memphis Regional Chamber, 
CPAs, real estate professional and State and local government entities. 
This Advisory Board has already developed an extensive marketing plan 
in preparation for the submission of our preliminary Tax Incentive 
Utilization Plan.
    Elements of the plan include detailed strategies for marketing to 
professionals, existing businesses, prospective businesses and to the 
residents themselves. By educating these individuals and entities about 
the tax incentives we will create a body of knowledge and an 
information distribution system far more expansive than we could hope 
to achieve through the efforts of government alone. Through direct 
mail, workshops and individual contacts we will create a network of 
educated professionals who will then be able to market the tax 
incentives to their clients and others.
    The plan brings together existing economic development efforts to 
assist in the successful marketing of the Memphis Renewal Community and 
to create a system to combine Renewal Community tax incentives with 
other federal, state and local incentives to create a synergy that will 
result in even greater advantages than each program alone.
    We have identified residents, faith-based and non-profit 
organizations within the Renewal Community as important target markets. 
Residents must be educated as to their `marketing benefit' when 
completing job applications. They must be aware that they bring with 
them a `hiring advantage' and must be able to recognize and articulate 
that advantage during the job application process. We will work within 
the community through the non-profit service and faith-based 
organizations who already have the trust of neighborhood residents.
    Finally, we are reminded on a daily basis that one of the key 
impact elements of the Renewal Community program is its ability to 
create jobs and thus lower the poverty rate and increase the standard 
of living for residents. To this end, efforts are underway for close 
coordination with both the Workforce Investment Agency and the State of 
Tennessee Department of Human Services, the entity responsible for the 
State's welfare program.
    But our plans do not stop there. We recognize the important 
synergies between the Renewal Community program and the New Markets Tax 
Credits program and are currently preparing an application for a 
Community Development Entity and an allocation of tax credits. We 
understand that the coordination of all of these economic development 
tools is critical.
    Mr. Chairman, one of our core strategies for attracting capital 
investment into the Renewal Community revolves around our ability to 
obtain an allocation of New Markets Tax Credits from the United States 
Treasury Department. Investors who purchase these credits will be able 
to deduct 39 cents for every one dollar they invest over a 7-year 
period and the proceeds from these investments will be available for 
equity capital, loans and technical assistance in low-income 
communities.
    Let me give you one real example of how all of these programs work 
together. Onyx Medical Corporation is currently located outside of the 
Memphis Renewal Community. They need to relocate in order to expand and 
upgrade their operation, and they understand the unique benefits of 
moving to the Renewal Community. When they do, renovation or new 
construction for their new Renewal Community facility will allow them 
to apply for a commercial revitalization deduction to expense up to one 
half of their costs. Next, they will be able to purchase even more 
equipment using the increased section 179 deduction. With the expanded 
facility and new equipment, they will be able to create jobs for 
Renewal Community residents and thus take advantage of the employment 
credit. In addition, they can apply for a tax freeze from our local 
Industrial Development Board to lower their property tax liability. 
Combine these incentives with an influx of equity capital from the New 
Markets Tax Credits program and you have shaped the kind of synergy 
that Congress intended when it created these programs.
    I am aware that Congress is considering legislation that will allow 
Renewal Communities to modify their boundaries based on Census data 
from 2000. We wholeheartedly support this effort. The ability to add 
census tracts to our renewal community will further enhance our 
success. I am aware also that Congress is considering legislation to 
expand the number of renewal communities across the country. Again, 
this is an effort we support. Economic development is critical to every 
community and these are the kinds of economic development tools that 
cost the Federal Government very little, but create significant returns 
for local communities.
    Mr. Chairman, distinguished Members of Congress and this 
Subcommittee, thank you for allowing me the opportunity to share our 
work. Our city was honored this past January with a visit from HUD 
Secretary Mel Martinez to announce the first Renewal Community on Dr. 
King's birthday. Secretary Martinez noted during his visit ``. . . 
there remain many unresolved issues that Dr. King sought to resolve 
during his life.''
    We, in Memphis, feel a special obligation in fulfilling the legacy 
of his life's work . . . to pursue a goal of expanding the equality of 
economic opportunity for all of our citizens. The Bible says ``. . . we 
shall be transformed by the renewal of our minds . . .'' and so shall 
our city be transformed by the renewal of our communities. Thank you.

                               

    Chairman HOUGHTON. Thank you very much Mayor Herenton, I 
congratulate you on your testimony. My congratulations on your 
sense of timing. There are few people who testify who have any 
sense of when the 5 minutes is up.
    I would like to ask a quick question and then I'll turn it 
over to Mr. Coyne and others. I don't see any basic 
disagreement on that this is a bad program. I think everybody 
thinks it is a good program. The question is what should we 
watch for, as we go along here. I'd like to ask anybody here. 
Steve, have you got any ideas?
    Mr. CENTI. Well, in particular, one of the areas, I think, 
the way the program is structured, the capital gains aspect is 
something that isn't really part of the Renewal Community right 
now. There are some limitations out there that I think in the 
case of trying to stimulate development in our particular area, 
that's a very important aspect of the requirement for 
employment that qualifies you for the capital gains exemption. 
As businesses are just starting in our area, we would like to 
be able to offer that and keep it flexible enough so that we 
can bring new development in, which I think will stimulate 
other developers to be interested in the area.
    So, I think that is one particular aspect that needs to----
    Chairman HOUGHTON. In other words, you feel that the people 
who do start, that are successful, will not have that 
exemption. Is that right?
    Mr. CENTI. It is possible. I believe that the requirements 
for that are a little restrictive right now in terms of the 
employment goal that is part of it in this point in time, for 
the Renewal Communities.
    Chairman HOUGHTON. Well, if you have any ideas on this as 
we go along, let us know. That would apply to everyone here. 
This has got to be a success. It is a great idea, but we want 
to be on top of it.
    Mr. CENTI. One other thing, quickly. I just learned today 
about some pending legislation, H.R. 3100, that I wasn't aware 
of before I came to the conference, that deals with the issue 
that was brought up before about which census was used and the 
data that was used for applications. I know that, probably over 
the last 10 years, I know there has been significant change in 
our community. I believe that, you know, we probably will see 
that some of the census tracts that were qualified based on the 
1990 data have either worsened over the 10 years--I can't 
imagine in our community, with the changes that have occurred, 
that the situation has gotten any better. This would provide 
for the additional capacity to add new census tracts within 
certain communities, but that is something that I think is very 
important as well.
    Chairman HOUGHTON. All right, well, that is good. I see a 
note here that this is something which Mr. Quinn and Reynolds 
and people like that have suggested. It is a good idea.
    Any other thoughts on this? Yes, Mr. Johnson.
    Mr. JOHNSON. Yes, Mr. Chairman, I just would like to add, 
sort of, support with what Congressman Jefferson mentioned. The 
ability to--let me back up for a minute.
    In the New Orleans area, we are trying to grow what is 
called a biotech cluster in New Orleans, to bring value-added 
jobs to help lift families out of poverty. The Renewal 
Community where it is located in New Orleans, the biotech 
company--I won't name the company, but their proposed location 
is just right outside of the Renewal Community.
    So the question, I think, is how do we, sort of, have the 
ability to expand the Renewal Community boundaries to take in 
some of those types of companies that tie into our long-range 
strategy to reduce poverty in Louisiana?
    Second, how do we get some support to the CRAs, to help 
them administer their plans and objectives for the Renewal 
Communities? We are doing some things in Louisiana to try and 
get some resources to the CRAs. Overall, to get the initiative 
off the ground, I think we're going to need some sort of help 
for the corridors.
    Chairman HOUGHTON. Sure. This is what I was referring to, 
and I think Mr. Centi brought up, H.R. 3100--the whole purpose 
is to expand the areas designated in the communities based on 
the 2000 census data. So, I think it will get right to your 
point.
    Any other questions or comments? Yes.
    Ms. RAMOS. I would like to add a comment about three things 
I have heard today. On expanding the Renewal Community areas, 
we must be the smallest Renewal Community. Ours is four 
counties in Eastern Kentucky. So, the benefit of that allowance 
would greatly help us in creating--or adding to the number of 
people that will benefit from this program, as well as 
businesses.
    The second point I want to make is one of the Members asked 
questions of the previous panel concerning small businesses and 
family-owned and -operated mom-and-pop-type stores. In rural 
Eastern Kentucky, the majority of our businesses are small 
family-owned businesses that hire their family members as 
employees. So, a great number of our people are not going to 
benefit from these tax incentives. If we could make some kind 
of way for rural areas to allow these kinds of businesses to 
benefit from more of these incentives, I think it would really 
raise the enthusiasm we have. That has been a damper on the 
excitement that we have had, especially when we go to talk to 
them about these incentives.
    Again, the third thing I would say is, like you said, we 
need some help. Our city and county budgets in our rural 
communities are economically distressed, and we are having a 
problem trying to figure out ways on how we are going to create 
these wonderful marketing programs, how we are going to 
implement these programs in our counties, hold public meetings. 
Even just keeping our CRA informed and meet together and things 
like that are expensive. The time that we consume in working on 
this program, we just don't have the money to do it with. 
Again, we knew when we applied for this program that there was 
not money attached to this. We accepted that up front, but that 
doesn't take away from the need we have for funds to implement 
this program. So that would be helpful.
    Chairman HOUGHTON. Okay, thank you. Anybody else? And if 
not--do you have a comment?
    Mr. NADEAU. Yes, Chairman. I guess I would like to 
ventilate the same thing on the Renewal Community on some of 
the tax incentive programs, that there are some situations they 
are going to run out before we have a chance to really realize 
that, and look at that legislation, possible legislation.
    I would like to get something back for what we have done. 
When we heard about the renewal county, we immediately had a 
meeting the following week. We have organized together as 
groups, as Subcommittee Members, as representatives of every 
area across our reservation. One of the things we want to look 
at, how big and how much of a magnitude do we have on a 
reservation, what are our major problems, what do we need to do 
about it? What type of solutions? What type of plan do we come 
up with?
    As we sat and thought about it, we put together our thought 
process to look at exactly what we are looking at as far as 
service area. We have had as much as 65-percent unemployment on 
our reservation. Our average age of our college students is 28 
and 30. That means we recycle them through the employment area, 
back to college, and back out to the unemployment line.
    Our average age of students, for instance, that start an 
employment area is 18 and 19. We cycle those in, they go to 
college, they come back, they're graduating from college at 28 
and 30, and that is at the 2-year and at the 4-year 
institutional level.
    We have lost major industries in our area. So, we are going 
to have to revitalize those. When we lost a sanitarium, that 
was over 1,500 jobs. We lost jobs both in our two defense 
facilities and our data processing. The magnitude of jobs we 
have lost is like in the 4,000 area. We have 17,000 people; you 
have 7,000 currently employed. We lost 4,000 people. That is 
our nucleus, and that is our base. That is a skilled labor 
force that is sitting, waiting to go.
    So, in looking at the incentive program, we are going to 
take those types of skills, if you will, and resources and 
market our people. We have already started this process. We are 
in the first planning stages of our 5-year plan. I just 
completed, for the industry, a 5-year business plan that will 
include the incentive programs, thoroughly.
    Again, like I said, with those time frames on there, it is 
going to be hard for us to realize some of those and offer 
those to the major industries.
    We are working with two major industries right now. We have 
one on-line, we are working with a second one, we are looking 
at a third one. So, we are looking at bringing those jobs to 
the reservation for our residents.
    Chairman HOUGHTON. Very good. Thanks very much. Do you have 
a comment?
    Dr. HERENTON. Yes. I think, Mr. Chairman, your question 
was, what should your Subcommittee be looking out for?
    Chairman HOUGHTON. Right.
    Dr. HERENTON. I would respectfully submit to you, Mr. 
Chairman, and Members of this Subcommittee, that you should be 
keying on holding the local communities accountable for 
tracking results of these incentives through the appropriate 
data collecting strategies.
    I also would like to echo some statements that the young 
lady made relative to assisting the communities with marketing 
these incentives to our communities.
    Chairman HOUGHTON. Thanks very much. What happened to Mr. 
Pomeroy? Why don't we just--Mr. Coyne, would you like to----
    Mr. COYNE. Thank you, Mr. Chairman.
    Any of the panelists can answer this question. The Act of 
2000 provided for the tax incentives provision in the Act of 
2000, but there were some other provisions in there, like low-
income housing, brownfield deduction, school tax-exempt bond 
financing. My question is, in your plans that have been drawn 
up or that you are drawing up, are any of the plans going to 
include school tax-exempt bond financing? Is that going to be a 
provision of your plans?
    Ms. RAMOS. Currently our school board in Owsley County is 
working with the State of Kentucky to investigate the use of 
those bonds. They are having a need for--they heat their 
elementary school with coal burners, and those burners have 
gone bad--and are having to replace that system and are really 
interested in expanding natural gas into the school system, 
which would have to come almost 11 miles from the next town. 
Our school board is looking at that.
    Owsley County also got good news Friday, that one of our 
240-acre sites that was recently purchased is declared by the 
State of Kentucky a brownfield. So, we will be going after some 
of those funds to develop and use that property as well.
    Mr. COYNE. Anyone else?
    Mr. NADEAU. Congressman Coyne, yes, we have, and our 5-year 
plan includes--we have five areas in our plan. We start out 
with education, business and industry, natural resources, 
housing administration, and education--I guess I said that 
twice, but it is included in our plans.
    Even though we are a tribal government, tribal organization 
entity, we are still going to look at every aspect of this, if 
it is bonds or whatever we do. We need more schools, as refers 
to our population. It continues to grow, and they do not go 
anyplace. They do not want to go anyplace. They would rather 
stay. So, through education, yes, we have to advance that, and 
we have to look at every opportunity.
    Mr. COYNE. Thank you.
    Dr. HERENTON. Congressman, we have 160 schools in the City 
of Memphis and all but 3 qualify, so we are certainly going to 
use this provision.
    Mr. COYNE. Thank you.
    Chairman HOUGHTON. Well, I just wanted to summarize what I 
heard. I mean, I heard that we have to be careful about the 
capital gains exemption that is there and being used. Second, 
we ought to think about the expansions through H.R. 3100. The 
third area is around timing--are we going to be running out 
before we really get something effectively done? Then, Mayor 
Herenton said holding the local communities responsible for 
results.
    Are there any other suggestions?
    Ms. RAMOS. Small business owners.
    Chairman HOUGHTON. What?
    Ms. RAMOS. Small family-owned businesses.
    Chairman HOUGHTON. Small family-owned businesses, yes.
    Ms. RAMOS. Need to have some help on those tax credits.
    Chairman HOUGHTON. Right. Well, that was the only exception 
we had in the work opportunity tax credit, to eliminate the 
family membership. The difficulty there was the abuse of the 
system. We will take a look at that again.
    Ms. RAMOS. Thank you.
    Chairman HOUGHTON. Well, anyway, I really appreciate your 
spending this time and all this effort. I hope something 
positive comes out of this.
    If there is no further business, the hearing is adjourned.
    [Whereupon, at 4:21 p.m., the hearing was adjourned.]
    [Submissions for the record follow:]
  Statement of Diane Bell, Chief Executive Officer, Empower Baltimore 
              Management Corporation, Baltimore, Maryland
INTRODUCTION
    Mr. Chairman, Congressman Coyne and Members of the Subcommittee, 
thank you for the opportunity to share some of our experiences, 
including successes and lessons learned through developing and managing 
Baltimore's Empowerment Zone (EZ). Baltimore is a Round One EZ covering 
6.8 square miles in three non-contiguous areas of East, West and South 
Baltimore. The Empower Baltimore Management Corporation (EBMC) is 
Baltimore's non-profit organization that oversees Title XX funding 
through its Empowerment Zone grant. The EBMC implements its strategic 
plan and mission focusing on four critical areas: Business Development 
(entrepreneurship); Workforce Development (human capital, family 
support, training, and substance abuse); Quality of Life (physical and 
emotional environment including land use, public safety, homeownership, 
etc.); and Community Capacity Building (enhancing the community's 
ability to affect and sustain positive change). EBMC's Board of 
Directors is strategically comprised to reflect the diversity of 
Baltimore's communities and businesses, underscoring our understanding 
that--critical to our success--is our ability to develop leadership 
that engaged all the voices and perspectives of our City.
    To best achieve this goal, EBMC created a comprehensive initiative 
to develop sustainable solutions through establishing six `Village 
Centers.' Village Centers function as their own 501c3--with 
sustainability in mind--to best provide leadership, skills development 
training and community-based partnership development. These community-
based institutions also support community capacity building through 
identifying additional resources and `asset' assessments, developing 
and expanding sustainable strategies through partnerships and 
collaborations while establishing a vehicle that can leverage resources 
through partnerships with both the City and private developers.
QUALITY JOB CREATION MEANS TRAINING EMPLOYEES
    EBMC has linked more than 7,600 Zone residents into jobs across the 
Baltimore area while creating to date more than 5,100 jobs within the 
Empowerment Zone. As such, our customers include employers in and 
outside of the Zone as they relate to linking Zone residents to job 
opportunities. We have seen that residents gain significant wage 
increases through direct linkage to an employer that customizes 
training programs and agrees to hire the resident upon successful 
completion of the training.
    In fact, through wage records we have tracked residents' increase 
or decrease in wages from the point of job placement, which includes a 
four-year history. The data indicate that customized training at 
placement and over time increases wages significantly. In fact, our 
recent data show a 313 percent wage increase of Zone residents, post-
customized training placements. Jobs obtained through customized 
training, include clean room laboratory technicians, surgical 
technicians, forklift operators, teachers' aides, etc. These are jobs 
with career pathways.
    Our grant funds and the flexibility of these grant funds allow this 
focused partnership with employers throughout the City of Baltimore. 
Flexible dollars have allowed us to serve Zone residents regardless of 
their ``categorical classification,'' which is often the restriction of 
other funds.
    EMBC's Workforce Agenda includes service to ex-offenders just prior 
to their release in an effort to break the cycle between repeat crimes 
and unemployment; no other flexible Federal dollars allow this 
concentrated focus on low-wage/low-income workers.
ACCESS TO FLEXIBLE CAPITAL IS CRITICAL TO SUCCESS
    EBMC's Business Empowerment Center (BEC) implements its business 
development strategy in partnership with a range of major economic 
development organizations by providing services to small businesses in 
the Empowerment Zone and those interested in locating in the Zone. The 
primary goal is to create and retain jobs by linking Zone businesses to 
capital, sites, and a trained workforce. The core services are 
strategically designed to work in tandem with each other, including:

         Technical Assistance
         Access to Capital
         Site Location Assistance
         Strategic Alliance
         Workforce Development
         Linkage to Government Agencies and Private and Public 
        Organizations

SUCCESSFUL CAPITAL PROGRAMS REACH MOST UNDERSERVED
    To ensure that there are an increasing number of jobs growing in 
the Zone that residents can access over a period of time, EBMC has 
established five small business loan and investment funds. These funds 
have provided 87 loans and investments, loaned $13.7 million of EZ 
funds while leveraging $80 million and creating 1,761 jobs.
    Focusing on Access to Capital, the BEC serves as a facilitator to 
link the business' financing needs to either a commercial lender or to 
one of its contracted partners (loan fund managers managing its five 
different loan/equity programs). EBMC has established five uniquely 
different capital programs for those Empowerment Zone businesses that 
have proven that they are a viable business that can produce a return 
but have limited or no access to traditional financial institutions. 
These programs include:

         Micro Loan Fund--start-up to small businesses needing 
        $1,500 to $50,000 in capital.
         Small Business Loan Fund--businesses needing at 
        minimum $50,000 to a maximum of $500,000 in financing.
         50/50 Loan Fund--businesses having already secured a 
        primary source of funding, but have a financing gap, which can 
        be addressed for up to $200,000 (subordinated debt).
         Brownfield's Loan Program--businesses developing on 
        environmentally contaminated land in need of financing from 
        $50,000 to $500,000.
         Equity Investment Fund--businesses looking for 
        venture capital financing of up to $500,000.

    In developing these funding programs, EBMC's intent was not to 
compete with existing loan programs and financial institutions in 
Baltimore, but to serve as a financial source of funds for those 
businesses that have viable businesses--but limited access--to such 
markets. In addition, the loan funds serve as a potential first source 
of funds that attract and leverage traditional financing.
    Since the implementation of the loan fund programs, with the 
initial program the 50/50 Loan Program (formerly the 80/20 Loan 
Program) beginning in 1997, and the latest program, the Micro Loan 
Program, implemented in 2000, we have achieved the following successes:

         Eighty seven (87) loans made to 79 different 
        businesses in the EZ.
         More than $13 million in loans/investments have been 
        made ($13,774,913).
         More than 80 million in dollars are leveraged from 
        other financing sources generated by the 87 loans.
         More than 1,700 jobs were created by the businesses 
        that received loan funds.

    EBMC's loan/equity program is well received by businesses because:

        1. LThe funds do not compete with, but serve as a compliment to 
        traditional funding sources.
        2. LThe fund managers understand the importance of providing 
        ``technical assistance'' to the borrowers. In the Micro Loan, 
        Small Business, and Equity Fund programs, technical assistance 
        is incorporated in the loan and is a condition of loan 
        approval.
        3. LA commitment must be made to jobs and jobs for Zone 
        residents as a part of the fund agreement.
        4. LAfter the loan is closed and throughout the life of the 
        business, the BEC, the fund manager and EBMC's Workforce Unit 
        continue to work with the business to provide counsel and 
        support as needed.

    Some of the lessons learned as we developed our loan fund programs 
include:

         Money without the provision of technical assistance 
        to the borrower (given the target market of our loan fund) does 
        not adequately address the full needs of the business.
         The business must be a viable business and able to 
        succeed and grow in the normal marketplace; often these are 
        businesses or the specific investment need that initially fall 
        below the radar screen of traditional banking institutions.
         A commitment to jobs and specific commitments for 
        Zone residents must be negotiated upfront as a part of this new 
        economic development approach in these communities.
         Our 50/50 Loan Program was initially implemented as 
        an 80/20 Loan Fund Program. Over time we learned that 
        traditional financial institutions required more subordinated 
        debt thus our Loan Program evolved from 80/20 to 65/35 to 50/
        50.
         In managing five different funds programs, the 
        interest rate charged varied widely. To be consistent between 
        loan programs, EBMC required the fund hold a maximum interest 
        rate as used by the SBA of 2\1/2\ to 2\3/4\ over prime on loans 
        for our debt funds.

    Some of the trends we see in our Loan Program include:

         Seventy-one percent of the loans made in the 
        portfolio would not have been closed without the funding from 
        one of the five loan programs (62 out of 87 loans).
         Eighty-four percent of the companies receiving loans 
        saw an increase in gross revenues the following twelve months 
        after closing the loan. Several examples include:

          a. LManufacturer--Pre-Loan $5.2 million gross revenues; Post-
        Loan $15 million gross revenues.
          b. LFuneral Home--Pre-Loan $501,000 gross revenues; Post-Loan 
        $900,000 gross revenues.
          c. LRestaurant--Pre-Loan $550,000 gross revenues; Post-Loan 
        $3.2 million gross revenues.

    To illustrate the success of our loan fund program, here are a few 
examples of borrowers involved in our brownfield's loan program:

    1. The development of a mixed-use project resulted in a 36,000 s.f. 
class A office space and 11 residential units. A portion of the project 
required remediation related to the removal of underground storage 
tanks. The borrower was unsuccessful in obtaining conventional 
financing for the project due to his lack of prior (comparable) 
development experience and the unresolved environmental issues 
associated with the project. As a result of the Brownfield's Revolving 
Loan Fund (BRLF) providing acquisition financing and assistance to 
address remediation issues, the Development Credit Fund was willing to 
provide construction financing for $3,717,000 and the developer was 
able to raise an additional $1,233,000 in historic tax credits. Since 
completion, the project has been fully leased having brought 
approximately 110 jobs to the area. The BRLF loan was fully repaid 
within two years of loan settlement.
    2. The EZ BRLF provided a loan of $180,000 to the borrower for the 
acquisition and partial renovation financing toward an 18-year-old 
Fells Point auto body repair company. The borrower purchased and 
renovated an adjacent, formerly vacant warehouse building to house its 
new custom auto accessories retail operation. Environmental issues 
surrounding this property are related to previous and current use of 
paint products and hazardous materials on adjacent parcels of land. The 
institutional lending community would not provide a loan to the 
borrower for the expansion parcel due to the facilities use of paint 
products as its core business and other environmental issues. The 
borrower raised $40,000 of equity for the project that was sufficient 
to complete the acquisition and renovation. The expansion of the 
business resulted in the creation of eight (8) new jobs.
    3. The EZ BRLF provided $50,000 site acquisition financing in 
addition to paying for a portion of the construction costs incurred to 
build a two-story, 5,500 s.f. new headquarters. The subject site is 
located in the heavily industrialized Hollins Ferry Road Corridor that 
contains several nearby sites that have had or are currently holding 
environmental permits. The new facility provides ample room for growth 
for the borrower's expanding business. The borrower utilized the EZ 
BRLF to bypass the stringent lending conditions that were required by 
the banking community as a result of the site's location in a heavily 
industrialized neighborhood. The borrower provided the balance of the 
financing out-of-pocket to complete the project. Since completion, the 
project created seven (7) new jobs.
    4. The EZ BRLF provided a loan of $110,000 to the borrower to 
assist in the acquisition of a new headquarters building located at 
2039 Hollins Ferry Road. The parcel had surface petroleum spillage that 
had to be remediated per the environmental auditors recommendation. The 
borrower operates a construction company that assembles the 
architectural concrete and structural pre-cast components, which 
constitute the exterior skeleton or structural frame of multi-story 
commercial projects. Local banks were not particularly interested in 
the project due to its location and remediation requirements. The 
borrower was able to increase his employee base by 15 subsequent to the 
completion of the project.
    5. The EZ BRLF funded a loan for $1,000,000 that was utilized for 
site acquisition and remediation/site work as part of the construction 
of a mixed-use facility that will contain a 20,000 s.f. office, 27,500 
s.f. for production space, and 2,500 s.f. in retail space located on E. 
Fayette St. The site suffered from the presence of underground storage 
tanks and surface petroleum spillage issues. The new facility is 
located near Baltimore's Main Post Office on a 1.7-acre site. The 
project will create up to 30 new jobs at the new facility. The funding 
for the project would have been insufficient were it not for the EZ 
BRLF due to a local bank's unwillingness to finance the remediation and 
site work for the project.
LAND USE AND HOUSING
    Now that we know you can move low-income persons into career paths 
and that access to flexible capital is critical to growing small 
businesses, we are shifting our attention to developing the land assets 
in these neighborhoods. All of EBMC's village centers have completed 
its land use plan and in one area near the University of Maryland, the 
community has clearly stated its desire and interest in having the 
university expand some of its growing market opportunities into its 
neighborhood. We are helping to fund the feasibility study to determine 
the economic possibilities of this opportunity.
    If this economic asset grows, it will increase job opportunities 
for residents and housing opportunities for a mixed income 
neighborhood. In this regard, we will begin to work with the City of 
Baltimore and national organizations to develop creative solutions in 
designing and developing a mixed income community.
    It is our hope that the persons for the community, whom now have an 
upward career path, will also now have the opportunity to gain 
additional assets, including a house with market value.
    Utilizing our land use plans, we intend to look for other 
opportunities to create new markets in the EZ and link our small 
businesses that are growing to those market opportunities.
    Moving forward to achieve our strategic plan would not have been 
possible without both the tax incentives and flexible funding. Overall 
to date our activities have leveraged $1.5 billion from both private 
and public sectors funds.
CLOSING
    Mr. Chairman, Congressman Coyne and Members of the Subcommittee, 
again I appreciate the opportunity to share some of our successes and 
lessons learned. I believe that our experiences demonstrate the 
resounding necessity of workforce, business development and diversified 
land use planning as part of market driven economic renewal strategies 
for our most underserved communities. Let me again underscore the 
critical importance of flexible capital for programs like these to 
succeed. We have learned so much and can continue to do more to lift up 
our communities and build from strength to strength.

                               

   Statement of the Hon. James K. Hahn, Mayor, City of Los Angeles, 
                               California
    Mr. Chairman and Members of the Subcommittee:
    The City of Los Angeles appreciates the opportunity to provide 
comments on the Federal tax incentives of the Renewal Communities 
program. We are grateful for the passage of the legislation which 
authorized the Renewal Community (RC) Program administered by the U.S. 
Department of Housing and Urban Development.
    The Los Angeles Renewal Community program provides a unique 
opportunity for the City, its businesses, and the targeted communities, 
to develop a comprehensive strategic approach to long-term economic 
viability in communities where economic and social distress have long 
been the order of the day. It provides for a concentrated and 
collaborative effort by all of the RC Program participants.
    The area selected as the Renewal Community abuts the city's 
Empowerment Zone and exhibits substantial economic distress. According 
to 1990 Census statistics, approximately 37% of the population lives in 
poverty, while 14% of its residents are unemployed and 81% of the 
households are low-income.
    The City of Los Angeles has begun to promote the incentives 
identified in its RC Course of Action. We have identified critical 
partners and are working on the linkages to create seamless incentive 
programs to aid businesses and residents. We have also held seminars 
with businesses and community organizations to promote the incentives 
in the RC.
    The Federal tax incentives of the RC program, combined with the 
city's own business tax incentives, provide a powerful combination to 
attract and retain businesses as partners in the RC program. This will 
help ensure that the residents of the RC will have the maximum 
opportunity to secure the new jobs created as a result of the RC 
program.
    The Work Opportunity and Welfare to Work Tax Credits will be a 
powerful incentive to hire RC residents and young people in particular. 
The city will extensively publicize those benefits to RC residents and 
businesses throughout the city.
    As the City of Los Angeles moves forward in the implementation 
phase of the Renewal Community program, we recommend that Congress 
consider the following points that we believe will increase the 
benefits to RC communities:

         Revise Federal guidelines for the Renewal Community 
        economic incentive program and other economic stimulus programs 
        to allow smaller, non-contiguous, urban areas that suffer from 
        poverty and unemployment to be eligible to receive economic 
        incentives;
         Create incentives to produce low-income housing 
        rental and ownership within Renewal Communities. For example, 
        provide grant preferences or set-asides of low-income housing 
        tax credits, mortgage credit certificates or tax-exempt bond 
        authority for housing produced in a Renewal Community;
         Create a Renewal Community bond financing program 
        similar to the one in Empowerment Zones, or increase the 
        flexibility for local jurisdictions to use existing bonds 
        within the Renewal Community;
         Create Renewal Community tax incentive programs for 
        financial institutions similar to those offered in Empowerment 
        Zones. For example, allow tax-free net interest deductions for 
        lending organizations that provide loans to Renewal Community 
        businesses, and;
         Provide start-up funding to leverage local and 
        private sector funds for the marketing and outreach of the 
        Renewal Communities incentives.

    Thank you, Mr. Chairman, for the opportunity to share the City of 
Los Angeles' views on this important new program. We appreciate your 
leadership in seeking ways to optimize the benefits of the Renewal 
Community Program, and I welcome the opportunity to work in partnership 
with Congress and the Administration as we begin implementation of this 
new initiative.

                               

 Statement of the Hon. Martin T. Meehan, a Representative in Congress 
                    from the State of Massachusetts
    Mr. Chairman, I appreciate the opportunity to present my views on 
Tax Incentives for Renewal Communities. My district includes two 
cities, Lowell and Lawrence, Massachusetts, which have been designated 
Renewal Communities. The Renewal Community designation, and its 
associated tax incentives, will assist Lowell and Lawrence to achieve 
their tremendous economic growth potential. However, I would like to 
bring to the Subcommittee's attention three key areas in which Renewal 
Community implementation can be improved to more effectively spur 
economic growth.
    First, the Renewal Community Employment Tax Credit should be made 
available to qualified businesses of a Renewal Community which hire 
residents of any and all other Renewal Communities. Currently, a 
qualified business's receipt of the Renewal Community Employment Tax 
Credit may be restricted to only hiring residents within the same 
Renewal Community, as opposed to permitting hiring residents of other 
Renewal Communities. Fixing this restriction would permit a qualified 
business to hire the residents of another Renewal Community. This fix 
would be of particular importance to businesses in neighboring Renewal 
Communities, such as Lowell and Lawrence. Today's workforce frequently 
crosses municipal and State boundaries for employment opportunities. 
Therefore, the Renewal Community Employment Tax Credit should certainly 
apply when the residents of one Renewal Community are employed by a 
qualified business within another. This technical improvement would 
expand the employment scope for qualified businesses and make 
relocation or establishment of a business to an area with multiple 
Renewal Communities a more attractive option.
    Second, designation as a Renewal Community should not come at the 
cost of all of the incentives associated with designation as an 
Enterprise Community. Currently, designation as a Renewal Community 
will only be completed if the area is not, or is no longer, designated 
an Enterprise Community. Enterprise Communities which were chosen to 
become Renewal Communities had to give up the former to achieve the 
latter. In practice, this prevents the newly named Renewal Community 
from continuing to access the valuable incentives associated with its 
former Enterprise Community designation. In particular, Enterprise 
Communities are provided a Public Service Cap Exemption. This exemption 
allows the designee to use Community Development Block Grant funds for 
public services in excess of fifteen percent, which is, otherwise, the 
maximum funding level for such activities. In the case of Lowell, which 
was an Enterprise Community prior to its Renewal Community designation, 
it has lost the ability to set aside up to $100,000 in additional 
Community Development Block Grant funds for public service projects. 
The Public Service Cap Exemption is especially valuable today due to 
tight State budgets which reduce available funding for public service 
activities. Restoring the Public Service Cap Exemption to Enterprise 
Communities/Renewal Communities will ensure that funding will remain 
available for important public service activities.
    Third, Renewal Communities should have the opportunity to expand to 
include adjacent areas which also are in need of the designation's 
associated incentives. In some cases, during the initial boundary-line 
establishment for Renewal Communities adjacent areas of high economic 
distress were not included. To fix this, Renewal Communities should be 
allowed to seek the Secretary of Housing and Urban Development's 
approval of expansion to include these areas. For example, the Tanner 
Street area of Lowell is located near the Lowell Renewal Community.
    However, it was not included within the Renewal Community's 
boundary despite its economic challenges including several tax 
delinquent properties and a Superfund site. Certainly, areas like 
Tanner Street which are adjacent to Renewal Communities and are in 
great need of the associated tax incentives to attract economic 
redevelopment should be considered for expansion.
    Mr. Chairman, I appreciate your Subcommittee's time and attention 
to these matters. I am eager to work together to resolve these issues 
so that Renewal Communities can realize their full potential.

                               

 Statement of Phil Cohn, President, Philip Cohn Group, East St. Louis, 
                                Illinois
    I would first like to thank the Oversight Subcommittee for the 
opportunity to submit testimony on these critical community development 
issues, and commend the Chairman for recognizing the positive impact 
that tax incentives are having on distressed urban areas like East St. 
Louis. It is important that the American public learn about the real 
progress being made in our cities, and that members of Congress 
continue to examine Federal economic development tools such as tax 
incentives to allow for continued improvements in future proposals.
    Before discussing recent developments I would like provide some 
background on the city of East St. Louis. This city presents a very 
good example of the plight of many urban areas since the industrial 
infrastructure of older American cities began to decline following 
World War II. East St. Louis is an urban area that at the turn of the 
nineteenth century was a highly successful city--a city experiencing 
tremendous growth on the strength of big industry. However, by mid 
twentieth century, East St. Louis experienced the loss of its 
industrial base and subsequently the flight of many of its residents to 
the suburbs followed. These citizens understandably left in search of 
jobs and a better future. The core of the city began to experience 
tremendous declines in both residential and business population. The 
factories closed, leaving large brownfield areas and the neighborhoods 
that once held stately homes became abandoned, leaving shells that were 
at once both hazardous to the community yet hospitable to stray animals 
and homeless citizens. By the latter half of the twentieth century, 
East St. Louis was a shell of its former self and the scourge of the 
region, building a national stigma as one of the worst inner city areas 
in the entire country. This state of decline continued for decades, and 
conditions have only recently begun to improve thanks to a coordinated 
effort by State, Federal, and local government working closely with the 
East St. Louis community.
    Today, businesses and citizens are beginning to take a new look at 
America's cities, they have become in many ways the ``new frontier'' 
for business expansion and relocation. One of the most effective and 
important tools that sparked this revitalization are the various tax 
incentives that have helped attract investment and reinvigorate 
America's cities. The Renewal Communities legislation coupled with the 
Empowerment Zone and Enterprise Communities legislation has played an 
extremely important in the new process of economic development in the 
urban cores of our cities.
    We have seen tremendous success through the incentives that are 
available to perspective businesses through these different programs. 
Businesses are beginning to realize the lucrative economic 
opportunities that are available to them through incentives that are 
available in designated RC's, EZ's, and EC's. Being able to attract 
business entities and the jobs they create is the single most important 
factor in urban revitalization. Without creating commerce and jobs in 
impoverished urban areas a turnaround will never be able to 
materialize. Through job creation and positive economic development we 
are able to redevelop and revitalize America's urban core.
    We have played a part of this process over the past fifteen years 
in East St. Louis. We have personally had to fight the national image 
of East St. Louis as an extremely dangerous and blighted city, and 
frankly until these programs and their corresponding incentives had 
been put into place we struggled in our attempts to attract large job-
creating businesses to properties in East St. Louis. The city had 
remained in a state of decay and severe blight, with a Central Business 
District that was for all practical purposes non-functional. What makes 
this problem even more devastating is that East St. Louis is directly 
adjacent to St. Louis, Missouri, a stones throw across the Mississippi 
River. The blight and decay that plagues East St. Louis directly 
affects the overall economic health of the city of St. Louis and the 
Metropolitan region as a whole. East St. Louis had become a detriment 
to the entire region, instead of living up to its potential as a 
natural extension of the Central Business District of the Metropolitan 
Area.
    We began to see the natural potential of the City of East St. Louis 
and as we became familiar with the incentives that the city has to 
offer through its designations, we began to market them to several 
companies throughout the Nation. While we often first encountered 
initial skepticism because of the infamous reputation of the city of 
East St. Louis, we were able to overcome this doubt once we were able 
to present to companies the significant economic benefits they could 
realize by utilizing the incentives available. For the first time in 
decades, we began to see serious interest in locating new facilities in 
East St. Louis.
    One recent example of how these incentives work to attract business 
recently occurred with a outsource firm to fortune 500 companies. We 
approached a site selection agency to help market East St. Louis to 
prospective companies. We conveyed to them the tremendous amounts of 
incentives available through East St. Louis and its designations, the 
cornerstone of which being the EZ Wage Credit, which is up to a $3,000 
credit per employee that is renewable every year throughout the life of 
the Zone. This is an extremely important credit to these communities 
since we believe that one of the most vital components to 
revitalization of blighted communities is significant job creation. 
Following suit, the companies that we have been pursuing have had been 
large employers, for example, companies in the call center industry. 
Through the help of site selection agencies we identified several 
companies who were looking to open new facilities in the near future. 
Upon initial contact to many of these companies the response was the 
same, they would hardly get past our introduction upon hearing the name 
East St. Louis before literally slamming the door in our face. However, 
once given the chance to explain the lucrative incentives and financing 
programs available they became interested yet skeptical.
    Many individuals do not fully comprehend the significant savings 
that can be accrued through location in a Renewal Community, 
Empowerment Zone, or Enterprise Community. When they actually see the 
numbers on paper it seems implausible that the tremendous amount of 
dollars saved can actually be realized. However, once the programs are 
explained and the information is backed up through the documentation 
that HUD and other agencies have provided to the public, these 
companies begin to show real interest in our community. What these 
incentives have done is enabled companies to look past the blight and 
bad reputations of communities and has let them focus on the real 
economic benefits of location within an EZ, RZ, or EC.
    In the case of the outsource firm, they too were initially 
skeptical about the community of East St. Louis, having heard of its 
reputation for many years. We utilized every incentive available 
through the Federal, State, and local governments. We presented to them 
a package that exceeded their expectations of the kind of incentives 
that are available. It took numerous correspondences with them and 
several reiterations that these incentives are available and they would 
be able to take advantage of them.
    They conducted a site visit to East St. Louis and were surprised 
that though the community is blighted, it did not live up to the 
``horror stories'' that they had heard. Let me reiterate, that without 
the incentives through the EZ we would never had been able to get them 
to even consider East St. Louis. During their site visit we set up many 
meetings with various representatives from Federal and State government 
to address incentives and programs that would be made available to 
them. They were indeed impressed by this array of incentives and the 
commitment on the part of government to actively take a role in the 
pursuit of bringing their facility on line in East St. Louis.
    The firm was so impressed by the package that was put on the table 
before them they conducted a second site visit, and again the 
incentives were thoroughly illustrated to them by members of Federal, 
State, and local government. Our primary competition is a city in sunny 
Florida. Obviously, without tax incentives East St. Louis would find it 
difficult to compete. However, because of our incentives and the 
economic benefits that they bring we have been able to compete with any 
city across the country. That is why it is absolutely vital for these 
incentives to be in place; they are creating opportunities where before 
there had been none. They are working and they will continue to work as 
long as they are kept in place, and communities like East St. Louis 
would never be able to begin the process of revitalization without 
them.
    In closing, East St. Louis still has a long way to go, and there is 
much work to be done. We understand that we are not going to completely 
reverse decades of decline in a few short years. However, today we see 
progress, and today we see hope. There is a vision for the future of 
East St. Louis, and there are many talented, dedicated people working 
to realize that vision. The Federal Government has played a critical 
role in this effort through the creation of Renewal Communities, 
Empowerment Zones, and the many tax incentives they include. We have 
seen the positive effects of these incentives first hand in East St. 
Louis, and would endorse the continued and expanded use of such 
incentives in future legislation.
    Thank You.

                                   - 
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