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S. HRG. 109–1037 

TESTIMONY ON THE IMPACT OF THE LAST REAUTHORIZATION OF THE APPALACHIAN REGIONAL COMMISSION AND ISSUES REGARDING 

THE UPCOMING REAUTHORIZATION. 

HEARING 

BEFORE THE

COMMITTEE ON 

ENVIRONMENT AND PUBLIC WORKS 

UNITED STATES SENATE 

ONE HUNDRED NINTH CONGRESS 

SECOND SESSION 

APRIL 20 2006—MARIETTA, OH 

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

( 

Available via the World Wide Web: http://access.gpo.gov/congress.senate 
COMMITTEE ON ENVIRONMENT AND PUBLIC WORKS 

ONE HUNDRED NINTH CONGRESS 

SECOND SESSION 

JAMES M. INHOFE, Oklahoma, Chairman 

JOHN W. WARNER, Virginia 

CHRISTOPHER S. BOND, Missouri 

GEORGE V. VOINOVICH, Ohio 

LINCOLN CHAFEE, Rhode Island 

LISA MURKOWSKI, Alaska 

JOHN THUNE, South Dakota 

JIM DEMINT, South Carolina 

JOHNNY ISAKSON, Georgia 

DAVID VITTER, Louisiana 

JAMES M. JEFFORDS, Vermont 

MAX BAUCUS, Montana 

JOSEPH I. LIEBERMAN, Connecticut 

BARBARA BOXER, California 

THOMAS R. CARPER, Delaware 

HILLARY RODHAM CLINTON, New York 

FRANK R. LAUTENBERG, New Jersey 

BARACK OBAMA, Illinois 

ANDREW WHEELER, Majority Staff Director 

KEN CONNOLLY, Minority Staff Director 

(II) 
(III) 

C O N T E N T S 

Page 

APRIL 20, 2006—MARIETTA, OH 

OPENING STATEMENTS 

Voinovich, Hon. George V., U.S. Senator from the State of Ohio ........................ 1 

WITNESSES 

Grossman, Steve, executive director, Ohio Water Development Authority ........ 29 

Prepared statement .......................................................................................... 69 

Hughes, Jeff, director, Environmental Finance Center, University of North 

Carolina at Chapel Hill, Institute of Government ............................................ 27 

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

Justice, T.J., director, Governor’s Office of Appalachia, Appalachian Regional 

Commission ........................................................................................................... 7 

Prepared statement .......................................................................................... 45 

Little, Gary, president, Information Technology Alliance of Appalachian Ohio 18 

Prepared statement .......................................................................................... 48 

Matusoff, David, principal and director of Technology Planning, Whiteboard 

Broadband Solutions ............................................................................................ 16 

Prepared statement .......................................................................................... 47 

Myers, Don, director, Ohio Mid-Eastern Governments Association .................... 9 

Prepared statement .......................................................................................... 46 

Pope, Anne, Federal co-chair, Appalachian Regional Commission ...................... 4 

Prepared statement .......................................................................................... 37 

Reed, Ken, director, Vinton County Community and Economic Development, 

Vinton County Courthouse .................................................................................. 31 

Prepared statement .......................................................................................... 81 

Scholl, David, Ph.D., president and CEO, Diagnostic Hybrid, Inc ...................... 22 

Prepared statement .......................................................................................... 51 

Stuber, Angela, executive director, Ohio Community Computing Network ....... 20 

Prepared statement .......................................................................................... 49 

ADDITIONAL MATERIAL 

Reports: 

Appalachian Regional Commission: Index of County Economic Distress 

in the United States, Fiscal Year 2006 ....................................................... 44 

Appalachian Regional Commission: Telecommunications and Technology 

in Appalachia, Program and Impact Summary, April 20, 2006 ................ 84-95 

Drinking Water and Wastewater Infrastructure in Appalachia, An Analysis of Capitol Funding and Funding Gaps—Report Summary ................ 56-68 

Water and Wastewater Infrustructure in the Appalachian Region of Ohio 71-80 

Statement of Jeff Spencer, executive director, Ohio Valley Regional Development Commission ................................................................................................. 81 

(1) 

TESTIMONY ON THE IMPACT OF THE LAST 

REAUTHORIZATION OF THE APPALACHIAN 

REGIONAL COMMISSION AND ISSUES REGARDING THE UPCOMING REAUTHORIZATION. 

THURSDAY, APRIL 20, 2006 

U.S. SENATE

COMMITTEE ON ENVIRONMENT AND PUBLIC WORKS, 

Marietta, OH 

The committee met, pursuant to notice, at 10 o’clock a.m., Washington State Community College, Graham Auditorium, 710 

Colegate Drive, Marietta, OH. Hon. George V. Voinovich presiding. 

OPENING STATEMENT OF HON. GEORGE V. VOINOVICH, 

U.S. SENATOR FROM THE STATE OF OHIO 

Senator VOINOVICH. Good morning everyone. Can you hear me? 

I am very, very pleased to be here today to conduct this field hearing on reauthorization of the Appalachian Regional Commission. It 

is nice to be back here in Washington County and at Washington 

State, and I would like to thank Dr. Hatfield for hosting us today. 

I know that when you put one of these things together, it is a lot 

of inconvenience to your staff, and we are very, very grateful for 

the venue that you provided to us. 

I think the last time I was here was back in 2002 when we 

toured Washington State’s nursing program which was set up, supported by the ARC, and Dr. Hatfield said she has a whole list of 

things that Washington State has adopted in part, I have it right 

here, for ARC. So it is nice to be in a place where we are having 

an impact on. 

I would also like to thank and recognize Joy Padget, the former 

director of the Governor’s Office of Appalachia, and now your State 

Senator. I really appreciate the good job that Joy did up at the 

Governor’s office, and we worked together for a long time, and was 

preceded by someone’s else work and that is T.J. Justice. 

I would also like to recognize some of our local development district directors, Boyer Simcox with Buckeye Hills which is based 

here in Marietta, Jeff Spencer the Ohio Valley Regional Development Commission based in Waverly. They do an outstanding job in 

making a difference in their respective communities. 

I am also very, very happy to recognize our first witness, Anne 

Pope. Ann is our Federal co-chair, and I know that this is a special 

day for you today, Ann. 
2 

Happy birthday to you. Happy birthday to you. Happy birthday 

dear Ann. Happy birthday to you. 

Ann has a background, her nationality is Hungarian, and I said 

that is the first hungarian—when I met her, the first hungarian I 

ever met that speaks southern. She has done an outstanding job, 

and she has been a great advocate of ARC, and I really appreciate 

all of the cooperation that you have given me over the years. 

As many of you know, the reauthorization for ARC that we got 

back in 2002 is about to expire and so we are going to be introducing legislation to get ARC reauthorized. What we hope to do 

today is get an overview of the importance of these programs to Appalachia and to closely examine the progress that has been made 

with respect to the implementation of our programs. 

In addition, we will look to identify the challenges that still must 

be overcome for the region to fully realize its economic potential. 

I think we always hear in Washington, ‘‘We don’t need it anymore. 

It’s caught up.’’ The fact of the matter is, you know the statistics. 

We haven’t caught up. 

To help us to meet this objective, we have assembled an impressive array of witnesses who will testify about the ARC and the variety of ways ARC funds can be used to foster local economic and 

social development. 

I want to welcome our witnesses and thank you for coming here 

today. We are looking forward to your testimony. I want you all to 

know that your written statements will become part of the record, 

and that record is available to my colleagues on the Environment 

and Public Works Committee, and more important, to their staff 

which they rely upon. 

I would like to ask all of the people to keep their opening remarks to no longer than 5 minutes because we do have a lot of witnesses here today. 

Since 1965 when Congress established the ARC to bring the Appalachian region—how do—is it Appalachia, the word, Scott, or— 

he’s not here. Let’s see the hands. Is it Apalasha (phonetic) or 

Apalayshea (phonetic). 

It was 1965 and it was established to improve the lives of 23 million citizens. You know, I do remember the need of this area because I lived here from 1954 to 1958 and I did get out into the community, and I did identify with John F. Kennedy in 1960. I didn’t 

vote for him, but I did identify with the fact that there was a part 

of America that wasn’t participating. As you know, he really 

brought the eyes of America to this part of the country and let folks 

know that we were not where we were supposed to be. 

We have done a great job of reducing infant mortality by twothirds and increasing the percentage of adults with high school 

educations by over 70 percent, and creating 1.6 million jobs. 

Our region includes 416 counties in 13 States including 29 right 

here in Ohio. Twenty-nine Ohio counties in Appalachia. The ARC 

is composed of the Governors of the 13 Appalachian States and a 

Federal representative who is appointed by the President. 

It is a unique partnership between the Federal Government and 

these 13 States. The ARC runs programs in a wide range of activities, including the highway construction, education and training, 
3 

health care, housing, enterprise development, export promotion, 

telecommunications, and water and sewer infrastructure. 

All of these activities help achieve the goal of a viable and selfsustaining regional economy and address the four goals identified 

by ARC in its strategic plan: The one, increasing job opportunities 

and per capita income, strengthening the region’s physical infrastructure, building a local and regional capacity, and creating a dynamic economic base. 

ARC’s programs fall into two broad categories. The first is a 

3,025 mile corridor highway system to break the regional isolation 

created by the mountainous terrain, thereby linking the Appalachian communities to national and international markets. I think 

we should feel very good that roughly 81 percent of the Appalachian Development Highway System is either completed or under 

construction. Here in Ohio, it’s 83 percent. I am hopeful that in the 

next couple of years it will be 100 percent. As Governor, we really 

worked on this area to make sure that we did our thing to help 

make that happen. 

The second is an area development program to create a basis for 

sustained local economic growth. Ranging from highway and sewer 

infrastructure to worker training to business financing and community leadership development, these projects provide Appalachian 

communities with the critical resources for future growth and development. The sweeping range of options allows Governors and 

local officials to tailor the Federal assistance to their individual 

needs. One of the great things about this program is the flexibility 

that it provides to communities. 

As many of you know, I have been an advocate for funding our 

Nation’s water infrastructure, particularly the Clean Water State 

Revolving loan program. 

In July, the EPW Committee, which I belong to, approved a water infrastructure funding bill which authorized $20 billion for 

the Clean Water SRF. I must tell you that I am disappointed that 

Congress has not passed this bill yet. Quite frankly, it is just being 

held up on the issue of prevailing wage. 

I am also deeply concerned about the Administration’s budget request to cut $310 million from the SRF program from the EPA’s 

annual budget. These proposed cuts will have a devastating impact 

on the ability of our States and cities to continue upgrading their 

water infrastructure and meet Clean Water Act requirements. I am 

going to be interested, from our witnesses today, to find out how 

the ARC funds have melded with the SRF funds to make a difference in their respective communities. And I really encourage everyone to lobby Congress to make sure that those funds are restored. 

The ARC uses the Federal dollars it receives to leverage additional State and local funding in order to undertake a wide variety 

of projects to help improve the region’s economy and its people. In 

rough figures, every ARC—this is really important, and you really 

need to drive it home. I call it the yeast that raises the dough. The 

ARC has leveraged approximately $3.37 in additional Federal, 

State and local funds, and over $4 in associated private investment, which I consider a great public, public-private partnership. 

People forget about how important those dollars are in leveraging 
4 

other dollars in the community. In Ohio, the ARC funds support 

projects in five areas: skills and knowledge, physical infrastructure, 

community capacity, dynamic local economies, and health care. 

In the fiscal year 2005, ARC provided approximately $5 million 

to fund projects in Ohio. Roughly half of this funding was spent exclusively on projects in Ohio’s nine distressed counties. This successful partnership enables communities in Ohio and throughout 

Appalachia to have tailored programs which help them to respond 

to a variety of grassroots needs. 

Today we are going to concentrate on the successes and the future needs of the ARC’s telecommunications and water infrastructure programs. 

While we still have a long way to go, we have seen some improvement since the last reauthorization legislation passed. In the 

last 5 years, ARC-funded infrastructure projects have provided 

clean water and sanitation facilities for over 183,000 households. 

In December 1999, 43 percent of zip codes in Appalachia had at 

least one high-speed Internet provider, and in 2002, 64 percent of 

zip codes had access to high-speed Internet. We’ve not more recent 

statistics on internet access of zip codes. 

Despite its successes to date, the ARC has not completed its mission in Southeastern Ohio and throughout Appalachia. The ARC is 

the type of Federal initiative that the Federal Government should 

be encouraging. 

I know there is a vast reserve of potential in Appalachia that is 

just waiting to be tapped. I wholeheartedly agree with one of ARC’s 

guiding principles that the most valuable investment that can be 

made in a region is in its people. 

I am anxious to hear the testimony of our witnesses and hear 

their views as to their experience with the ARC, especially what 

they believe the ARC should be doing in cooperation with other 

Federal and non-Federal entities to do the most good for the region’s people with limited resources. 

I would like to now call on our panel to begin with Anne Pope. 

Anne, you can begin. We’re so happy to see you. 

Ms. POPE. Thank you, Senator Voinovich, and I appreciate that 

birthday song, and I want to just let you know that I am announcing here a significant budget savings as I am going to fire all of 

my staff. 

Senator VOINOVICH. Could you bring that up closer, the mic? 

STATEMENT OF ANNE POPE, FEDERAL CO-CHAIR, 

APPALACHIAN REGIONAL COMMISSION 

Ms. POPE. It is wonderful to be here, Senator. I want to thank 

you for holding this hearing and giving me the opportunity to testify on behalf of the Bush administration. The President is very 

strongly committed to Appalachia, and I want to take a moment 

and thank you for being a champion of ARC and a champion of all 

of Appalachia. Appalachia is a wonderful region of the country. So 

I want to thank you. 

I also want to thank Washington State Community College and 

Dr. Hatfield for hosting this field hearing. Washington State Community College is a partner to ARC and it has done some great 
5 

things with the resources and things that ARC has given this wonderful facility. 

The President is strongly committed to Appalachia and he recognizes that this region has not fully participated in the growth of 

the American economy and that he will not be content until every 

person who wants to work has a job. He believes ARC can play an 

important role in this. 

Since I have had the pleasure to have traveled around Appalachian Ohio with you and seen firsthand your passion for this region and for its people, I am grateful for your commitment. I’m also 

pleased to be joined here with T.J. Justice with the Governor’s Office of Appalachia. He and Governor Taft have been vigorous and 

affective advocates for this region and for ARC. He has done a lot 

to move ARC forward. 

Also, I am delighted to be here with Don Myers who is the director of our ARC local development district. When you see this panel 

sitting here, I think that is what makes ARC work. They represent 

a Federal, State, and local partnership, and I believe that is 

what—this model is why ARC has been so effective. 

Mr. Chairman, I know that you know that the economic landscape of Appalachia has shifted. With this global economy, we are 

seeing dramatic changes in every local economy in the Appalachian 

region. Appalachia has relied on what I called the big four which 

is manufacturing, mining, tobacco, and steel, but this has shifted 

to a knowledge-based economy. You know that the knowledgebased economy, 80 percent of these jobs will be knowledge based 

and therefore require enhanced education and training. We know 

that Appalachia must match up to this new economy. We know 

that we are going to have to look for new ways to create jobs. We 

are going to have to enhance our schools. We will have to home 

grow some of our own businesses. We have to have innovative, regional strategies that position our communities to compete when, 

as the book says, the world is flat. 

In ARC, we’ve adjusted our programs to respond to this changed 

environment. We’ve become more performance based. We are increasing our leverage, we’re expanding our partnerships, and we 

are focused on innovative regional strategies. All of this will help 

communities help themselves. 

I want to talk a bit about each one of these when we discuss the 

new ways that ARC is responding to the Appalachia’s changing 

economic landscape. 

First, performance based. I believe to be effective, ARC must 

have a plan, work that plan, and then measure what it has accomplished. For that, we are guided by our strategic plan. We developed that in 2004 in a public way. We went to over 1,000 people 

across five town hall meetings throughout the region who actually 

voted on what was important to them. From that, we came up with 

four goals or four things where we are going to make investments. 

One, we need to invest in creating jobs. Two, we need to invest in 

strengthening the capacity of our people. Three, we need to invest 

in our infrastructure knowing that that infrastructure is one of the 

building blocks that we need to make our region competitive. And 

four, you also mentioned, we have to continue to build and com-
6 

plete the Appalachian Development Highway System. That is the 

linch pin of our economic development strategy. 

With that, we have for the first time in 2004 developed 10-year 

performance goals. We call them ‘‘buckets’’. We have four areas. I 

am always asking, ‘‘Which bucket does it go into?’’ So every investment that we make has to be in those four areas. So after 10 years 

our investments will create and retain 200,000 jobs, will enhance 

the employability of 200,000 workers, and provide basic infrastructure to 200 households—200,000 households, and open 250 miles of 

the Appalachian Development Highway System. 

Our new strategy and our mission now is that Appalachia should 

reach parity with the Nation and to measure that, we have developed an economic index that measures Appalachia against the rest 

of the country. When we reach that mission, Senator, I believe ARC 

will go out of business. What our index has shown is that Appalachia has more of the worst counties and fewer of the best counties than the rest of the Nation. 

Second, leveraging. We know that we can’t do it alone and we 

must use our resources to leverage other resources, and we are 

doing that. I am very pleased that this last year we have increased 

our leverage ratio so that every $1 the ARC invests, we are 

leveraging $11, and out of that, $8 is from the private sector investment. This is very impressive, I believe, because most of what 

we do at ARC is predevelopment in nature, and so this private investment is significant because the private sector is risking its own 

capital in Appalachia. 

Next, partnerships. We know that we have to expand our partnerships, and we are doing that with the Government Agencies and 

with the private sector. I consider that as one of my main jobs, to 

increase our partnerships within the Federal structure and the private sector. We are doing that. Senator, you and I were together 

last year, and I was pleased there to announce a major commitment that Microsoft was donating a million dollars of software to 

the region, but I quickly saw that the demand and need was far 

greater, and Microsoft doubled that. We have delivered most of 

that software out in the region, including a significant portion right 

here in Ohio. 

National Geographic recognized that tourism is a key industry 

and a growing industry here in Appalachia. We have partnered 

with National Geographic to create the first map of a region, first 

map ever that National Geographic has done to boost tourism and 

create jobs. That map had many sites throughout Appalachia, including one right here in the Marietta, and I think it is very fitting 

that we have a hearing in Marietta, the heartbeat of tourism. I saw 

this morning, when I was running in downtown Marietta, where 

Lafayette’s American Tour ended in Marietta. I think that is something that is really important in this area. 

The Centers for Disease Control. Since 2001, the CDC has committed well over a million dollars to the partnership of ARC that 

targets diseases such as diabetes, which I know is something that 

affects your family, as well as mine, and cancer. These two diseases, as well as others, disproportionately affect Appalachia. I 

know this is something that is key to moving the region forward. 
7 

You and I, Senator, were at Ohio University a few years ago to 

announce the diabetes initiative. This is critical in dealing with the 

health issues that face Appalachia. 

Innovative regional approaches. We know that we have to look 

at innovative regional approaches to make our communities work 

together to be competitive. 

Senator VOINOVICH. You are about 10 minutes already. 

Ms. POPE. Let me just say, end by saying that we—we thank you 

for being here and I—many of the things I’m saying I am summarizing from my written statement, so I appreciate you letting me 

say that. I want to thank you for helping make ARC better. You 

have done much to push us and to make us look at what we can 

do to do better, and I think that we are making a difference and 

we are helping Appalachia move forward. So thank you. I think 

that ARC has positioned itself to respond to the challenges that 

face the region, and I thank you for helping us to move Appalachia 

forward. 

Senator VOINOVICH. Thank you. Thank you very much. T.J. 

STATEMENT OF T.J. JUSTICE, DIRECTOR, GOVERNOR’S OFFICE OF APPALACHIA, APPALACHIAN REGIONAL COMMISSION 

Mr. JUSTICE. Thank you, Senator. Good morning. I too am very 

thankful to have an opportunity to provide testimony today. I appreciate your willingness and effort to hold this field hearing here 

in Ohio. I am here on behalf of the 1.4 million people that live in 

the 29 counties that you mentioned which compose the 13-State 

Appalachian region throughout the country. 

Your leadership on behalf of the ARC is very much appreciated, 

and it is recognized that you have not been bashful or shy about 

your appreciation of the program. 

I would also like to thank President Bush and Anne Pope for— 

despite the fact that these are difficult economic times and while 

many programs are being cut, this is a program that is proposed 

to be kept whole this year with the $64.8 million budget request. 

So I certainly thank them. 

I would also like to thank Bob Ney, my Congressman from back 

home, who equally has been a true advocate and strong supporter 

of the ARC. 

Finally, before I offer my formal testimony as to why I believe 

the ARC should be reauthorized for another 5 years, I would like 

to recognize four previous directors of the Governor’s office of Appalachia that are in the room. One of them—Senator Joy Padget. 

There is also Jennifer Simon. Nancy Hollister was here, former 

Lieutenant Governor, as well. And Dan Neff. So thank you for joining us today. 

Senator the ARC breeds success and fuels partnerships that have 

led to an organization that I would like to talk about for a moment 

that excels here in Ohio called OACHE. You will have an opportunity to visit with some of the students tomorrow over in Perry 

County. 

The Ohio Appalachian Center for Higher Education is one example of the ARC at work. This is an organization that begins to work 

with students as young as in the 6th grade and allows them to 
8 

come up with—to dream big and find adequate resources to make 

their dreams come true. 

I would like to share a personal story about a young man that 

I met a couple of years ago in Scioto County that moved me and 

I hope that it moves you in the same way it moved myself. While 

visiting the OACHE students at South Webster High School in 

Scioto County, a senior approached me and wanted to let me know 

how the OACHE program affected him and his life. He told me as 

he was growing up, his own family, including his own father, had 

discouraged him from even trying to go on to college. He was discouraged to apply. He was discouraged to take placement exams. 

He was discouraged from visiting campuses. But he knew deep 

down inside, he wanted to go. He wanted to try. He wanted to succeed and excel. 

OACHE found this young man and through their work, this 

young man who had been discouraged by his own family from going 

to college, he today is a sophomore at Hocking College in 

Nelsonville studying to be a police officer. I had hoped that he 

would be here to join us today, but he was unable to join us. This 

young man represents the work of the Appalachian Regional Commission and the way that they impact folks and our lives here in 

the region. 

This is a model and successful program that has also been replicated here in Ohio by Governor Taft. We are the only State that 

replicated that program by providing an equal amount of State 

money following the same ARC guidelines, goals, objectives and 

network using the local development districts. So by receiving $4.1 

million in our Federal allocation, the Ohio General Assembly and 

the Taft administration have matched that—also through difficult 

budget problems, have maintained that in recent years, including 

the current biennium. That is a true testament as to how Ohio, including Governor Taft and myself, value the Appalachian Regional 

Commission. 

Their commitment to communities in the region have developed 

a number of new programs, and you have several in my formal 

written testimony, but I would like to specifically mention a couple 

that I believe are of significant value. 

When we talk about jobs, the beauty of the ARC program is that 

they will assist an entrepreneur creating as few as two or three 

jobs, or they will help to rehabilitate a water plant in Jackson 

County that will preserve 1,000 jobs, a large, major manufacturing 

employer. So it is a unique program that supports small business 

entrepreneurs, as well as large and major employers, and that is 

very unique. 

This is a program that has also allowed a mobile diabetes clinic 

to be deployed, and it travels throughout five or six counties, including Pike, Vinton, Athens, Hocking and others, through Ohio 

University. They are reaching out and testing other individuals 

who otherwise would not be screened to determine if they have diabetes. Another positive, we now have, thanks to ARC, a kit to give 

them so that they can self-manage their disease and take better 

care of themselves. 

So I believe this is an appropriate program that truly works, and 

we make very strong efforts that are measurable here in Ohio that 
9 

allow us to have a very positive impact on the residents of our region. Senator, this is a program that works. There is no question 

about that. I appreciate your staunch support of this program and 

the opportunity to be here today. I hope the few minutes of testimony that I provided will make a difference and allow you to reauthorize this for another 5 years. Thank you. 

Senator VOINOVICH. That is very comforting to me to hear that 

has been involved here, as one of the Governor’s regional reps in 

charge of the ARC for the State of Ohio, because I think that you 

bring a real insight into the job, and thank you for being here 

today. 

Don, you have been at this a long time, haven’t you. 

Mr. MYERS. Real long. Too long. I had the privilege of working 

with you a couple of times. I am going to bring that up in my testimony. I hope that you remember some of the items that I wish to 

bring before you today. 

Senator VOINOVICH. Thank you for staying in there, and I am 

really interested in your perspective because you have had a 

chance to kind of watch how things have moved along. I am really 

interested in if we are holding our own or going forward, or you 

think we are slipping backward. You’re on. 

STATEMENT OF DON MYERS, DIRECTOR, OHIO MID-EASTERN 

GOVERNMENTS ASSOCIATION 

Mr. MYERS. I have to be good today in front of Anne Pope. She 

demands that. I get to tell you the truth today. It is a privilege to 

be here testifying before you today and your Senate Environment 

and Public Works Committee. I testify to express my comments 

and those of the Ohio Mid-Eastern Governments Association’s 

(OMEGA) Board and to seek your consideration and support in securing funding and reauthorization status for the ARC and all of 

its programs. In addition, we ask that you and the committee support retaining the original mission of the program as a flexible, locally driven program that provides valuable assistance to county 

commissioners, mayors and development officials working to improve local communities and the needs of those communities. 

As Executive Director of OMEGA, I represent an organization 

that serves as, quote, a Council of Governments (COG), a Local Development District (LDD) and an Economic Development District 

(EDD) serving a 10-county region with a population of 593,211 plus 

people in eastern Ohio. 

At our most recent Annual Board meeting held last Wednesday, 

April 12, 2006, 90 officials were in attendance, including commissioners, mayors, county engineers, development officials, educators 

and private business leaders, and we spoke of the critical importance of continuing funding and securing reauthorization of the 

ARC program. At this meeting, we held discussion on this hearing 

today that you are holding, and our Board in its entirety requested 

your support and leadership in securing proper funding and reauthorization of this most important ARC program. 

As a former development directer in Belmont County, OH, I’ve 

had the privilege of working with you personally as Governor on 

three separate occasions. They are as follows, the $80 million Ohio 

Coatings Electrolytic Tin Plating Plant in Yorkville, a Wheeling 
10 

Steel project, the Shadyside Stamping Plant in Shadyside, OH, 

built a cost of $32 million, and the Belmont Correctional Institution 

built at a cost of $38 million. These three development projects 

alone were built at a total cost of $150 million and have approximately, when I left Belmont County in 2001, 900 employees with 

a payroll of over $35 million. Belmont County and its people today 

benefit because of these developments. These special projects could 

not have happened had it not been for the ARC program and others like it. 

Senator we met with Ohio Coatings in your office, Wheeling 

Pittsburgh Steel, Chairman Song from Sole, South Korea, Nitetsu’s 

(phonetic) chairman, and Jim Antem, Wheeling Pittsburgh Steel, 

and we put that $80 million package together. Five Hundred thousand dollars of it came from ARC to build that road when we had 

no other place to look. And that $1.3 million road, a mile and a half 

of it, serves needy people today. 

Senator on the side, we gave them a 50 percent tax abatement, and that company today has paid over $3 million in taxes in this 

8-year period of time at a 50 percent tax break. That will go off 

in 2 years, and they will be doubling that payment, and that’s how 

it is returned to the community. The jobs that are there are 

$56,000 a year, the 80 jobs that we have. So I know that you liked 

that project, and it is very, very special to eastern Ohio. Records 

at our OMEGA office through 1968 to 2005 in our OMEGA region 

10-county area state that we have been able to give out $75 million 

in ARC grants, both State and Federal. These grants have enabled 

us to complete 360 projects addressing health, safety, welfare, and 

educational projects totaling over $305 million just for those items 

themselves. This does not include an $80 million project like Ohio 

Coatings. These programs could not have happened, these developments, without the ARC program. 

Our infrastructure needs are many, not only here, but throughout the county. Last summer, the American Society of Civil Engineers prepared a report which addresses 12 categories of infrastructure that gives the Nation’s transportation, water, and energy 

system an overall grade of D—D+, excuse me. Both drinking water 

and waste water received the grade of D. The report states that the 

Nation’s 54,000 drinking water systems are aging rapidly, and 

some sewer systems and water systems are more than 100 years 

old. We need quality programs like the ARC that address these 

issues of concern and importance. 

In closing, this program is very, very, very, special to the districts in Ohio. We are in Buckeye Hills District right now, and I 

just wish we had time to tell you Senator, and I will not because 

of the sake of time, but in closing, you have done much for the people of Ohio and for economic disadvantaged citizens throughout the 

United States. We ask that you continue to look out for these individual and those people living in the shadows of light. 

It is a very sluggish economy, and three major floods in our region, our 10-county members need your help and that of Congress 

more than ever. We ask for your continued leadership to support 

programs like the ARC and to secure the necessary reauthorization 

that we need for a 5-year period of time, at a minimum. We thank 

you for everything and for being here in Ohio today. 
11 

Senator VOINOVICH. Thanks very much for your testimony. I 

would be remiss if I didn’t introduce the blessing on me, and that 

is my wife. It’s really interesting, last week, or the last week, and 

I know a lot of you are going to say, it must have been a real deal 

with the Asset Institute in Honolulu, and I conducted a hearing 

there. I am chairman of the Oversight of Government Management 

and the Federal Workforce with Senator Dan Conklin who is a 

member of the National Security of Personnel System. Here we are 

in Ohio, and this is just the second hearing that she sat in on since 

I have been a U.S. Senator, and I just want to thank her for coming along today. 

John, you mentioned the Civil Engineering Commission of Infrastructure, and I have introduced a piece of legislation that with 

Senator Clinton and Senator Harper and several others to look at 

the infrastructure needs of our country, and I think that maybe 

Congress has followed the advice that Jim Rhodes gave me one 

time. Jim Rhodes, some of you remember, was Governor of the 

State. He said, ‘‘Georgie, never put anything in the ground because 

they don’t see it.’’ I think that is the flag that we have been flying. 

I think that we really have some real difficult challenges here. 

Thank God for the ARC, and it has been able to handle this with 

some of these infrastructure problems particularly. But we need to 

do a whole lot more in that area or we’re going to end up—if you 

don’t have the infrastructure, you just can’t be competitive. We 

need this infrastructure and we also need the intellectual infrastructure more than ever before, and energy. 

Anne, your testimony mentioned the need to improve basic 

water, water infrastructure in Appalachia and we know it is a complex problem. What I would like to know is, when we passed the 

last authorization, one of the things that I wanted in there was to 

have the ARC be the coordinator for the Federal dollars in an area. 

Have you been able to take advantage of that? Has that helped at 

all, or has it been in the law but people have not taken advantage 

of it? 

Ms. POPE. Are you talking about the interagency—— 

Senator VOINOVICH. Yes. The concept of leveraging all of the Federal dollars and bringing them to the table to get the biggest bang 

for our buck, and then after that interfacing with the State money 

and with the private sector money. 

Ms. POPE. I think the short answer is yes, and I think that the 

Interagency Council has 15 Federal Agency members that make up 

the vast majority of the investment within the Appalachian region. 

I was the Federal person to chair that, and I think that it has been 

very effective for a number of reasons, not the least of which is, 

what we have found is that many of the Federal programs—and 

let’s just talk about infrastructure, our main partners, USDA, EPA, 

the State Agencies as well, TVA for the southern part of Appalachia region, they have difficulty getting into the Appalachia region and getting their programs into the Appalachian region in 

many places. 

We call that a low ‘‘take rate;’’ where for some reason, those Appalachian communities are just not applying for these grants within these areas for several Federal Agencies. So we are helping with 

the grassroots organization through the local Governments and 
12 

State level, as well, to try to bring the Federal Government into 

the Appalachian region. 

So I think that has been something that has been most effective, 

I think, with this partnership. We have had some concrete results, 

as well, something that we are going to see, I think, tomorrow. 

This partnership with the Department of Labor and the private 

sector working in the utility industry to try to create a highly 

trained work force, where there is a shortage of it within the utility 

industry. So we are working with other agencies to try to increase 

that. It is something that we need to continue to do. We still have 

a ways to go. 

But yes, in answer to your question. I am sorry to—us southern 

Hungarians talk a little slower, but yes, it has been a very effective 

tool for us and we have had four meetings—as well as a field meeting, and we will continue to do that. 

Senator VOINOVICH. Don, have you seen any of that on the local 

level as a result of the change in the law? 

Mr. MYERS. Senator, we have three projects this year and I—I 

have got to say this. Our poorest counties are not applying for the 

ARC program because they do not have the necessary match 

money, the ones that we really, really want to help. In OMEGA, 

we have no distressed counties. We have two of them that are very, 

very borderline, and you know Bob Harron (phonetic), Commissioner Bob Harron, he told me last year that they got 30 projects 

that they would like to submit. They cannot submit any of them 

because they don’t have the necessary match dollars. If you are a 

distressed county, you need 20 percent. There has to be something 

done for those programs that are not where we think they should 

be. There has got to be a mix between the distressed counties and 

those that are at attainment, or those right on the borderline. 

We lost—we had one up here on Stark for 2 years. It’s one of the 

poorest counties in Ohio. They’re not at risk here, or if they are, 

they just made it. Fourteen thousand people, you lose 1,500 jobs, 

they need help. 

Senator we are doing water projects that are in to the Federal 

co-chair, Anne Pope, right now for signature consideration. One of 

the—— 

Senator VOINOVICH. May I say something? Are you using any 

SRS funds along with that? 

Mr. MYERS. We are. Whenever we get the chance, we are. 

Senator VOINOVICH. So that is a case where you are working 

with the EPA? 

Mr. MYERS. Absolutely. They have been a salvation to us on our 

big water projects. We are doing one in Guernsey County. You’ll be 

there tomorrow and meeting today. 

But as we come from Muskingum County, Zanesville to Cambridge to Belmont County, we have three projects, water and 

sewer. All of them are under citation, and in Muskingum County, 

49 people’s homes have been trying to get water for 30 years. 

In Guernsey County, 112 homes, we have to run 13 miles of water line at $1.3 million. ARC has $125,000 in it, but it was 

enough to put the project over the top to where the people could 

afford it. In Bridgeport, OH in Belmont County, for 40 years they 

have been trying to put in a sewer project, $3.1 million. We have 
13 

$125,000 into that. It is that small amount of money, coupled with 

EPA and CDBG and USDA that makes these three projects go, the 

30, 40, and 50 years of water and sewer projects. 

Senator VOINOVICH. And all of them—— 

Mr. MYERS. Yes. 

Senator VOINOVICH. We have a lot of that, and you put them 

under water and then the community doesn’t have the resources to 

deal with the demand and what we are mandating them to do. 

Let’s move from water infrastructure to technology and telecommunication. One of the things that we also put in the legislation and anticipated doing it again this time is the issue of divide 

and the issue of technology. I would be very interested to know 

how successful that has been and if you could share with us any 

examples of where you think that that has made a difference, and 

if you had your druthers, would you look for more money in that 

area than what we are now spending percentage wise? 

Ms. POPE. Let me just say it is a big issue for ARC. The specific 

authority that you put in the last reauthorization has been very 

useful. ARC is focusing on the importance of technology. The answer is that it is very helpful. I do believe that the investments 

that ARC has made have been very positive. 

You asked about the numbers. In December 1999, 44 percent of 

Appalachian zip codes had high speed providers, and in December 

of 2002, it was up to 63 percent. We are moving forward, just not 

at the pace that the rest of the country is moving forward, but we 

are making progress. I would, Senator, like to put in the record the 

program impact summary of our telecommunications program. 

To answer your question, it was very helpful, and if I had my 

druthers, yes, Senator, I would like to see that language in there 

again. I believe that telecommunication is very important. If business can be done anywhere, with technology, I think that no region 

can benefit more than the Appalachian region. Small communities 

can stay small communities, but can compete with technology. 

Senator VOINOVICH. One of the things that we started doing was 

to build a highway system, and you have to be able to get in and 

out to the area as you mentioned. Technology-based jobs, you can 

have computers, but if you don’t have broadband or can’t get it in, 

it’s just—I don’t see how you can possibly survive. 

One of the things that we did when I was Governor is we rewired 

all of the classrooms and started putting the computers in the 

school, and hopefully they will be computer literate, but the issue 

at the time, do they have the infrastructure to have broadband. 

T.J., could you comment on where we are with broadband in the 

region? Do you have any information on how it might compare with 

some other States? 

Mr. JUSTICE. Sure, and I think that you will obtain some additional information later today from a couple of other folks that testify to that. The statistics have shown from 2002 to 2004 a more 

than 50 percent increase in terms of access to the high speed 

broadband, which is largely by the private sector, like the phone 

companies running DSL or the cable companies running 

broadband. 

Our emphasis here in Ohio through work with Dave’s organization has been to try to identify the communities where it is highly 
14 

unlikely that broadband or DSL is ever going to be extended there, 

even in the foreseeable future. The best 30 second example that I 

can think of is Chesterhill up in Morgan County, a small village, 

very little commerce, no major industry. It is isolated. It is probably cost prohibitive for the cable companies to run broadband 

there. They used the technology from out west through Ohio State 

University. You will find this amazing. I love telling the story. For 

$9,000, they have two towers that they put up. Right, David? 

DAVID. Antenna. 

Mr. JUSTICE. Antenna. I call them towers. So by way of doing 

these antenna—— 

DAVID. Radios, things like—— 

Mr. JUSTICE. I am not technologically sophisticated. For $9000, 

they have these two antennas up, so now the whole village of 

Chesterhill has wireless high-speed broadband access. We are exploring replicating that using the ARC dollars to other communities in the Appalachian region where it is just very unlikely they 

are ever going to get this kind of access. 

I think the short answer to your question is that we have had 

some dramatic improvement in terms of areas that have high-speed 

internet access in their homes. 

Ms. POPE. I—— 

Senator VOINOVICH. The 29—go ahead. 

Ms. POPE. I was just wanting to add one other thing. I think the 

word is getting out to communities, one, that it is important, and 

they have to know how to use it. I think the word is getting out 

and I think the reauthorization money is very effective for that. 

But I think that one of the things that we were doing—I come 

from a business background, and we are cross promoting telecom 

and every other program that we have. We just started this last 

year, and we are looking at what we call E-infrastructure. Anything we build, any project that we do, any education project that 

we do, any infrastructure that we add, we are asking the grantees, 

‘‘Is there a telecom component in there? Does it make sense? If so, 

how much money do you need?’’ I think that that is going to be 

very important, particularly in infrastructure. 

As you know, we spend half of our non-highway money in infrastructure, so while we are laying the pipes, we can lay the fiber, 

as well. 

Senator VOINOVICH. Any other comment? 

Mr. MYERS. We have the infrastructure in place, the programs, 

the bands to do the assistance. We have come a remarkably long 

way in a very, very short period of time with just the little per capita, and we are indebted to that, and we have high hopes for the 

future. We think that technology improvements are going to assist 

a lot of this in the very, very, very near future. The money is there. 

USDA has it, ARC has it, CDG has it, and we are indebted for 

that. We are taking advantage of it. We are here and very proud 

of some of our accomplishments. We’re not there yet, but we have 

come a long way. 

Senator VOINOVICH. Do you have a score card, T.J., on broadband 

in the county? Of the 29 counties, how many of them have 

broadband? 
15 

Mr. JUSTICE. Broadband is present in all 29 counties. We do have 

an updated map that shows areas that have broadband and areas 

that don’t that we could certainly provide to you or your staff. 

Senator VOINOVICH. I want to thank you very much for your testimony, and I can assure you that Congress will spend—pool the 

money for it. It is not what we originally authorized back in 2002. 

I want to thank Anne for digging in with the administration a couple of years ago to get about 36 or something like that for the ARC, 

and you were able to get them to bring it up and at least keep it 

at a flat-funded amount. 

What all of you should realize is that the non-defense portion of 

the discretionary budget, we have mandatory spending and we 

have discretionary spending. Mandatory is, about two-thirds of the 

money goes out for Medicare, Medicaid, Social Security. Veterans 

programs, and a lot of them the money just automatically shows 

up, and you are entitled to it. 

The discretionary is where we have some options available to us, 

and because of the war and the Homeland Security, all of which 

is thrown on the non-defense discretionary, so it is very, very tight 

today, and the budget that we had, quite frankly, did not do the 

job. 

What I am concerned about is that we are neglecting the infrastructure, our education commitments, and if we don’t keep up 

with those things, we are not going to be able to compete in the 

global marketplace. In other words, we are now in the most formidable, competitive environment that I experienced in my life, and 

it is not going to get any better. Our seminar with the Asset Institute was on U.S./China, and you see what is happening in China 

and see what is happening, and the competition is out there. My 

dad once said that the reason why we have more of the world’s 

prosperity than any other Nation in the world is we got more out 

of our people because of education and free enterprise. Frankly, 

other countries are getting on to it. The issue is, how do we stay 

in there, and we are seeing it right here, aren’t we? The jobs that 

traditionally were here are gone. We are never going to see them 

again. What do we do? 

There are jobs that are here in Muskingum County training 

them for the energy industry. I understand there is going to be a 

great need for more coal mining. New technology, there are a lot 

of parts of Ohio that we are going to see more mining because of 

the fact that they are coming down here. We have to have an idea 

of just where are we going. What is the strategy. Where are we 5 

years from now and what are the things that we should be concentrating on then. 

I love this part of Ohio. It’s beautiful. I’ve always said the more 

beautiful it is, the poorer it is. But the fact is that more people are 

interested in their environment, and if you can have broadband 

and get a job and live in a beautiful place like this part of Ohio, 

I think it has got tremendous attraction. So thank you very much 

for being here. 

Our next panel is Mr. David Matusoff, Mr. Gary Little, President 

of Information Technology Alliance of Appalachian Ohio, Dr. David 

Matusoff, Principal and Director of Technology Planning for the 

Whiteboard Broadband Solutions, Ms. Angela Stuber, Executive Di-
16 

rector of Ohio Community Computing Network, and Mr. David 

Scholl, President and CEO of Diagnostic Hybrid, Inc. Mr. Matusoff, 

we are going to start off with you. 

STATEMENT OF DAVID MATUSOFF, PRINCIPAL AND DIRECTOR 

OF TECHNOLOGY PLANNING, WHITEBOARD BROADBAND 

SOLUTIONS 

Mr. MATUSOFF. Senator Voinovich, thank you very much for the 

opportunity to be here. As I was listening to the panelists before 

me, one of the things that struck really me, and one of the things 

that I like so much about working in the Appalachian region of 

Ohio is—you could really hear it in Don’s voice—people are really 

passionate about economic development down here and about sustainability. As you mentioned, I believe you posed the question to 

Anne Pope about the telecommunication portion of the ARC budget. I believe it is critical. As you mentioned in your comments at 

the end, with all of the natural assets that we have in this part 

of the State, improving the broadband infrastructure, I think that 

we really have something that we can sell here in Appalachia. I 

think it is something that we can be excited about. 

I just want to spend a few quick moments this morning talking 

about the impact that ARC investment has had on improving 

broadband access in Ohio, and not only improving access, but 

changing culture, which I think you talked about—I think that 

they have done a really good job of that, and I think there are some 

more opportunities in that area. 

I started working with the Governor’s Office of Appalachia and 

the Appalachian Regional Commission back in 1999 when Joy was 

here and Jennifer Simon, and I think that we were one of the first 

States in the ARC region to really take a comprehensive snapshot 

of the supply and demand for broadband services in a region like 

the ARC region within Ohio. To date I have managed three largescale broadband assessment improvement projects in the State. As 

T.J. mentioned, we are currently in discussions about replicating 

successes like we have seen in places like Chesterhill where we are 

looking at wireless investments, broadband investments in communities without any access to broadband services today. So the very 

last of the last mile. In general, I spend a significant amount of my 

time not just in Ohio, but in many States proselytizing about the 

importance of the broadband infrastructure and the possibilities 

that that create for economic development and educational opportunities and workforce development opportunities. 

And central to that discussion and any broadband improvement 

project is what we call a sparkplug. This is someone in a community that gets a hold of this issue and says, ‘‘No matter what, I am 

going to make sure that we have better broadband access in our 

community.’’ In many instances, it is a public sector official. Sometimes it’s a private sector person. They don’t have to have any real 

knowledge or understanding of the technology. They just know 

what is important and really are passionate about doing something 

about it. 

I kind of view ARC’s role in this region as the sparkplug for moving broadband access, because I think what we have been able to 

do through ARC funded projects in the State of Ohio over the last 
17 

6 or 7 years has really raised the overall level of education about 

the importance of broadband. Through all of the outreach that has 

been associated with the projects that I have managed in the State 

and through talking with the development districts—it is funny. 

When I came here, I had been—I live in Columbus. I have been to 

this campus probably about 40 times now talking about the importance of broadband and, you know, I believe sincerely that that has 

made a real difference. As I said when I started, changing culture 

is more difficult than building the infrastructure. 

Building the infrastructure is getting much cheaper today than 

it was 6 or 7 years ago when we started taking a look at this, and 

it is much easier. But I think the change in culture thing has been 

really significant. 

I want to give you a few specific examples of, not just the indirect impact that the ARC has had, but the direct impact I believe 

that the ARC has had on improving broadband access. In 2003 

there was a national organization called Technet. A bunch of big 

Fortune 500 companies, CEO’s that participate in this, and they 

ranked States. There was an index for State broadband access and 

use. Ohio was ranked, in 2003, fifth nationally, which I was really 

proud of. 

Three of the projects that I worked on specifically were part of 

the justification for that ranking. One of the projects listed specifically was the Access Appalachian project which was funded 

through ARC and the Governor’s office of Appalachian. So part of 

it is a perception issue, and I think looking at economic development opportunities, if we are perceived nationally, this region in 

the State of Ohio, as a place that is focusing on telecommunications 

and doing interesting things with it, I think that that can really 

help in the economic development. I think that is important. 

The second thing, as T.J. mentioned, between 2002 and 2004, we 

actually measured it. Broadband access doubled in—or in the ARC 

region of Ohio. I think that is significant. 

Data from the Access Appalachian Project was used to facilitate 

the providers when they were going to alternate regulations. So I 

think that is really important. The final thing that I want to mention is that through our last project here in Ohio, we developed 

plans for broadband improvement in 13 different counties here in 

Appalachia, so while some of the folks are still going out and looking for funds to implement those projects, having the capacity to 

have the plans in place allows them to go pursue State and Federal 

dollars to help implement those. 

I cannot speak enough about the importance of ARC’s investment 

in this area, how critical it is. I was with your colleague Senator 

DeWine earlier this week doing a USDA broadband financing conference here in Ohio. There were almost 300 people there, which 

was very exciting, folks around the State figuring out how to get 

these plans implemented. 

One of the things that Anne Pope talked about was leveraging 

other dollars, and some of the folks that the ARC funded to put 

these plans together are now going to be going to USDA to get lowinterest loans to implement some of those. So I think that is a really good example of how the communities are leveraging these ARC 

investments to go after additional dollars. 
18 

So included in my testimony are a few more instances, but as 

T.J. mentioned, I would be happy to provide more information, specific information for the record about the important contributions 

that ARC had made in this area. 

I will wrap up saying that first, I want to thank you for your 

championing this program in the past, certainly the last time. I 

think that it has had a significant impact on the region, and for 

inviting me to be here today. 

Senator VOINOVICH. Thank you very much. Do you think it is 

cold? 

Mr. MATUSOFF. Do I think it is cold? No, but because I am testifying before you—— 

Senator VOINOVICH. The air conditioning seems to be pretty cold. 

I don’t know who controls it, but—I see the breeze blowing by here. 

Mr. Little. 

STATEMENT OF GARY LITTLE, PRESIDENT, INFORMATION 

TECHNOLOGY ALLIANCE OF APPALACHIAN OHIO 

Mr. LITTLE. Thank you, Senator. I have crammed a lot into 5 

minutes, and I am going to try to stick to the script here. I may 

run over 30 seconds. Please bear with me. 

I am going to be speaking to the creation of a new economy and 

new high-tech industry and high-tech dollars. The IT Alliance of 

Appalachian Ohio wants to thank you Senator Voinovich and members of the Senate Committee on Environment and Public Works 

for this opportunity to speak in support of the reauthorization of 

the Appalachian Regional Commission. ITAAO, the IT Alliance of 

Appalachian Ohio is a nonprofit organization fostering economic 

development for the information technology sector of the region. 

For clarity, this sector includes computer, internet, ecommerce, and 

related businesses and industries, and also all the various computer applications found in public sector organizations including 

education. 

ITAAO, Ohio’s IT Alliance, the State of Ohio, the Governor’s Office of Appalachia, and the Appalachian Regional Commission have 

partnered on several occasions over the past 5 years to create an 

information technology community, an information technology visibility in Appalachian Ohio where it barely existed before. I often 

find myself on a soapbox promoting the region. Appalachian Ohio 

not only has a significant information technology sector, but we are 

leading the way in some areas. 

Shawnee State University in Portsmouth, for instance, is one of 

the few universities in the country to offer two bachelors degrees 

in interactive digital technology development; one with a digital 

arts concentration side and another with computer science and engineering concentration. Student enrollment is now over 100 

bright, exceptional students from all around the country and locally. An article recently published by the Associated Press, and 

was in the USA Today yesterday, told of Michael Zyda’s astonishment with the program, the creativity, and enthusiasm for computer game and serious game development in Appalachian Ohio. 

Zyda was the lead researcher on the U.S. Army’s recruitment and 

instructional game, America’s Army, and is Director of the 

GamePipe Laboratory at the University of Southern California. 
19 

Zyda presented at the Shawnee Conference 3.0 on Interactive Digital Technology in 2005. This conference gained national attention 

in 2004, in part because of the support of the Appalachian Regional 

Commission. This is an example of great return on your investment. The small, but important, $5,000 grant generated nearly 

$20,000 in support on that specific event in 2004, but the real 

value is measured in the national publicity for Interactive Digital 

Technology (IDT) development, for Shawnee State University’s IDT 

degree programs, and also for related degree programs that are developing at Ohio University, Washington State Community College, 

Hocking College, and an existing computer animation degree program at Kent State University’s Tuscarawas campus. 

That event in 2004, grew from an original concept of a Region 

of Excellence in Interactive Digital Technology when ITAAO Board 

Chairman, Bill Sams; Adena Ventures president, Lynn 

Gellermann, Shawneee State University Fine and Digital Arts 

Chairman, Tom Stead, Ohio University Provost, Kathy Krendl, and 

Shawnee State University President, Rita Rice Morris germinated 

the idea in 2003. This has now grown to the development of a prototype ‘‘cyber park’’ in the GRID (Game Research and Immersive 

Design) Lab that you will be seeing this afternoon, Senator, at Ohio 

University with a $247,500 Appalachian Regional Commission 

grant. From the original local match commitment of $62,000 from 

Ohio University, they have now expanded that dedication to nearly 

$250,000 for this project, with additional funds from various local 

sources of nearly $20,000. 

The Lab has also developed research and project relationships 

with the Smithsonian Institute, with a Columbus, OH company, a 

Massachusetts company, and a New York City game development 

company to develop educational and instructional games, and recently developed a partnership with Intel. To expand upon this success, Ohio University has now announced its intentions to create 

an IDT, interactive digital technology, research and development 

institute seeking Ohio Third Frontier support. Hundreds of thousands, and very possibly millions of dollars of program, research, 

and education activities are about to explode onto the scene only 

2 years after ARC made its initial $247,000 commitment, and in 

the previous year a $5,000 investment. Without these funds you 

would not see the interaction and possibly the business development in Appalachian Ohio by some of the Nation’s leading computer and IDT development companies. 

Shawnee State University also has further expansion plans, and 

is now seeking private and public support to develop a whole new 

immersive arts and technology center that will include the most 

advanced motion capture facility for digital animation east of the 

Mississippi River. 

The Appalachian Regional Commission has been instrumental in 

the blossoming of this concept, and will be a valuable partner in 

our continued efforts to create an innovation economy for this century. 

A huge economy continues to grow nationwide (estimated at $100 

billion this year in computer games, educational and health applications, and corporate and business applications) and worldwide in 

an interactive digital technology and there is no reason why our 
20 

students, our young entrepreneurs, and retrained workforce in our 

region could not or should not take advantage of it. All we need to 

do is focus upon the polygon—in IDT terminology—and strive for 

it. Thank you, Senator. 

Senator VOINOVICH. Thank you. Very impressive. Ms. Stuber. 

STATEMENT OF ANGELA STUBER, EXECUTIVE DIRECTOR, 

OHIO COMMUNITY COMPUTING NETWORK 

Ms. STUBER. Thank you, Senator. I am very excited to be here. 

ARC is a Government Agency in which one of its benefactors is 

Community Technology, so that is pretty exciting. 

Community Technology is providing technology access to those 

who don’t have access. ARC actually invests its time and resources 

and has made a huge difference in the community. So it is very 

good. 

I’m representing the Ohio Community Computing Network and 

the Community Technology Centers Network. I am the executive 

director of OCCN which is a State network of Community Technology, which is a non-profit, and I am also Board President for the 

national network. 

ARC is fortunate to have—or the Appalachian region is fortunate 

to have two strong State networks within the region, West Virginia 

and Ohio. In West Virginia, they have a program called STEP UP, 

which for them, ARC’s program is instrumental in bringing in new 

technology to their existing programs and able to improve existing 

programs for them. What this is is they put labs in the churches 

and community organizations and they utilize existing space, so it 

is matching up of existing resources with new technology. They 

have leveraged funds with the Investment Board and the State Department of Education. Their approach is to partner community assets and create strong relationships. 

For OCCN the relationship is to match the Microsoft dollars. So 

what we did was distribute the Microsoft dollars to Community 

Technology programs. The Microsoft dollars, we could not distribute them to libraries or to schools, because Microsoft already 

distributes those to those organizations in other programs, which 

really limits the distribution to Community Technology Centers. So 

in Ohio, we distribute them to seven Community Technology Centers, so it’s $90,000 of Microsoft software distributed in Ohio. 

What ARC found when distributing the Microsoft software is 

that there are not Community Technology Centers in all areas of 

Appalachia. I should note that Community Technology Centers are 

not Government Agencies. Community Technology Centers can be 

community centers. They can be labs. They are developed by folks 

who see the need for community technology. They see the need for 

folks to have access to technology and the training that is needed. 

So it is not that they are everywhere. They are not in every county 

or every community. So when ARC went to distribute the Microsoft 

software, they found some communities simply don’t have Community Technology Centers, and upon realizing this, are now developing a program to develop new community technology programs, 

and that is hugely commendable and I think that is needed. 

One thing that we should note is that the Community Technology Centers in Appalachian are some of the most innovative 
21 

programming in Ohio. In Perry County, we are doing multimedia 

technology, which includes video cameras and then the software to 

figure out how to use that technology. It’s amazing. 

In Muskingum County, they are using online learning tools, and 

in Coshocton County we are doing after school family focused programs. 

The youth have become so engaged in their Community Technology Centers that they feel the centers are theirs, as they should. 

I took a couple of the ARC staff to one of the Community Technology Centers, and we were sitting in the center, and a couple of 

the kids came in and gave us looks like, ‘‘Well, you’re sitting in my 

seat.’’ That is cool, right? That is great because that means that 

they feel that the center is theirs. 

Senator VOINOVICH. These are kids that don’t have access at 

home? 

Ms. STUBER. They may or may not have access at home, right. 

If they have access at home, it is probably not broadband access, 

and the centers often have broadband access because the centers 

are created—they’ve either gotten it through the library or they’ve 

gotten it through some sort of network or come up with some sort 

of creative arrangement with someone else that has access when 

they’re in town. The kids might be out of town, but come in for 

school, and they stay for the after-school programs. Some of them, 

if they do have computers at home, then it is an issue of who gets 

on the computer, the parents or the child. 

A lot of the centers, they become training places, also. There is 

the issue of training. There is also an issue of community building. 

They are there to hang out with their friends there and it is a safe 

place to be, while they’re also learning skills. ARC has supported 

OCCN’s attempts to find technology programs. Because they are 

not government funded programs that we know where they are, we 

have to search for them, and when we find them, we can show 

them where the resources are so they are not recreating the wheel, 

so to speak. 

Another thing that we found, or found us actually, was 

Chesterhill that has been mentioned twice now, I think. That is a 

really amazing project. The really neat thing for me to see there 

is that not only do they have the project going, but they realized 

the need for the Community Technology Center also. So they are 

already developing a public space for community training in association with their wifi network. 

We are actually helping them to figure out how they are going 

to sustain their wifi network. That is the next issue, that they may 

have this wifi network; how do they keep it going. 

The issue of local control is a big issue because there are going 

to be lots of pressures on them to figure out what to do with the 

wifi network. 

The one thing that I want to note is that the digital divide has 

not been closed. You might think every now and then, ‘‘Oh, well, 

there has been money allocated. We are done.’’ It is not done. You 

have been hearing that here today. We still don’t have broadband 

everywhere. That is my whole testimony. I am really excited to be 

here. 

Senator VOINOVICH. Thank you very much. Mr. Scholl. 
22 

STATEMENT OF DAVID SCHOLL, Ph.D., PRESIDENT AND CEO, 

DIAGNOSTIC HYBRID, INC. 

Dr. SCHOLL. Thank you, Senator Voinovich, for inviting me to 

partake in this hearing. A couple of comments before I start. No. 

1, I share some similarities with you. I was born in Northeast 

Ohio, graduated from Ohio University, and stayed there 27 years, 

and enjoyed the same quality of life and beauty that you cited. 

Second, I was fortunate to hear you speak last year about your 

early activist days as a student at Ohio University, and your aggressive, passionate pursuits and I appreciate that. 

The third thing that I would like to suggest is DHI, before I go 

too much further, is what it is for several reasons, but most, many 

people in this room have allowed us to grow and thrive. Joy Padget 

is one of those. Jen Simon is another. T.J. Justice. 

Actually, I remember Anne coming to the innovation center 

where we are located, and making a commitment, I think, of $1 

million. Without that million dollars, the innovation center 

wouldn’t be here, nor would the 170 employees. 

So I would like to start on the script and say I wish to thank 

you for allowing me to testify on this important issue that affects 

the vitality of DHI and that of other businesses trying to get a 

start or maintain their operations and growth in the region. 

So that I don’t fail to summarize, I would like to begin at the 

end. Operating as a business enterprise in a global marketplace 

means having ready access to two major things, a telecommunications infrastructure capable of delivering you to the world, and 

the world to you, each and every second of the day, 24/7, and two, 

the necessary human resources to assist business operators like 

myself with implementing productivity applications such as Enterprise Resource Programming, bar coding technology, web-enabled 

business applications, EDI for processing business transactions, email, and internet security solutions. That is a requirement whether you are in Athens, Appalachia, Chicago, New York or Tokyo. 

That is required. 

Diagnostic Hybrids has been successful to date for multiple reasons. Underpinning the national recognition we received in 2004, 

2005 by being named in consecutive years to Inc. 500 Magazine’s 

list of Fastest Growing Companies in America, we owe that to our 

people. Our employees are dedicated, committed and talented, and 

we attract them from within a 50-mile radius of Athens. We invest 

heavily in workforce development, both inside our organization and 

within the community, to help us meet our projected need for talent, particularly in the specialized manufacturing and laboratory 

technician area. This commitment is paying off and it is a great investment for our company. 

Meeting our needs at Diagnostic Hybrids for telecommunications 

infrastructure is a bit more daunting task. Certainly, much 

progress has been made in focused areas of our region to build the 

telecommunications infrastructure necessary to meet the two primary needs I mentioned above. For example, The Ohio University 

Innovation Center, a small business incubator affiliated with Ohio 

University, is equipped with broadband capability, and is a phenomenal facility. Access to the telecommunications infrastructure 
23 

provided by the center is absolutely critical to our past and future 

growth. 

I am sure there are other examples in the region, but I don’t 

know how many. 

Unfortunately, I can drive 10 to 15 minutes in any direction from 

our headquarters in Athens where we employ nearly 170 of the 

best and brightest biotech employees in the world and likely be 

without cell phone service for lengthy stretches, wireless internet 

access, and broadband capability. Actually, I was on a cell phone 

over by the hospital, and from that location to the top of the hill, 

we were not connected to the world by cell phone, 3 minutes away 

from this hearing. Not too surprisingly, the many areas of the Appalachian Region in which this major deficiency, or digital divide, 

exists are characterized by those that develop telecom infrastructure as rural and underpopulated, and thus economically not feasible to establish proper infrastructure. 

Perhaps even more demoralizing, both personally and professionally, is to hear ‘‘outsiders’’ characterize those people that live 

within these areas, including me, as economically and intellectually 

impoverished because we are not connected. At a minimum, we are 

viewed as out-of-step with today’s global economy, and perhaps 

more fundamentally, today’s world. 

The impact of this situation sooner or later ends up as a nonviable outcome for those without access. The impact is first felt 

with reduced educational aspirations on the part of our young people and ends with a lack of opportunity on the economic side, forcing many to move to somewhere that has the infrastructure and 

thus the opportunity. My recommendation for you to act upon 

would include providing incentives or grants to communities and/ 

or businesses to acquire towers to increase the density within the 

region to enable DSL and wireless connectivity, underground cable 

to provide for greater access to broadband, and consulting service 

talent to enable implementation of important productivity IT applications to help businesses run more efficiently and cost-effectively. 

In summary, telecommunications infrastructure has become a 

vital utility to the global educational and business community in a 

fashion similar to the value placed on water, sewer, and hybrids. 

Without immediate and aggressive attention paid to this regional 

need, residents of the very beautiful and scenic region known as 

the Appalachian Region are destined to fall behind even further. 

Thank you very much for your time. 

Senator VOINOVICH. Thank you. Mr. Little, I was very impressed 

with what you had to say in terms of what is going on. I think the 

real issue is how is what is going on in the educational institutions, 

how much of a spin off are you getting in terms of creating businesses like Mr. Scholl’s? 

Mr. LITTLE. In the region right now, there are seven companies 

that are involved in computer game or educational game development. Three of those are local companies, four are companies outside of the region that are working with organizations. 

The entire focus of this effort, to create a region of excellence in 

interactive digital technology, is to not only attract an educational 

or series of educational companies to the region, but to grow our 

own. Continued support by the Appalachian Regional Commission 
24 

with market access visibility for any new business that may startup in this area is going to be vitally important. 

We have spent 3 years in this effort, and we are finally starting 

to get the national attention with this associated press article that 

has gone nationwide now. In it, incidentally, the author mentions 

that the world may be flattened in Appalachia, because the people 

that were interviewed for that article did talk about the low cost 

of business startup, the low cost of operating a business in the region, and the quality of life here, and with broadband access, they 

can do business anywhere. 

Senator VOINOVICH. The point is that you have got three or four 

businesses from outside that have found out about what you are 

doing, and they have established themselves or are in the process 

of establishing themselves? 

Mr. LITTLE. They are working with research facilities on software 

modifications and on upgrades. One company out of New York City 

has a computer game that is focused on improving Algebra II 

skills, but they did not have that in an Apple format. They had it 

in a PC format. So the Grid Lab with Ohio University is working 

with that company to convert it. 

Senator VOINOVICH. The Grid Lab, I guess so I understand, that 

is located at the university and the university, through their resources, have some very bright people that are there and are they 

doing research work or are they doing research and education? 

Mr. LITTLE. It is a multipurpose facility. The college of communications 

Senator VOINOVICH. Does that create jobs? 

Mr. LITTLE. That is what our intent is. 

Senator VOINOVICH. On the campus you have more people and 

more teachers. 

Mr. LITTLE. It is located on Court Street beside the courthouse, 

and the reason that it was put there in a storefront facility where 

the Chamber of Commerce’s office used to be is so that middle 

school and high school students could have access to the facility, 

and also so that upstart computer companies—and there are three 

students, two undergrad and a grad student at Ohio University 

right now that are working with the Dean of Interest starting a 

computer game company. They can use the facility for special 

equipment and software that they may not have access to. 

So that facility is to capture and bring into this new technology 

middle school and high school students. They can be a part of the 

demonstration process of games that are in their data phase and 

are being tested. The students can get involved with that process 

with the research staff at Ohio University. We want to encourage 

the students then to improve their math skills, improve their 

science skills, so if they like this kind of activity, which most kids 

do with computer games, they can have a career in the computer 

game work or serious game development. So we are working 

Senator VOINOVICH. You have that interest, the universities are 

putting in the people that in the event that you have got—they 

have courses in the subject. 

Mr. LITTLE. That is right. Through the College of Communications, they have some degree programs that are beginning to evolve 
25 

into classes that are in computer game development, animation development and so on, so—— 

Senator VOINOVICH. Ventured capital—— 

Mr. LITTLE. One of the lead partners in this effort from the beginning has been a Adena Ventures and the concept grew out of 

Lynn Gellermann’s, Adena’s president involvement with a computer game development company, butterfly.net, one of the first 

companies that the Adena Ventures invested in, in West Virginia, 

and it is now being purchased by Sony. They saw that this could 

be a new industry for our region, and with very little capital initially, companies could start, and students fresh out of college and 

even while they are in college could begin the development of the 

companies, and the market is expanding greatly. 

You hear a lot of negative comments about the computer game 

industry, the shoot-them-up programs that are out there, but that 

is a very small segment of the industry, about $10 billion per year. 

Nearly $90 million is tied to education, research, simulations, military per year. 

Senator VOINOVICH. When I first heard about it, my wife said, 

‘‘These guys are in the gaming business.’’ You know how I feel 

about gambling. It is the way to get people turned onto technology 

for educational purposes, you play a game on it and spin off into 

the other applications. 

Mr. LITTLE. There are two existing companies in our region that 

are doing very well with educational, online education and using 

the gaming technology, and with cooperate education. Visum in 

Marietta does corporate education with this same technology, and 

Electronic Vision in Athens—— 

Senator VOINOVICH. So actually, you are building up—it is starting to build—— 

Mr. LITTLE. An entire industry. 

Senator VOINOVICH [continuing]. An entire industry, right. Obviously, where they are locating, they have the broadband, so you 

were saying—I understood that you could compete because you 

were saying to me that there are places that could potentially be— 

that have a potential, but they are not there at all in terms of the 

Mr. SCHOLL. I think at Ohio University we are really blessed 

with a significant amount of activity within the State and the educational institution itself. There is an issue of doing an incubator 

and doing a full scale constructional outlay for early startups and 

young companies. I think it is showing a tremendous amount of reward and benefit. I think it’s the same model we are trying to 

apply in Gary’s case, and I think that is also very good. 

What I would think is that region needs to decide whether regional hot spots, sparkplugs, not ARC as a sparkplug, but regional 

sparkplugs is the way to go because, you know, you have got to be 

careful to not get spread too thin, and there is not enough to go 

around anyway. How can you take some of those Centers of Excellence that are starting to kind of come out of a significant amount 

of time—23 years we tried to grow to this level. Sometimes people 

would say a typical slow, bad management team, but I think in 

some respects, the startup companies generally take time. They 

take that 12 to 15-year period. 
26 

So I think it would be useful to take an inventory of what has 

happened, and then try to identify things that are nationally, and 

certainly regional highlights and see how it can kind of spin off of 

that and go into the region. 

Senator VOINOVICH. Who would do that? 

Mr. LITTLE. Who would do that? Not me. I think the place is look 

into—let’s look at Ohio for a second. I think Ohio is very interesting because it has a major network of operations and has these 

three huge cities 70 miles away from Appalachia. So it seems 

Senator VOINOVICH. By the way, I think nationally that Ohio and 

Cleveland, in terms of broadband capacity, is like right at the top. 

Dr. SCHOLL. Yes. I have a map here that actually is from Time 

Warner that shows the Appalachian States in color. This is over 

stated, because if one home in the zip code has access, then it 

counts. Anyhow, I guess the digital divide is common in Ohio because if you think of just those distances that we travel, we do it 

everyday to get to Columbus, but—I think in the region, if you look 

at the regional hot spots, you learn a lot. I think Governor Taft in 

his program, the Office of Appalachian, I think they would be 

somebody that would be very much interested in trying to—— 

Senator VOINOVICH. Trying to get a task force together, look at 

the region, see what the strengths are, and start talking and figuring out how it all works together. That is what I miss about not 

being Governor, because I like that stuff—— 

Dr. SCHOLL. If I might add, speaking of leverage, in 2004, we raised $10 million for the Palo Alto Fund. So what that does is tell 

you that if the opportunity is there, the money will come. Creating 

that opportunity I think is really what has happened in Athens. 

Senator VOINOVICH. I am excited about it. You have the center 

there. Its—I just—the potential is fantastic. 

Dr. SCHOLL. I think that model needs to be discovered. 

Senator VOINOVICH. I thank you very much. I am very impressed. And the real—we put this technology thing into the ARC, 

and we specified that, we focused in on it, and what I am hearing 

from you is that that helped, so we should continue it and maybe 

even do more, understanding that there are also other needs that 

are in the communities and we have limited resources. So it is a 

question of, where do you get the biggest return on your investment for the area, and the bottom line is people want to work and 

keep jobs. Thank you. 

We are going to take a little recess before we start with the next 

panel. 

[Break taken—11:50 a.m. through 12:01 p.m.] 

Senator VOINOVICH. We are going to resume the hearing and 

have our last panel. We are pleased to have with us Mr. Jeff 

Hughes who is the Director of the Environmental Finance Center 

at the University of North Carolina at Chapel Hill. We are very, 

very happy you are able to come over here from the wonderful location over there. 

And Mr. Steve Grossman, the Executive Director of the Ohio 

Water Development Authority, which is near and dear to my heart. 

And Mr. Ken Reed who is the Director of the Vinton County 

Community and Economic Development organization. Vinton County is one of my favorite counties, and my wife’s. We spent a lot of 
27 

time at the State forest and have been there on several occasions. 

I think it is the smallest county. 

Mr. REED. Yes. 

Senator VOINOVICH. I will be interested to hear what you have 

to say. We will start out with Mr. Hughes. 

STATEMENT OF JEFF HUGHES, DIRECTOR, ENVIRONMENTAL 

FINANCE CENTER, UNIVERSITY OF NORTH CAROLINA AT 

CHAPEL HILL, INSTITUTE OF GOVERNMENT 

Mr. HUGHES. Thank you very much, Senator Voinovich, for giving me the opportunity to present today. As you said, I am the Director of the Environmental Finance Center at the University of 

North Carolina. We are one of nine environmental finance centers 

across the country that focus on the ‘‘how-do-we-pay-for-it’’ question. The ARC has that question thrown at them a lot. How do you 

pay for it is really the critical question in the case of planning for 

infrastructure. 

We recently completed a project for the ARC where we examined 

the current status of water infrastructure throughout Appalachia. 

Over a period of 2 years, we visited numerous communities, interviewed and surveyed literally hundreds of State, Federal, and local 

officials, and analyzed data from dozens of organizations. 

I am going to take the few minutes I have to give you the highlights from that study especially in regard to the assistance that 

ARC provides. 

While we focused on the 410 counties in the ARC region, we realized quite quickly that from a water quality standpoint, you really 

cannot separate out ARC from the rest of the country. Appalachian 

is the home to the head waters of many of the eastern United 

States rivers, and clearly their water quality successes and water 

quality failures flow downstream. So assistance in this region is 

really assistance that cuts across political boundaries, and that was 

a big finding for us. 

There is a saying that what goes on in Las Vegas stays in Las 

Vegas. What goes on in the ARC relative to water quality does not 

stay in the ARC. It has a big impact far from the boundaries of the 

region. Our work involved a series of fundamental basic policy 

questions. I’m just going to go over those now quickly. Are water 

and wastewater services in Appalachia much different from other 

areas of the country? The answer is yes. We found that while community water system coverage has expanded quite a bit in the region over the last 15 years, the region as a whole still lags approximately 10 percent behind the rest of the Nation in terms of coverage by community water systems (pipe water systems as opposed 

to a private wells). 

The difference is even more pronounced on the wastewater side. 

1990 was the last time that good data was collected on this issue, 

and 75 percent of the United States reported being served by the 

public sewers and only 50 percent reported being served by public 

sewers in Appalachia. Not being served by public sewers is not necessarily a problem, except that studies in Appalachian show that 

folks not served by sewers have a lot of problems with their septic 

systems and in some cases have direct discharge (strait-piping). 
28 

Are there sizable infrastructure needs in the region? Yes. The 

documented need is quite significant. If you look at the EPA studies, you will see some large numbers. These numbers do not even 

include a lot of the needs that are disproportionately high in Appalachia like failing septic systems and the cost of running lines to 

people that are not currently served. We estimate that the capital 

needs are probably $35 to $40 billion, and this is larger than some 

of the estimates you might see coming out of the surveys. 

How significant is public funding in Appalachia for water and 

sewer? Very. Relatively few communities in this part of the country 

have access to commercial credit. They rely on public funding. During a 4-year period between January 1, 2000 and December 30, 

2003, we documented $4.6 billion in funds went to water and 

wastewater in Appalachia from public sources. 

‘‘Public sources’’ does not equate to ‘‘grants’’. $3.1 billion of the 

funds were in the form of subsidized loans. This public funding is 

not simply ‘‘handouts.’’ 

We found that the manner in which disbursements are made and 

for what purpose they are made quite important. Very little of that 

public money is accessible for certain types of projects, particularly 

projects involving decentralized systems. So where half of the population is served by decentralized wastewater systems, very little 

public funds can go toward these systems. 

It is important to point out that in my home State (North Carolina), the ARC has stepped in and been eager to correct failing septic systems in areas where other funding sources couldn’t. 

We looked at some of the financial management funding strategies that are likely to have the biggest impact on service in the region. There are a lot of national policy prescription being suggested—some of those will work in the ARC region and some won’t. 

The core factor in all of these strategies is that they require capacity. The idea of regionalization, the idea of improved asset management, the idea of privatization. All of these have benefits, but they 

require educated staff and they require some basic resources which 

in some cases in the Appalachian region are still lacking. There is 

not very much money going into the development in these areas. 

ARC is one of the few organizations that focuses on this area and 

we saw some big impacts. 

Just to finish up, the word ‘‘leveraging’’ has come up over and 

over again today. We have found that leveraging does hold a lot of 

promise in the ARC region. Leveraging is really hard work. You 

need someone on the ground pulling all of these groups together. 

So often we found it is not necessarily the ‘‘big guys’’ (big funders) 

doing that leveraging, it is the little guy, and I do not mean that 

in a derogatory sense at all. You can look at the funding sources, 

and sometimes the ARC will be a relatively small percentage of an 

overall project, but it is their effort behind the scenes leveraging 

that really makes the whole project go. We found this over and 

over in our study. 

I think that is a good place to leave. I thank you for the opportunity to present and I will be happy to answer any questions. 

Senator VOINOVICH. Thank you very much. Mr. Grossman. 
29 

STATEMENT OF STEVE GROSSMAN, EXECUTIVE DIRECTOR, 

OHIO WATER DEVELOPMENT AUTHORITY 

Mr. GROSSMAN. It is a privilege to be here this morning. The 

Ohio Water Development Authority has existed for 38 years. We 

have to date funded $7.3 billion worth of projects. Currently a little 

bit under half of all of the funding for water and wastewater 

projects in the State comes through the Ohio Water Development 

Authority. 

We are extremely proud, Senator, that you had the insight to 

help create the authority, and we are proud that U.S. EPA used 

the work of the Authority as its model to create the State Revolving Fund Program in the mid 1980’s. It is with an extensive background and numerous experiences in funding water and wastewater projects and a strong interest in knowing and understanding 

all of the funding sources for water and wastewater in the State 

that I come before you today. I have submitted with my testimony 

some attachments which document what I am going to be saying. 

During the period of 2000 to 2004 throughout the State, approxi- mately $4.15 billion was invested in Ohio’s community water and 

wastewater projects. Of this amount, 12 percent came from grants, 

45 percent came from loans with an interest rate that had been 

subsidized by a governmental body, and 43 percent came from 

loans at a market rate of interest. 

Funding during the 5-year period of 2000–2004 has averaged $830 million, and that is compared to a 10-year average starting 

in 1990 of approximately $500 million. This is an increase of 64 

percent. While there was an increase in funding of 37 percent in 

grants and 43 percent in loans at a market rate of interest, the 

greatest increase of 120 percent came from loans at an interest 

rate that had been subsidized by a governmental body. 

Further analysis reveals that the SRF programs, both for water 

and wastewater, primarily accounted for this increase; thus enabling Ohio to keep up with the 64 percent increase in demand. 

Having set the overall State picture, one needs to look at what 

is happening in the Appalachian region. A breakdown by funding 

types is significantly different in Appalachia as compared to the 

rest of the State. Where the rest of the State received 9 percent of 

its funding from grants, Appalachia received 32 percent. As the 

rest of the State received 46 percent of its funding from loans at 

a market rate of interest, Appalachia received 15 percent. The difference for loans with an interest rate that has been subsidized by 

a governmental body is not as dramatic; the rest of the State received 45 percent compared to 53 percent for Appalachia. 

Appalachia also is significantly different from the rest of the 

State in terms of program participation in funding water and 

wastewater projects. Historically, bonds issued by a local Government and the SRF Programs account for more than 75 percent of 

project funding outside of Appalachia. Within Appalachia they account for only 34 percent. 

Ohio, as compared to many other States, has a relatively large 

variety of programs to assist communities in funding their water 

or wastewater projects. While this is good, with this variety comes 

complexities and an increased need for program coordination, especially at the small community level. This is clearly shown in two 
30 

of the attachments provided where the role of each program is 

shown. There is no one dominant program. Each community, with 

the assistance of its technical assistance provider and/or consulting 

engineer, sorts through a variety of programs, choosing the group 

of programs that the leadership of the community believes is best 

suited for its needs. 

While 5 percent of total funding comes from the Appalachia Regional Commission, this is 15 percent of all grant money, a critical 

component for funding projects in Appalachia. As one looks toward 

the future, and by the future, please assume a period of no more 

than 4 years, it is clear that there will not be a let up on demand 

for project funding in Appalachia. Using a variety of sources from 

Ohio EPA’s Intended Use plans to an Appalachia Bulletin Board 

which was initiated at the stimulus of Joy Padget when she was 

Director of the Governor’s Office of Appalachia and carried on 

through T.J. Justice, I estimate that the next 4 years would need 

$340 million. I believe this is a minimum demand for funding that 

will be requested over the next 4 years. As noted earlier, the total 

demand has grown in the State and will continue to grow. 

If the number of $340 million proves to be accurate for a period 

of 4 years at $85 million per year, it would exceed the annual average of $80 million for the period of 2000 to 2004. The estimates are 

not precise and, as I have discovered in my 17 years with the Authority, the seriousness about any one project comes and goes. But 

one thing is certain, decreases in any grant funding will provide an 

increasing financial burden on any community. 

One only has to look at the increasing water and sewer rates as 

compiled by the Ohio Environmental Protection Agency to see that 

user fees for both water and wastewater are increasing at a faster 

pace than inflation, and this increase, given today’s economic conditions and environmental demands, is only going to continue to increase at this higher pace. 

If one was to look at all sources of funding in the State, one 

would conclude that, at best, it will remain the same during the 

next 4 years. While grant funds from the Ohio Public Works Commission will increase by approximately 20 percent, this will not 

happen until 6 years from now. There is continuing pressure on the 

U.S. Department of Agriculture’s Rural Development Program to 

reduce the percentage of grants it provides to communities, and 

this decrease has been occurring in recent years, and the Community Development Block Grant Program is under continuous pressure to have its funding reduced. Besides the U.S. Department of 

Commerce’s Economic Development Program, which really just 

plays a minimum but significant role in the Appalachian region of 

the State, the only other program source of grant money is from 

the Appalachian Regional Commission. 

Decreasing these funds would have a significant impact on Appalachia. I might add that a major unknown in all of this is Federal 

appropriations coming from Ohio’s congressional delegation to Ohio 

communities through State and Territorial Assistance grants and 

through the Army Corps of Engineer’s 594 Program. While I recognize this is congressional prerogative, I believe that funding for 

this is not going to increase. 
31 

So I think that the increase in actual demand is going to continue. It will not be as dramatic as all the national studies proclaim it will be, but it will increase. Where will the funding come 

from for this? There only are three possible sources, debt issued by 

the community which infrequently occurs in Appalachia, OWDA’s 

market Rate of Interest Loan Program and it’s Community Assistance Program, or the SRF programs. 

Regardless of which of the three financial programs is selected 

in the future, users in the communities will be paying more. Obtaining a 5-year reauthorization of the ARC will be a significant alleviating financial factor in Appalachia. 

Thank you. 

Senator VOINOVICH. Thank you. Mr. Reed. 

STATEMENT OF KEN REED, DIRECTOR, VINTON COUNTY COMMUNITY AND ECONOMIC DEVELOPMENT, VINTON COUNTY 

COURTHOUSE 

Mr. REED. Thank you, Senator. I welcome the opportunity to be 

able to testify this morning about the effects of ARC in my communities. 

You are aware of Vinton County, and I don’t know if you and 

Mrs. Voinovich have heard, that beautiful lodge of the State park 

burnt down a couple of months ago. 

The good news is that the State of Ohio has assured us that they 

insured a replacement value, and they want to try to build something back similar to all of the wood. It was a beautiful place. But 

as you have noted to me, I think Vinton County is probably, if not 

the most rural, the most economically depressed county in the 

State of Ohio. With this comes a lot of challenges. 

Jeff gave the regional perspective for many States. Steve kind of 

brought down the State of the Ohio and Appalachian region, but 

I am the little guy that Jeff speaks of. I am the guy with the boots 

in the ground, to use a common phrase, implementing ARC projects 

in my community. 

I am the one trying to get water up City Run Road and up State 

Route 278. I am the one that folks stop at the ball game at the 

school and ask, ‘‘When are they going to get Vinton County water?’’ 

I am the one. I hear it all of the time. ‘‘We are working on it,’’ and 

we are working on it. 

With ARC funding, we’ve made a huge impact in implementing 

rural water projects in Vinton County. As I came in on US 50 out 

of Vinton County today, the USDA Rural Development big signs 

are still up from the project that we completed last year in which 

$300,000 in ARC funds was used to leverage $3.5 million to run 53 

miles of water line in Vinton County. The folks who hauling water 

was a way of life are no longer hauling the water. That was made 

possible through the ARC. There are folks out there that stop me— 

she had bought a new washer and dryer. She was tickled to death 

to be able to do laundry at home. So we see the impact, the human 

face. 

There are projects that we’ve done where we went and ran water, 

and then later in our housing program were able to put in bathrooms for people, putting in flush toilets for somebody that lived on 

$400 a month Social Security, but because of the rural waterway, 
32 

we put in a septic system and a bathroom. There are a lot of basic 

human needs we are trying to meet. 

I appreciate young, smart guys like David in the technology end 

and things. We are still trying to get folks water out there. Sometimes when I see the billions of dollars going for water and sewer 

infrastructure in Iraq, I wish that we had some of that in our community to be able to extend those lines. 

In Vinton County and all over southern Ohio are dotted with 

small villages that simply don’t have the affordability go in to put 

in municipal sanitary sewer systems. I have seen that. We are 

working with a village in Vinton County, 800 folk. We need some 

$300,000 in ARC funds to put together a $6 million funding package to do sanitary sewer. A huge impact with a relatively small 

amount of ARC funding. 

We are able to use the ARC money. It does take somebody in the 

community. It does take that little guy on the ground to be able 

to put these types of things together, and I have seen some communities in our area that do not have that person. 

I have been doing this for 16 years. It is a good program. It is 

able to help people. We really put a human face on it. 

One thing that I liked about the ARC—I have went through a 

wide variety of Federal and State grant programs, so I see them. 

ARC is an impacting program. There is a good partnership with 

the State of Ohio to the Governor’s Office of Appalachian, our local 

development district, our local county caucus. We do work together 

in identifying local needs, prioritizing local projects. We have that 

flexibility to address our local needs. I think that the system works 

in Ohio. My on-the-ground experience, it works well in the State 

and the local and the regional. 

But the ARC funding has had an impact on the quality of life in 

Vinton County. It has made a difference in our community. I implore you and the committee to continue the reauthorization of the 

ARC so we can continue to improve the lives in our community. 

In our written remarks, I close by saying ‘‘The Bible says ‘a man 

reaps what he sows.’ How true that is of the ARC.’’ It says that, 

‘‘The local projects that have been seeded with ARC funds have resulted in a harvest of improved living conditions for the residents 

of Vinton County. If you continue to furnish us with the seeds, we 

at the local level will continue to plant, water, and cultivate, and 

we as a society will reap all the benefits.’’ 

Thank you. 

Senator VOINOVICH. Thank you. I think that Vinton County is 

very fortunate to have you. I appreciate your input today. You are 

the kind of person that Mr. Hughes talked about that needs to be 

on the ground. That is human capital that you need to kind of organize. You were saying, Mr. Hughes, that a lot of communities do 

not have those individuals. They do not have the capacity from an 

organizational point of view to put these things together, and then 

I suspect you have to have the volume of the capacity of the community to pay for the rate increases that are necessary to go ahead 

and get the job done. 

I should know this, but in terms of the paying for your salary, 

who pays for your salary? 

Mr. REED. I am glad you brought that up. 
33 

Senator VOINOVICH. Can you get any ARC money for yourself? 

Mr. REED. No. The county commissions do not pay me a dime, 

or my staff. I live off of the programs I administer. It is kind of 

like a business. I cannot show up everyday and get a paycheck. I 

have to produce. I am only as good as my last project and last program, and in our community, they don’t have the resources. The 

county commissioners, they have to come up with money to buy 

tires for the ball field truck. It’s a budget issue in a small county. 

So we operate off of the administrative dollars, and fortunately, 

the CDBG and some of the other programs, there are sufficient administrative dollars. 

Senator VOINOVICH. You don’t have the administrative dollars 

that you can take off of ARC. 

Mr. REED. No. Many times though we blend the ARC and CDBG 

and there are some administrative dollars there. That would help 

increase the capacity. When it’s the local ground spending the 

money, I think we should be able to have a portion of it. I think 

ARC will get a better product also, if somebody is getting paid. 

Senator VOINOVICH. That might be something to look into because it is the issue of having somebody who has the knowledge to 

put this together. As I mentioned to Ms. Pope, one of the things 

that we want to see is coming together of these various programs, 

but you need someone with the capacity to understand what the 

programs are and how you can bring them together, and I suspect 

that—I know that you are one of those people. 

So what you do in terms of your cost would be off the CDBG. By 

the way, come hell or high water, we are not going to cut CDBG. 

We didn’t do it last time. I think the CDBG is one of the finest programs that we have in terms of throughout of the county dealing 

with the problems with the small cities and big cities, and it is one 

of those programs that just leverages a whole bunch of money. You 

can get something out of that. 

How about the USDA? I keep hearing that. That is money that 

comes from the Department of Agriculture? What program is that? 

Mr. GROSSMAN. That is a project, a program that divides waterworks loans and grants. It’s been in existence for several decades 

now. 

Senator VOINOVICH. It is part of the Department of Agriculture? 

Mr. GROSSMAN. Yes, it is. It provides in the neighborhood of $40 to $50 million in loans and grants. Over the years it was changed 

from approximately 60 percent grant money and 40 percent loans 

to now 30 percent grant money and 70 percent loan money. 

Senator VOINOVICH. The loans are paid off from user fees. 

Mr. GROSSMAN. Correct. Yes. 

Senator VOINOVICH. I would like to know, and maybe—I would 

like to see how some examples of Appalachia in ARC, how some of 

the water projects are funded. In other words, the various sources 

of funds and how they are blended, and I suspect that you might 

have some from the rural, from the Department of Agricultural. 

You probably would have some money from the revolving loan 

fund. 

Mr. GROSSMAN. Correct. I have developed an extensive data base 

going back to 1989 through 2005, which can show you by county, 

by community—— 
34 

Senator VOINOVICH. I would be interested to see how this all 

blends together. 

Mr. GROSSMAN. I can provide that to you. 

Senator VOINOVICH. If you increased one of them, where would 

you have the largest impact? The SRF, as you know, has just been 

frozen, and we need to put more money into it. But you have got— 

just melding together a bunch of stuff—How about the OWDA, 

where do you fit into the picture. Do you—does the community 

come to you and say, ‘‘We want to do something,’’ and you issue the 

bonds? 

Mr. GROSSMAN. We only issue the bond. First of all, from the 

SRF we are the financial administrators of that, the Ohio EPA is 

the program administrator, but we still have our own program. 

Senator VOINOVICH. So any of the money that comes from the 

SRF program to the State, you are the one that would administer 

Mr. GROSSMAN. Yes. 

Senator VOINOVICH. In other words, the allocation out of that 

money to Ohio, you guys, you run it. 

Mr. GROSSMAN. We run it, and if we need more money, we issue 

bonds. We have a leverage program to get more money that way. 

All of our programs, while OEPA has a better sense of what is 

about to happen than we do, the money is there, they come to us 

for a loan and we make the loans, and 

Senator VOINOVICH. Again, the money is paid off through user 

fees. 

Mr. GROSSMAN. That is correct. We are an extremely sound financial body. I am proud to say that through our three major programs, they have rated a triple A from standard and poors; and 

Mondays and the strength of all of our programs lies in the fiscal 

responsibility of all of Ohio communities. Not the State of Ohio, the 

Ohio communities. 

Senator VOINOVICH. Do other States do it that way? Do they— 

that is how 

Mr. GROSSMAN. Most of the States operate the same way. I am 

part of the trade associate of State Agencies, similar agencies, I can 

speak to that. More than half of the States, for the SRF programs, 

issue bonds to leverage the program. 

The beauty of the SRF is when you do run out of money, you do 

have the ability to issue interest payment on the bonds. When 

you’re lending money at a lower rate of interest than the bonds, 

eventually that cannot go on. But to the extent that you can do it, 

in Ohio we have issued over $1.6 billion of bonds in the SRF program in wastewater alone to enable more loans to be made. 

About half of the States do it that way. The other half of the 

States do not do that and just loan the money out without 

leveraging. 

Senator VOINOVICH. You have to compete with other tax exempt 

bonds in terms of the rate. You have to get people to buy your 

bonds. 

Mr. GROSSMAN. We do, but we don’t compete. I am not a licensed 

broker, so I cannot market our bonds, but I can tell you when the 

bonds are issued, they go fast and they go at competitive levels. 
35 

Senator VOINOVICH. So the point is that you end up having—you 

said some of them are at market rate and some are subsidized. 

Where does the subsidy come from? 

Mr. GROSSMAN. The subsidy is built into the SRF program. We 

are lending money out at a lower rate of interest than interest payments on the bonds. 

Senator VOINOVICH. Money from the SRF money coming, and 

when that money comes in, they don’t require—what is the interest 

rate they set on that or is that just—— 

Mr. GROSSMAN. It is based on a market rate of interest. For most 

communities, the lowest rate it can be is 3.25 percent. For small 

communities or impoverished communities, it can be a 1 percent 

level or 0 percent level. 

Senator VOINOVICH. That is based on the formula coming out on 

the SRF, if they have different categories—— 

Mr. GROSSMAN. This is a State decision. Each State sets its own 

interest rates. 

Senator VOINOVICH. So you decide how that is. What happens is 

is if the ones that are getting the lower interest rate, the other 

ones are picking up on the tab on that, too. 

Mr. GROSSMAN. They are picking up the tab or running it, but 

the overall thing is that we are still borrowing money at a higher 

rate of interest than we are lending it out, but given that we’ve 

made over $3 billion in loans, even in the mid-term, Ohio is in good 

shape with respect to funds to lend out. The long-term, it is going 

to be a problem. 

Senator VOINOVICH. Mr. Hughes, you have been studying this. 

Mr. HUGHES. I think this is on excellent place to have a dialog. 

We started our study thinking that we were going to be focusing 

mostly on the needs, but that, in my opinion, is not the most interesting story. They are big numbers. They are scary numbers. What 

are we going to do? Somebody has to document those. What we 

found which was fascinating was that there are 13 States in the 

ARC region, and there are 13 approaches at each State level, and 

we were able to look at in our study where the public funds go in 

each individual State, how much is spent, how much is loaned, how 

the things are packaged together. 

There are some States like Ohio that have a pretty high degree 

of coordination. There are other States where it is four or five, 

sometimes six or seven different funders out there, folks like Ken 

on the ground. We are fortunate people to have someone like Ken 

that can understand those six, but put yourself in—the mayor of 

a small town steps up to the plate and tries to figure out six or 

seven programs. We found States where—Ohio, West Virginia, and 

Kentucky come to mind, where they did great jobs pulling this all 

together. 

In our study, this is where we probably spent the bulk of our 

time. We collected information from 50 or 60 different funding programs, all with different rules. I am not a critic of this because on 

the ground you see that these funding programs have different objectives. The EPA programs, as you know, are environmentally oriented. USDA is a rural development program. So the trick is, you 

have water and wastewater. It is a public service and it is an economic development. The trick is at the local levels, how do you put 
36 

all of these together. I think that the ARC as a leveraging element 

has been instrumental in that. I think there is still a lot of work 

to be done. 

I think having an across State organization like the ARC let’s the 

folks from Mississippi and Alabama hear what the folks in Ohio 

and West Virginia and North Carolina are doing. I am particularly 

passionate about this because I think my home State has a lot to 

learn from what you do in Ohio. 

Senator VOINOVICH. The ARC is the yeast in a lot of these 

projects. That is where it begins, then you build from there. 

Mr. HUGHES. It’s a small—both on the technical assistance side 

it is the yeast, and then also, as a couple of people mentioned, it 

sometimes can be that $300,000 that can be missing from a $4 million project. One thing I didn’t say 

Senator VOINOVICH. This is mostly we are talking about safe 

drinking water. We are not talking about clean water. 

Mr. HUGHES. I think the ARC has been instrumental in wastewater. They took out more straight piping systems in North Carolina than any other organization in the State. But if you look at 

the region as a whole, I am an advocate of loan financing. I think 

that grants can get communities in trouble. I came in somewhat a 

skeptic of the study. I am leaving the study feeling like without 

some targeted grant money, these project will not work. 

People in the ARC already pay a higher percentage of their income on water and wastewater than any other place in the county. 

West Virginia is by far the highest per capita basis, what people 

currently pay. There are counties—and McDowell County is one of 

our case studies in West Virginia, they are paying more in absolute 

terms than Orange County where I come from, a very wealthy 

county in North Carolina, in absolute terms. 

Senator VOINOVICH. It is interesting, we were able to get—we authorized a billion and a half—do you remember? A billion and a 

half dollars, I think back when I was chairman of—I was chairman 

of the Infrastructure Tax Division my first 2 years. The thing is, 

we got the money authorized, but we did not get it appropriated. 

I would be really interested if you could sit down with some of 

your colleagues to look at where you put—how do you really, you 

know, once you identify—and we are going to come to the number, 

but the question is how do you go about funding the thing. You do 

need the grants, because we have seen from the testimony here 

today that these counties and areas do not have the wherewithal 

to do it as you would have in the larger, urban area, and the septic 

tanks and all of the other stuff you have to contend with. 

The question that I have is, if we are talking about wastewater, 

which is probably the big number, wouldn’t you say? 

Mr. HUGHES. It is high, but it is not 

Senator VOINOVICH. Now we are talking about the lines, not just 

the treatment facilities. 

Mr. HUGHES. We are talking about both. 

Senator VOINOVICH. In your study, you did the treatment, too. 

Mr. HUGHES. We were looking at everything. But there is a very 

large type view of wastewater; sewers are it. The ARC really suffers nationally because half of the population is septic systems. So 

when someone comes in to document the need, what do they do? 
37 

They start by going to the local sewer plant and asking, ‘‘What is 

your need?’’ Those numbers are the numbers that you see. Nobody 

goes to the individual people with failing septic systems and says, 

‘‘What is it going to cost to run you to the city system or fix your 

system?’’ 

All of the estimates to the ARC are grossly under estimated, in 

my opinion, on the wastewater side. 

Senator VOINOVICH. It is interesting that the major improvement 

in waste treatment in the country occurred during the early seventies. My first resolution for bond issue when I came to the legislature was $375 million to do waste treatment facilities. When the 

Federal program came in, it was 75/25. 

I will bet you if you go back and look at that program, that Appalachia fell behind then because that money was going to the larger 

cities, and you had no—you didn’t have any governmental entity to 

deal with it. I bet they were just completely kind of ignored during 

that period of time. 

If you came up with a new program, I believe if you want to 

make progress, you need to come up with something like that 75/ 

25 for a while, or 50–50, something that would have a special ingredient or program to deal with the situation in the Appalachia. 

I want to thank you very much for being here. It has been a 

great hearing, and I got a lot out of it and I’m hoping some of your 

thoughts this morning, this afternoon, we can fold into the legislation. We are going to try to get it done, and I thank all of you for 

what you are doing in your respective positions. It makes a big difference to our country and to your respective communities. Thank 

you. 

Hearing adjourned. 

[Whereupon, the hearing was adjourned at 12:37 p.m.] 

[Additional statements submitted for the record follow.] 

STATEMENT OF ANNE POPE FEDERAL CO-CHAIR, APPALACHIAN

REGIONAL COMMISSION

Thank you, Senator Voinovich. It is indeed a pleasure to be with you here in Appalachian Ohio to review the work of the Appalachian Regional Commission (ARC). 

We appreciate your strong personal commitment to the future of the Appalachian 

region and the work of ARC. Since I have traveled with you several times around 

Appalachian Ohio, I know that this is a subject that you feel passionately about. 

All of us in Appalachia appreciate your leadership. 

This hearing affords us a chance to assess the effectiveness of the 2002 reauthorization, review how ARC’s programs are working, and examine the economic development challenges facing rural communities across Appalachia 

I am particularly pleased that you have chosen to hold this hearing in the heart 

of Appalachia. Southeast Ohio shows both the significant payoffs of prior ARC investments and the continuing need for the Commission’s assistance as a profound 

restructuring sweeps across the economy of Appalachia. I am delighted to be here 

at Washington State Community College, which has partnered with ARC on a number of important projects 

The region’s traditional reliance on low-skilled jobs—particularly in manufacturing, natural resources, and extractive industries—is rapidly shifting to more 

knowledge-based employment. While this transformation offers the promise of higher incomes and improved standards of living, many Appalachians—and their communities—are at risk of being unable to compete for these new jobs and businesses. 

Education and workforce development programs geared to high-growth high-demand jobs, entrepreneurial strategies to capitalize on local assets, access to 

broadband technology, and adequate basic infrastructure are essential if Appalachia’s communities are to compete in the global economy. ARC’s flexibility, its 
38 

ability to adapt quickly, and its expertise in crafting regional approaches make it 

an effective partner in helping communities put these critical components in place. 

ARC OVERVIEW

I should take just a minute to review ARC’s mission and structure, as I think that 

is a key to ARC’s success. The Commission has been charged by Congress with helping bring Appalachia’s 410 counties and their 23 million people into socioeconomic 

parity with the rest of the Nation. The Commission represents a vital partnership 

between the Federal Government and the 13 Appalachian States. The 13 Governors 

and the Federal co-chair collectively set policy and allocate ARC’s dollars in a true 

partnership that requires a consensus on priorities. I am pleased to be joined today 

by T.J. Justice, Director of the Governor’s Office of Appalachia and Governor Taft’s 

Alternate to the Commission. Throughout his 8 years in office, Governor Taft has 

been a vigorous advocate for Appalachian Ohio and the ARC, and T.J. has been effective in carrying out the Governor’s vision for Appalachian Ohio. 

While the formal policies of the Commission are established by the Governors and 

the Federal co-chair, the real strength of ARC rests in our local partners, the local 

development districts. These multi-county planning organizations act as our local 

eyes and ears, identifying potential projects, providing technical assistance to small 

communities, piloting innovative development approaches. They are indispensable to 

our effort to move Appalachia into economic parity with the Nation. 

Every Appalachian county is served by one of the 72 local development districts 

(LDDs) in our region. You have three excellent ones here in Ohio: the Ohio MidEastern Governments Association, the Buckeye Hills-Hocking Valley Regional Development District, and the Ohio Valley Regional Development Commission. I am 

glad that Don Myers is here this afternoon to represent the LDDs. He is a forceful 

advocate for innovative regional development. 

2002 REAUTHORIZATION

Mr. Chairman, I am pleased to report that the reauthorization that you sponsored—and that President Bush signed—in 2002 has worked quite well. As a result 

of the legislation, and bolstered by the Administration’s support for the work of 

ARC, we have become more performance-based, we have increased our leveraging, 

we have expanded our partnerships, and we have focused on innovative, regional 

approaches to economic development. 

Performance-based Agency 

ARC is a performance-based organization, with clear goals and performance measures driving everything that we do. I believe that successful organizations are ones 

that develop a plan, implement it, and then measure what they have accomplished. 

Last year we implemented a new strategic plan to guide the Agency for the next 

5 years. We did not just sit in Washington and write a document. Rather, we went 

out into the region to listen to the people of Appalachia and hear how they thought 

ARC could best help their communities. We held five town hall meetings across the 

region, with participation and voting by more than a thousand Appalachian citizens. 

Then our States, the local development districts, and I sat down to shape these comments into a new plan to govern our investments. That plan articulates four major 

goals: 

• Increase job opportunities and per capita income through business development 

and diversification strategies that will capitalize on the region’s unique assets, foster local entrepreneurship, expand trade, and encourage technology-related jobs. 

• Strengthen the capacity of the people to compete in the global economy through 

increased workforce participation and productivity, with emphases on improving 

educational attainment and training and reducing disproportionately high rates of 

certain chronic diseases. 

• Develop and improve regional physical infrastructure, particularly in economically distressed areas, as an essential step to increase potential for private sector 

growth by addressing the need for clean water and wastewater treatment facilities 

and advancing the access to and use of high-speed telecommunications. 

• Build the Appalachian Development Highway System, designed to reduce the 

historic physical isolation of the region and link Appalachia to national and international commerce. 

Performance measurement is an integral component of the strategic plan. The 

Commission has outlined annual and 10-year performance targets that are aligned 

with these four goals. We analyze each project to see what it contributes to one of 

these targets. 

Those 10-year regional performance targets are as follows: 
39 

• Create and/or retain 200,000 jobs in Appalachia • Position 200,000 Appalachians for enhanced employability • Provide 200,000 households with basic infrastructure services • Open 250 miles of the Appalachian Development Highway System 

I am pleased to report that we are well on our way to meeting these 10-year targets. 

Leveraging 

Meeting these targets will require the investment not just of ARC dollars but of 

funds and resources from other Government Agencies and the private sector. We 

have worked to increase our leverage of outside dollars. Last year, the $66.3 million 

in grants that we funded attracted $170 million in additional project funding, a 

ratio of almost 3 to 1, and $560 million in leveraged private investment. That means 

that for every dollar that ARC invested in a project, the private sector invested $8. 

Since many of our projects are in areas with weak economies, and they often meet 

needs that are almost pre-development in nature, this private investment is particularly striking and has a significant economic impact. 

In our role as advocate for the region, we have been the catalyst for other investments as well. Parametric Technology Corporation (PTC), a leading developer of sophisticated engineering and design software for industry, NASA, and the Defense 

Department, has worked with ARC to make their Pro-DESKTOP software available 

for free to all high schools and colleges in the Appalachian region that have a faculty member trained in using the software. So far 31 community colleges, 4 technology centers, 44 high schools, and 1 middle school across 9 ARC States have participated in the project. To date, the market value of the software PTC has donated 

is $24 million. 

Partnerships 

Achieving the goals or our strategic plan requires an extensive network of partnerships with the private sector, the non-profit community, and other Government 

Agencies. Expanding our partnerships has been one of my primary goals at the 

Commission. I think we are making excellent progress in this area. 

The Interagency Coordinating Council on Appalachia, which the 2002 legislation 

created, has been an effective tool for strengthening our partnerships with other 

Federal Agencies. Last fall, for example, Labor Deputy Assistant Secretary Mason 

Bishop and I convened a field meeting of the Council at Zane State College in 

Zanesville to discuss strategies to prepare Appalachia’s workers for high growth, 

high demand jobs. Presidents of 17 community colleges from across Appalachia, 

along with economic development and business leaders, participated in the conversation. 

At that time we announced an innovative pilot program to train workers for jobs 

in the electric utility industry. An interstate partnership between Zane State here 

in Ohio, Ashland Community College in Kentucky, and West Virginia State Community and Technical College will yield a rich curriculum, open to students in all three 

colleges. A key private sector partner, AEP, will work with the colleges to make sure 

that the curriculum matches the jobs that AEP offers. AEP will also offer internships that are integrated into the program. This regional approach to workforce development is just the sort of innovative collaboration that both ARC and the Department of Labor are seeking to foster. 

Our relationship with the Centers for Disease Control and Prevention is another 

innovative Federal partnership. Since 2001 the CDC has committed over $1.4 million to special work in Appalachia targeted to certain diseases, such as diabetes and 

cancer, that disproportionately affect our region. That partnership has led to three 

successful ongoing projects: a jointly funded initiative to reduce the high rate of cervical cancer mortality in Appalachia, a partnership with East Tennessee State University to implement a comprehensive cancer control program, and a collaboration 

with Marshall University to reduce the impact of diabetes on people in Appalachia. 

For each of these, the CDC has looked to ARC as its connection to local communities 

and local needs. 

We also understand the importance of the private sector and sectors, and we have 

worked to create new partners here as well. In a first-of-its kind collaboration, ARC 

worked with the National Geographic Society to develop a geotourism mapguide to 

Appalachia, boosting the tourism industry and the jobs that flow from it. The map 

features 356 sites, including 24 sites in Ohio. Marietta is one of them. This special 

map is the kind of activity that could only be accomplished through an organization 

that has a specific, regional focus. 

Over the past 2 years we have worked with Microsoft Corporation to make computer software available to more than a hundred organizations across our 13 States. 
40 

Microsoft initially committed $1 million in software donations, but when they saw 

the enormous need there was for this across our region, they quickly increased it 

to $2 million. At this point Microsoft has distributed $1.5 million of that, and an 

additional $400,000 is in process. Microsoft has been a great partner for us, and we 

appreciate their commitment to Appalachia. 

Innovative Regional Approaches 

ARC stresses innovation and regionalism in building thriving local economies. 

One of our model innovative programs, the highly successful Appalachian Higher 

Education Network, originated here in Ohio. It provides funding, training, and assistance to high schools to encourage students to undertake postsecondary education. We know that the jobs of tomorrow are going to require enhanced training 

and education, yet the ‘‘college-going’’ rate for high school students in Appalachia 

lags behind the rest of the Nation. Our Appalachian Higher Education Network 

speaks directly to this gap. 

We have taken the Ohio model, which won an ‘‘Innovations in Government’’ 

Award from Harvard, and are replicating it across Appalachia. There are now 10 

centers in 9 States. Since 1998, the network’s programs have reached nearly 11,000 

high school seniors in Appalachia, of whom 68 percent have enrolled in college. This 

is an increase of almost 20 percentage points over pre-intervention college-going 

rates. 

We seek opportunities by which our States and communities acting regionally can 

accomplish more than if they were acting on their own. A good example of regional 

innovation is the Southern Appalachian Fund. In response to ARC studies that documented the lack of equity capital in Appalachia, five States Tennessee, Kentucky, 

Mississippi, Alabama, and Georgia came together and ARC invested $1 million to 

help capitalize a venture capital fund focused on Appalachia. This attracted $11.6 

million in funds from other public and private sources, including BankOne and 

Wachovia, to yield an overall pool of $12.5 million of venture capital that can only 

be invested in Appalachian businesses. 

The Southern Appalachian Fund is off to a great start. It has now made invest- ments in eight companies, totaling $4.4 million, resulting in the creation of 100 jobs 

and leveraging $18.3 million of additional equity and debt investment. All the 

money has been invested in low-income census tracts. Here again, without ARC’s 

special regional focus, these venture capital dollars would not be available to grow 

businesses in Appalachia. 

Another area where we have fostered innovation is telecommunications and technology, one of the key elements of the 2002 legislation. Through the first 4 years 

of the program (we are now in the fifth year), the Commission spent $32.2 million 

on activities related to this important initiative. This has been matched by $6.5 million in other Federal funds, $10.3 million in State dollars, and $41.3 million in local 

support. These activities are projected to leverage an additional $61.7 million in private investment. 

ARC’s program has been built around four broad areas: increasing affordable access to broadband services, providing training and educational opportunities related 

to telecommunications and technology, increasing the use of e-commerce throughout 

the region, and increasing entrepreneurial activities within Appalachia in the technology sector. Projects in these areas stress innovation and regionalism. 

The direct economic impact of the telecom program has been substantial: 

• 2,600 jobs created and 2,100 jobs retained • 45,000 students served with enhanced academic offerings through distance 

learning and new technology • 65 community and regional plans for telecommunications networks and applications 

In Ohio, ARC funds have supported a widespread community outreach and strategic planning effort, a technical assistance ‘‘circuit rider’’ traveling across the region to work with communities and private-sector providers, and 5 cluster demonstration projects. The number of telephone central offices that are enabled with 

DSL services jumped from 46 in 2002 to 168 in 2004, while the number of counties 

with cable modem access grew from 8 to 28. In addition, 16 Appalachian Ohio counties now have some form of limited wireless broadband. That is significant progress, 

led by the private sector and supported by ARC, in expanding broadband access in 

the region. 

A couple of examples from other States suggests the range of ARC’s work in the 

telecom area. In Delhi, New York, in partnership with Motorola we used a wireless 

canopy demonstration system to provide the first broadband access to the community. Working through the local college, the project created a network among village 

and county Government offices, the high school, a senior citizens’ center, the State 
41 

Department of Transportation regional office, the community library, and the SUNY 

Delhi campus. As a result of the broadband access provided by the project, Delhi 

is now considering establishing a technology-oriented business incubator to spur 

new businesses and jobs. This option would never have been possible without ARC’s 

wireless telecom project. 

Last month I joined Mississippi Governor Haley Barbour in officially ‘‘lighting’’ a 

new fiber network that will serve the bulk of northeast Mississippi. ARC provided 

$2 million of a total $7 million project, in partnership with TVA, HUD, and the private sector, to install a fiber loop that will link major State universities, the largest 

rural teaching hospital in the Nation, several small cable companies, and a growing 

number of private businesses. This project has the potential to transform the economy of that part of Mississippi. 

As you can see, Mr. Chairman, the telecom authority provided in the 2002 legislation has enabled us to make significant progress in connecting Appalachia to the 

information highway, and I encourage you to continue this authority. 

HIGHWAYS

While the primary focus of today’s hearing is ARC’s nonhighway program, I do 

want to touch briefly on the status of the Appalachian Development Highway System, since it is the linchpin of our efforts to connect Appalachia with the international economy. As of September 30 of last year, 2,632 miles 85 percent of the 

3,090 miles authorized were open to traffic or under construction. 

We are only a few miles away from one of our important corridors, Corridor D, 

which you know as U.S. 50. Construction is now underway on the bridge across the 

Ohio River at Parkersburg, which is the last remaining work to be done on this important east-west corridor. 

Last year’s Highway bill provides funding for the ADHS out of the Federal highway trust fund at $470 million per year. This will enable us to make significant 

progress in completing our highway system, and I thank you and your colleagues 

for your leadership in ensuring that the ADHS was included in SAFETEA-LU. 

STRATEGIES FOR THE FUTURE

As you look to the future, Mr. Chairman, I want to discuss briefly the steps ARC 

is taking to ensure that our programs respond to the challenges of Appalachia’s 

changing economic landscape. 

Targeting.— First, we are continuing our focus on the areas of Appalachia that 

have the greatest need. To help us do that, we recently developed an economic condition index that enables us to directly compare the condition of our counties with 

those of the rest of the Nation. Using unemployment, poverty, and per capita market income, the index assigns a score to every county in the country, and then divides those counties into quartiles. Attached to my testimony is a map that shows 

the distribution of counties across the Nation according to the index. The index reveals that Appalachia has more of the worst counties and fewer of the best than 

it would if the region was at the national average. 

We have traditionally focused special attention on those counties that are formally 

classified as economically distressed. This year there are 77 of those across the region, with four (Athens, Meigs, Pike, and Vinton) in Ohio. But many of our counties 

are just on the cusp of being distressed; and therefore, ARC is focusing attention 

and resources on them to ensure that they do not become distressed. 

The Commission now has begun formally designating these ‘‘at-risk’’ counties. In 

FY 2006, there are 81 of them, including six in Ohio. Under our current statute, 

projects in these distressed counties are subject to the same match requirements (50 

percent) as those in counties with stronger economies, though projects in distressed 

counties are eligible for up to 80 percent ARC funding. We believe that targeting 

funding to those counties that continue to have weak economies and limited financial resources is the most effective way for ARC to help move the region to economic 

parity with the country. 

Telecommunications.— As I noted earlier, over the past 5 years we have had a 

robust telecommunications program that has significantly expanded the access and 

use of telecom and technology in Appalachia. But the region continues to lag behind 

the Nation in access to broadband, and businesses and communities too often fail 

to capture the economic potential offered by new technology. 

According to a study we conducted initially in 2002 and updated in 2004, Links 

to the Future, in December 1999 there were 44 percent of Appalachian zip codes 

with at least one high-speed provider, compared to 60 percent for the Nation. In December 2002, the Appalachian percentage had increased to 63 percent. That is defi-
42 

nite progress, but the national rate had grown to 88 percent, actually increasing the 

gap between Appalachia and the rest of the Nation. 

We expect to continue our work in this area. We are pursuing several strategies. 

One is ensuring that whenever we do a basic infrastructure project, we consider 

whether there is value in including a telecommunications component as well. Another is to continue our focus on e-commerce, training our small businesses to take 

full advantage of the business opportunities and efficiencies offered by the Internet. 

Finally, we will continue our commitment to distance learning, telemedicine, and demand aggregation projects. 

Asset-Based Development.— ARC is now in the second year of a special initiative 

designed to help tap the full potential of the region’s natural, cultural, leadership, 

and structural resources. Too often we in Appalachia tend to focus on our deficits, 

on the barriers to economic development. And much of what ARC does is help overcome those barriers. But I come from the business world, where the balance sheet 

has two sides the deficits, or liabilities, AND the assets or revenue streams. ARC 

is working with our communities to help them identify their assets and put in place 

strategies that will capitalize on them. 

This initiative has sparked considerable enthusiasm around the region, as communities take a new look at the economic development resources they have within 

their own borders. Some examples include the following: 

• Mingo County, West Virginia has used water in abandoned mines as the basis 

for a thriving aquaculture business that grows and sells artic char to high-end restaurants along the East Coast. 

• In Virginia, the 250-mile ‘‘Crooked Road’’ driving trail links 8 music venues in 

10 counties in an exploration of the region’s rich musical heritage. 

• Appalachian Pennsylvania is capitalizing on some of the finest hardwood forests 

in the world to promote sustainable agriculture, value-added wood products, and job 

creation. 

Both ARC and our communities believe that this asset-based approach to local 

economic development affords a realistic opportunity to diversify our local economies. 

Patterns in global trade and technology have shaken Appalachia’s historic reliance on traditional manufacturing, extractive industries, and tobacco, threatening 

many communities whose local economies were already fragile. For example, Appalachian coal mining, long a mainstay of the economy of central Appalachia, has fallen from 101,500 workers in 1987 to 46,000 in 2003, largely because of productivity 

gains. Similar employment declines have occurred in manufacturing, with significant Appalachian job losses in textiles and apparels and primary metals. Our assetbased approach offers an additional tool for communities as they refocus their economies. 

Energy.— One asset class to which we are dedicating special attention is energy. 

Appalachia is rich in energy resources fossil fuels, renewables, and the research capacity to develop alternative energy sources. From coal to oil and gas to wind to 

biomass, all of the Appalachian States have significant energy assets. 

Earlier this year the Appalachian Governors and I committed the Commission to 

developing an ‘‘energy policy blueprint’’ for Appalachia that can boost the region’s 

economy. We are currently conferring with energy experts, as we work to have our 

regional energy blueprint ready to unveil at our annual conference this fall. 

The challenge is to craft regional strategies that will use these resources to spur 

widespread economic growth and job creation. Tapping Appalachia’s energy potential for economic development is about more than just getting additional coal out 

of our mines. Rather, it requires looking at the entire energy supply chain research, 

commercialization, manufacturing, exporting and seeing it all as one comprehensive 

economic development strategy for our region. 

Basic Infrastructure.— The bulk of ARC’s funding continues to go to basic infrastructure. Lack of adequate water and wastewater systems is frequently a major impediment to local economic growth. 

ARC recently commissioned a study to document the region’s funding resources 

and gaps for drinking water and wastewater infrastructure. It found that, using 

EPA data, Appalachian counties require investments of at least $11.3 billion for 

drinking water needs and $14.3 billion for wastewater needs. According to the 

study, Appalachia’s water and wastewater service lags behind the United States, 

and local technical, managerial and financial capacity is significantly lower in Appalachia. On average, community water systems in distressed counties have greater 

financial needs per person served than systems in non-distressed counties. 

ARC will continue to help communities with these challenges in a number of 

ways: 
43 

• Targeting our infrastructure investments. ARC will continue to focus its funding on those communities with the greatest economic need and those with critical 

public health and safety issues. 

• Strengthening our partnerships with other Federal Agencies. We have historically had a strong relationship with Rural Development at the Department of Agriculture, and we have been expanding our partnership with the Environmental Protection Agency. 

• Fostering regional approaches to water and wastewater service. Economies of 

scale and improved service reliability occur when small communities come together 

to develop interconnected systems that operate on a county-wide or regional basis. 

ARC will continue to emphasize a regional approach to basic infrastructure. 

• Encouraging innovative solutions to infrastructure needs. The combination of 

rugged terrain and low incomes puts traditional systems beyond the financial reach 

of some of the more remote, distressed communities. This calls for alternative approaches, such as the Self-Help program in Virginia, innovative financing options, 

and alternative technologies. ARC will examine ways of deploying these alternative 

solutions across Appalachia. 

CONCLUSION

Mr. Chairman, since ARC was created, Appalachia has experienced significant 

economic improvement: 

• The number of economically distressed counties has been cut by more than half, 

from 223 distressed counties in 1965 to 77 counties in 2006. 

• The per capita income gap between Appalachia and the United States has been 

reduced from 22 percent below the national average in 1965 to 18 percent in 2001, 

and the poverty rate has been cut more than half, from 31 percent to 13 percent. 

• Appalachia’s infant mortality rate has been cut by two-thirds, and more than 

400 ARC-funded rural health facilities have expanded access to health care across 

Appalachia. 

• The percentage of Appalachian adults with a high school diploma has increased 

by over 70 percent (from 45 percent in 1960 to 77 percent in 2000), and ARC has 

helped build and equip 700 vocational education facilities. 

• In the past 5 years alone ARC grants have provided clean water and sanitation 

facilities for over 183,000 Appalachians. 

• Since 1977 ARC has invested $36.7 million in revolving loan funds that generated $115 million in loans for small businesses and leveraged $8.59 in other investment for each ARC dollar, helping create over 30,000 jobs. 

Despite these significant improvements, Appalachia still does not enjoy the same 

economic vitality and living conditions as the rest of the country. I have already outlined some of the challenges in telecommunications, infrastructure and employment, 

but let me suggest a few more of the region’s continuing needs. 

• Widespread poverty. One fourth of Appalachia’s counties have a poverty rate 

more than 150 percent of the national average. 

• Persistent unemployment. A majority of Appalachian counties have a higher unemployment rate than the national average. 

• Lower per capita income. Appalachia trails the rest of the Nation by 18 percent 

in per capita income. 

• Educational attainment gaps. The number of Appalachian residents with a college degree is less than three-fourths of the national average and the gap is widening. 

• Health disparities. Appalachia has higher rates of cancer, heart disease, diabetes and chronic obstructive pulmonary disease compared with the Nation as a 

whole. 

Mr. Chairman, we are on the right track; the region is moving forward, but we 

still have key obstacles to overcome if we are to move Appalachia to economic parity 

with the Nation. We believe that ARC can be a key partner in helping achieve this 

ultimate goal, and we look forward to working with you and other Members of Congress. 
44 
45 

STATEMENT OF T.J. JUSTICE, DIRECTOR, OHIO GOVERNOR’S OFFICE OF APPALACHIA, APPALACHIAN REGIONAL COMMISSION

Good afternoon. I am thankful to you—Senator Voinovich—for providing me with 

the opportunity to present formal testimony regarding the re-authorization of the 

Appalachian Regional Commission on behalf of Ohio’s 1.4 million Appalachian residents located across a 29-county area. I would like to thank you for your exceptional 

support of the ARC as well as your leadership and dedication to this part of Ohio 

and the other 12 States that create the Appalachian Region of the United States. 

Senator, I am privileged to have had the chance to work for you while you served 

8 years as Governor of Ohio and I want to make certain you are aware of the appreciation the people in eastern and southern Ohio have for the ‘‘dear colleague’’ letters 

you initiate to members of the U.S. Congress in Washington, DC. You have not been 

reserved in your interest to maintain and expand the level of funding for the ARC. 

I also want to thank President Bush and ARC Federal co-chair Anne Pope. It is 

no secret that domestic spending is tight for obvious reasons. To ensure our country’s safety the Administration has been constrained to look more closely at how and 

where it spends Federal dollars in our homeland. Although many programs are proposed to be cut, the Bush administration has recommended flat funding of $64.8 

million for the ARC. This is a testament of Miss Pope’s ability to represent us within the White House and also reflects the measurable success of the ARC. 

Before I share my views on why reauthorization of the ARC is warranted, I want 

to recognize Congressman Bob Ney. A close friend of mine as well as my own Congressman in Jackson county, where I reside. Bob knows what is important to his 

constituents, whether it’s advocacy for the ARC, the community development block 

grant program or other successful programs for his district and the region as a 

whole. 

This Appalachian Regional Commission breathes success and it fuels partnerships 

that have led to organizations such as the Ohio Appalachian Center for Higher 

Eduation—Or OACHE—being formed. This program focuses on encouraging students to go to college and aims to increase the low educational attainment level of 

Appalachian citizens. The OACHE provides career planning and financial aid funding, starting as early as 6th grade to help kids dream big and find adequate resources to make those dreams come true. 

On a more personal note, I would like to share an OACHE story with you in hopes 

that it will move you in the same way that it moved me. While visiting with some 

of the OACHE students at South Webster High School 2 years ago, a senior approached me and wanted to let me know how this program had impacted his life. 

He told me that he came from a family who discouraged him from going to college. 

His very own father told him to not even try—that he should take his high school 

diploma and get a job at a local auto or body shop. OACHE found him. He told me 

that despite what his father had told him, he knew inside—that he had always 

wanted to try college. Today, he is a sophomore at Hocking College in Nelsonville, 

OH training to become a police officer. 

This young man is the work of the Appalachian Regional Commission. This is how 

the investments of this entity make a difference for people of all walks of life. 

ARC’s model and success here in Ohio has been so highly regarded that Governor 

Taft not only recognized that early in his first term, but he replicated it. Ohio’s allocation of ARC funds has generally been in the $4.1-$4.5 million range excluding 

highway funds. The Taft administration created its own State Appalachian Program 

with an equal amount of funds operating under the same guidelines and goals of 

the ARC thus doubling the amount of investments able to be made each year by 

the Governor’s office of Appalachia and the Appalachian Regional Commission in 

Ohio. 

Senator, this program works. It creates jobs and stimulates health care in areas 

like southern Perry County near Corning and New Straitesville where a new health 

clinic partially funded by the ARC is providing health care services that otherwise 

would not be provided. It supplies dental services in Meigs County for uninsured 

and underinsured individuals. It offers a mobile diabetes unit at Ohio University 

that screens residents in Pike, Vinton, Athens, Meigs, Hocking and other Appalachian counties. 

The ARC’s commitment to communities in the Appalachian Region has led to the 

development of new programs. For example, the Ross County Child Development 

and Family Service Center at Ohio University in Chillicothe is now able to furnish 

and equip its facility to accommodate educational, rehabilitative and social welfare 

services to 360 children and their families. As a direct result of the ARC, the city 

of Wellston, in Jackson County retained more than 1,000 jobs with the upgrade of 

a water treatment plant. The foundation for healthy communities can assist 11 hos-
46 

pitals in Appalachian Ohio and acquire the diagnostic equipment needed to conduct 

hearing screenings for all newborns. These projects have all been made possible, and 

in most cases, would not have occurred had it not been for the ARC’s involvement. 

This is a program that has produced countless employment opportunities, whether 

it’s entrepreneurs creating 2 and 3 jobs at a time at Hickory Ridge in Morgan County or Acenet’s agribusiness incubator in Athens County. It also generates hundreds 

of jobs at other large manufacturers by supporting the necessary infrastructure in 

places like Zanesville’s industrial park where Wendy’s bakery and the Dollar General Distribution Center are located or Buckingham coal in Perry County. 

The Appalachian Regional Commission is also a dependable resource in times of 

need. Ohio used $1 million of ARC funds for flood recovery efforts during catastrophic flood events that occurred 18 months ago. I can tell you that repairs were 

made in critical areas that otherwise would not have occurred due to FEMA policies. 

An example is the restoration of a shortline railroad in Guernsey County that supported 180 jobs at a manufacturing facility in Byesville. 

On behalf of Governor Taft and the residents, employers, and local Government 

officials of Appalachian Ohio, I submit to you—Senator Voinovich—that there are 

few, if any other, Federal programs that are as effective and worthy as the ARC. 

I am very proud to represent the people of this region—a region that my 14-year 

old daughter and I live in and believe in —and I’m hopeful that my remarks today 

will help you in obtaining a 5-year reauthorization of the ARC. Thank you. 

STATEMENT OF DON MYERS, DIRECTOR, OHIO MID-EASTERN

GOVERNMENTS ASSOCIATION

I thank you for the invitation and privilege of testifying today, to you and the Senate Environment and Public Works Committee, at this field hearing being held at 

Washington State Community College in Marietta, OH. The primary purpose of this 

hearing is to receive testimony on the Appalachian Regional Commission (ARC) and 

the impact of the last reauthorization of this program and issues regarding the upcoming reauthorization. 

I testify to express my comments and those of the Ohio Mid-Eastern Governments 

Association’s (OMEGA) Board and to seek your consideration and support in securing funding and reauthorization status for the ARC and its programs. In addition, 

we ask that you and the committee support retaining the original mission of the 

program as a flexible, locally driven program that provides valuable assistance to 

county commissioners, mayors and development officials working to improve local 

communities and the needs of those communities. 

As Executive Director of OMEGA, I represent an organization that serves as a 

Council of Governments (COG), a Local Development District (LDD) and an Economic Development District (EDD) serving a 10-county region with a population of 

593,221 residents in eastern Ohio. 

At our most recent Annual Board meeting (April 12, 2006), 90 officials, including 

commissioners, mayors, county engineers, development officials, educators and private business leaders spoke of the critical importance of continuing funding and reauthorization of the ARC program. 

At this meeting, we held discussion on this hearing today and our Board in its 

entirety requested your support and leadership in securing proper funding and reauthorization of this most important ARC program. 

As a former development director in Belmont County, Ohio, I have had the privilege of working with you when you were Governor of the State of Ohio on three (3) 

separate development projects and they were: the $80 million Ohio Coatings Electrolytic Tin Plating Plant in Yorkville, OH, the Shadyside Stamping Mayflower Plant 

built at a cost of $32 million and the Belmont Correctional Institution built at a 

cost of $38 million. These three (3) development projects were built at a total cost 

of $150 million and when I left Belmont County in 2001, these three (3) development projects had approximately 900 employees with an annual payroll and benefit 

package of over $35 million. Belmont County and its people benefit today because 

of these developments. These special projects could not have happened had it not 

been for the ARC program and others like it. 

Records that we have in the OMEGA office from 1968 through 2005 report the 

OMEGA region of 10 counties has received a total of $75.4 million in Federal and 

State ARC grant awards. These grants have enabled us to complete 360 projects addressing local health, safety, welfare and education projects totaling over $305.385 

million. These ARC grants are so important to our region and to the individual 

counties and cities they benefit. 
47 

Our infrastructure needs are many not only here but also throughout the country. 

Last summer, the American Society of Civil Engineers prepared a report which addresses 12 categories of infrastructure that gives the Nation’s transportation, water 

and energy system and overall grade of ‘‘D’’ plus. Both drinking water and wastewater received a grade of ‘‘D’’. The report states the Nation’s 54,000 drinking water 

systems are aging rapidly and some sewer systems are 100 years old. We need quality programs like the ARC that address these issues of concern and importance. 

In closing, I would like to reiterate my strong support for the ARC and its model 

for service delivery. It is clear that the administration of the ARC program by the 

Agency’s staff and the Federal co-chair’s office is not conducted in a manner that 

many would consider to be ‘‘typical Washington bureaucracy’’. The ARC has shown 

that it is a program that seeks to simplify rather than complicate. It does not try 

to operate under a rigid or lengthy review or approval process that in many other 

agencies tend to frustrate and confuse the applicant. Of extreme importance is that 

the ARC administration operates with a programmatic mindset that seeks to work 

with the States and local Governments in order to get their priorities funded. 

You have done much for the people of Ohio and for economically disadvantaged 

citizens throughout the United States. We ask that you continue to look out for 

those in need and in the shadows of life. With a sluggish economy and three (3) 

major floods that occurred recently, our 10 member counties need your help and 

that of Congress more than ever. We ask for your continued support of this most 

worthy program and we ask for your leadership in securing reauthorization status 

and proper funding needed for so many projects within the ARC region. 

We thank you for your consideration of this report and for all that you do for the 

OMEGA region. 

STATEMENT OF DAVID MATUSOFF, PRINCIPAL AND DIRECTOR OF TECHNOLOGY

PLANNING WHITEBOARD BROADBAND SOLUTIONS

Senator Voinovich and other distinguished colleagues, thank you for the invitation 

to speak with you this morning regarding the reauthorization legislation of the Appalachian Regional Commission. It is my pleasure to come before you to discuss the 

importance of the ARC and the critical role the ARC has played in the improvement 

of broadband availability in the Appalachian Region of Ohio. Your role and leadership regarding ARC’s last reauthorization has been a critical factor in the successes 

I’ll be discussing today. 

My partnership and consulting with the ARC started in 1999 through a project 

called Access Appalachia and has continued through today. To date, I’ve managed 

three large-scale broadband assessment and improvement projects over a six year 

period and I’m currently in discussions with ARC to begin implementing some exciting new wireless broadband projects in communities without any current access to 

broadband services. 

I spend a significant amount of time proselytizing about the importance of 

broadband services to improve economic development opportunities throughout rural 

America. Central to that discussion and critical to any rural broadband improvement project is the role of the ‘‘sparkplug.’’ It does not matter if this individual 

comes from the public or private-sector, or if this person understands much about 

broadband technologies, but without their determination and persistence, rural 

broadband projects won’t work. These sparkplugs are responsible for creating 

broadband availability in spite of all the market-based factors that suggest, ‘‘This 

is not a place to invest in broadband services.’’ Without these local visionaries, rural 

broadband efforts would go the way of other rural communities that lost economic 

opportunities as the result of lack of access to other forms of vital infrastructure 

like adequate water, roads and sewers. 

It is my sincere belief that the ARC has served as a regional sparkplug for 

broadband efforts in the Appalachian Region of Ohio. Without the financial support 

and programmatic focus on broadband improvement by the ARC, the Appalachian 

Region of Ohio would be woefully underserved with respect to broadband availability and lack educated public officials who aspire to improve broadband access 

in rural Ohio. The impact of the last part of that sentence can not be underestimated. Through the ARC’s education efforts, the culture regarding the importance 

of broadband availability has changed throughout the region. In many instances, 

changing culture is much more meaningful than a new investment in broadband 

service and will serve the region for years to come. The ARC’s efforts in this area 

have made significant impacts both directly and indirectly. 

Although it’s not always an easy task to measure the exact or direct impact of 

ARC investments on the quality of life and business climate in the Appalachian Re-
48 

gion of Ohio, here are a few examples of broadband improvements that I believe are 

a result of ARC investment in the region: 

• 2003 TechNet Survey ranked Ohio 5th nationally with respect to Broadband deployment and use policies- The ARC funded Access Appalachia project was sited as 

a critical factor to that ranking • Between 2002-2004, DSL availability doubled in the Appalachian Region of 

Ohio- PUCO requirements were given to telecom companies as a result of data collected through the Access Appalachia project • The region now has Thirteen counties/communities with broadband improvement plans that are currently seeking funding 

As an example, Marietta, the lovely City we are in this morning makes an excellent case for both the direct and indirect benefits of ARC investment on broadband 

availability within the Appalachian Region of Ohio. Mayor Michael Mullen, or Moon 

as he is commonly referred to down here heard me speak at a meeting in Chillicothe 

that was part of the outreach I was conducting for the Access Appalachia project. 

Through that educational process, he became a sparkplug for broadband improvement locally. Eventually, the Mayor responded to an RFP for a broadband planning 

grant funded through the ARC. He was successful in that effort and today, Moon 

has a plan to create a wireless broadband network within Marietta that will enhance municipal, educational, safety services, business and economic opportunities 

within Marietta. Although he is still pursuing funding to implement the project, I 

guarantee his persistence will lead to eventual success for his project and the region 

will benefit as a result. 

I can’t stress enough about the importance of ARC’s investments and leadership 

with respect to broadband improvement within Ohio. Without their assistance, the 

Appalachian region of Ohio would not have the coordinated effort to improve 

broadband services we’ve seen to date. The ARC’s investment started first with providing the benchmarking of broadband supply and demand, and then transitioned 

to education and local broadband planning projects. Through your leadership with 

the reauthorization, my sincere hope is that we will be discussing implementation 

projects next. 

I appreciate your commitment to the ARC and would be happy to answer any 

questions. Thank you. 

TESTIMONY OF GARY LITTLE, PRESIDENT, INFORMATION TECHNOLOGY ALLIANCE OF

APPALACHIAN OHIO

Thank you Senator Voinovich and members of the Senate Committee on Environment and Public Works for this opportunity to speak in support of the reauthorization of the Appalachian Regional Commission. I am Gary Little, President of the Information Technology Alliance of Appalachian Ohio, Inc., a nonprofit organization 

fostering economic development for the information technology sector of the region. 

For clarity, this sector includes computer, internet, ecommerce, and related businesses and industries, and also all the various computer applications found in public 

sector organizations including education. 

ITAAO, the State of Ohio, Governor’s Office of Appalachia, and the Appalachian 

Regional Commission have partnered on several occasions over the past 5 years to 

create an information technology community, an information technology visibility in 

Appalachian Ohio where it barely existed before. I often find myself on a soapbox 

promoting the region. Appalachian Ohio not only has a significant information technology sector, but we are leading the way in some areas. 

Shawnee State University in Portsmouth, for instance, is one of the few universities in the country to offer two bachelors degrees in interactive digital technology 

development; one with a digital arts concentration and another with computer 

science/engineering concentration. Student enrollment is now over 100 bright, exceptional students from all around the country and locally. An article recently published by the Associated Press told of Michael Zyda’s astonishment with the program, the creativity, and enthusiasm for computer game and serious game development in Appalachian Ohio. Zyda was the lead researcher on the U.S. Army’s recruitment and instructional game, America’s Army, and is Director of the GamePipe 

Laboratory at the University of Southern California. Zyda presented at the Shawnee 

Conference 3.0 on Interactive Digital Technology in 2005. This conference gained 

national attention in 2004, in part because of the support of the Appalachian Regional Commission. This is an example of great return on your investment. The 

small, but important, $5,000 grant generated nearly $20,000 in support on that specific event in 2004, but the real value is measured in the national publicity for Interactive Digital Technology (IDT) development, for Shawnee State University’s IDT 
49 

degree programs, and also for related degree programs that are developing at Ohio 

University, Washington State Community College, Hocking College, and an existing 

computer animation degree program at Kent State University’s Tuscarawas campus. 

That event in 2004, grew from the original concept of a Region of Excellence in 

Interactive Digital Technology (IDT) when ITAAO Board Chairman, Bill Sams; 

Adena Ventures president, Lynn Gellermann, Shawnee State University Fine and 

Digital Arts Chairman, Tom Stead, Ohio University Provost, Kathy Krendl, and 

Shawnee State University President, Rita Rice Morris germinated the idea in 2003. 

This has now grown to the development of a prototype ‘‘cyber park’’ in the GRID 

(Game Research and Immersive Design) Lab at Ohio University with a $247,500 

ARC grant. From an original local match commitment of $62,000., Ohio University 

has now dedicated nearly $250,000 to this project, with additional funds from various local sources of nearly $20,000. The Lab has also developed research and 

project relationships with the Smithsonian Institute, with a Columbus, OH company, a Massachusetts company, and a New York City serious game development 

company to develop educational and instructional games, and recently developed a 

partnership with Intel. To expand upon this success Ohio University has now announced its intentions to create an IDT research and development institute seeking 

Ohio Third Frontier support. Hundreds of thousands, and very possibly millions of 

dollars of program, research, and education activities are about to explode onto the 

scene only two years after ARC made its initial $247,500 investment, and in the 

previous year a $5,000 investment. Without these funds you would not now see the 

interaction and possibly business development in Appalachian Ohio by some of the 

nation’s leading computer and IDT development companies. 

Shawnee State University also has further expansion plans, and is now seeking 

private and public support to develop a whole new immersive arts and technology 

center that will include the most advanced motion capture facility for digital animation east of the Mississippi River. 

The Appalachian Regional Commission has been instrumental in the blossoming 

of this concept, and will be a valuable partner in our continued efforts to create an 

innovation economy for this century. 

A huge economy continues to grow nationwide (estimated at $100 billion this year 

in computer games, educational and health applications, and corporate/business applications) and worldwide in interactive digital technology and there is no reason 

why our students, our young entrepreneurs, and retrained workforce cannot and 

should not take advantage of it. 

All we need to do is focus upon the polygon—in IDT terminology—and strive for 

it. 

STATEMENT OF ANGELA STUBER, EXECUTIVE DIRECTOR, OHIO COMMUNITY

COMPUTING NETWORK

SUMMARY

ARC’s understanding of technology literacy has led to ARC investment of time 

and resources to improve the digital literacy skills and broadband access of Appalachian residents and businesses. They are excellent at connecting organizations 

and individuals with complementary goals. ARC recognizes the benefit of utilizing 

existing infrastructures while also leveraging local funds with federal funds. All of 

which is accomplished in projects controlled locally, not by the ARC. 

ARC also recognizes there is a continuing need to expand broadband access and 

digital literacy programs in Appalachia. The continually expanding resources online 

are profound, from medical information, to financial resources to homework assistance, those without broadband must wait for pages to download, taking hours to 

complete tasks that should only require minutes. ARC is a great supporter of Community Technology Centers. They have seen the connection users form to their Centers and the variety of tech skills they obtain from the CTCs. 

MY QUALIFICATIONS

I have been the Executive Director of the Ohio Community Computing Network 

(OCCN, www.ohioccn.org) for six years. I have served on the Community Technology 

Centers Network (CTCNet, www.ctcnet.org) Board of Directors for four years and 

as the Board President for one and a half years. I also serve as the Board Secretary 

for Grassroots.org (www.grassroots.org) and on the Board of Advisors of the Association of Community Networking (www.afcn.org). In addition, I blog about community 

technology issues at www.angelastuber.blogspot.com. 
50 

OCCN AND CTCNET

The Ohio Community Computing Network (OCCN) is a member-driven organization supporting community technology to promote full participation in a digital 

world. OCCN is committed to ensuring that every Ohioan can make full use of modern computing and networking technology for personal and community empowerment and enrichment. 

OCCN was originally established in 1995 as the oversight and evaluation organization for the 14 community computing centers created and funded by the 

Ameritech Advantage Ohio alternative regulation case settlement. This was the first 

time in this country that a settlement before a state public utility commission included the funding of community computing centers in low-income neighborhoods. 

It was an important breakthrough in the effort to make computers and telecommunications technology accessible to people of all incomes. Community technology centers provide basic computer training and support to people with limited 

opportunities to learn about or use computer technology. CTCs are not developed 

by any Government Agency or program. They are developed by communities who 

see a need for technology access and training, usually focused on low income, disabled or rural populations. OCCN has distributed over $5 million to community 

technology programs through agreements between the Public Utilities Commission 

of Ohio, regulated telecommunications companies and interested community organizations. 

In June of 2005, the OCCN membership accepted the board and staff’s recommendation to expand OCCN’s mission beyond support to CTCs. OCCN now supports community technology efforts that include public access centers, mobile labs, 

computer refurbishing programs, online trainings and broadband access programs. 

Our expanded mission led to OCCN helping form the Ohio Digital Divide Working 

Group (ODDWG). The Ohio Digital Divide Working Group is a unified effort to incorporate the goals of universal basic digital literacy & ubiquitous, affordable highspeed Internet access in regulatory, development and educational policies. 

The Community Technology Centers’ Network (CTCNet) was founded on the recognition that in an increasingly technologically dominated society, people who are 

economically disadvantaged will be left further behind if they are not provided access to and training on information tools. CTCNet envisions a society in which all 

people are equitably empowered with these tools. CTCNet is a national network of 

over 1000 Community Technology Centers. 

ARC SUPPORT OF COMMUNITY TECHNOLOGY

Without ARC’s support, the STEP UP program of Mission West Virginia’s E-Impact initiative would not have been possible. STEP UP provides modern computer 

labs and high speed Internet access—for free—to some of the most rural areas of 

southern and central West Virginia. These labs utilize existing space in churches 

and community organizations while also leveraging the funds spent by Workforce 

Investment Board and state Department of Education officials, who use these labs 

to teach their curricula. The approach to partnering with community assets already 

in place also helps create a strong stakeholder relationship—again, improving sustainability and creating stronger communities through the use of ARC dollars. 

ARC secured a million dollar Microsoft software donation, twice. Eligible applicants are nonprofits providing computer access or trainings. Microsoft limited distribution of the software from libraries and schools because they were already participating in Microsoft distribution programs, which leaves Community Technology 

Centers (CTCs) to receive the free software licenses. Partners in various states 

helped eligible organizations submit applications to ARC who would ensure the applications were complete and forward on to Microsoft. OCCN helped with the distribution in Ohio. To date, seven CTCs in the Appalachian region of Ohio have received free Microsoft software at a total retail value of over $90,000. 

ARC, in working with Microsoft and CTCNet, would like to expand CTCs in more 

areas of Appalachian Ohio. Distributing the Microsoft software licenses resulted in 

ARC realizing many Appalachian communities do not have CTCs. The ARC staff is 

currently discussing the development of a new program with CTCNet to create 

CTCs where there are none. This is a very exciting program which could intensely 

impact the lives of Appalachian residents in the target states. In Ohio we have seen 

tremendous success among the youth served by the CTCs in the Appalachian region 

of Ohio. The CTCs in this region have been very innovative in using online learning 

tools (Muskingum County), multimedia technology such as video cameras (Perry 

County), and after school family focused programs (Coshocton County). The youth 

have become engaged in the CTCs to such an extent that they feel the centers are 

‘‘theirs’’. As they should. 
51 

ARC has supported OCCN’s attempts to find community technology programs we 

are not currently aware of in order to introduce them to existing resources and provide assistance to them. One exciting initiative found is the community technology 

efforts in Chesterhill, OH. Utilizing an OSU developed transportable satellite dish, 

Ohio State University installed a wifi network in Chesterhill. To maximize use of 

the new broadband and to ensure residents have the opportunity to learn digital 

skills, the community is also creating a CTC. OCCN will continue to work with the 

community members and project partners to point them to resources and provide 

advice for them to choose their own path. Chesterhill now has a wifi network. They 

will be deciding whether to sustain it as a community network, a municipal network 

or a pubic/private network. OCCN very much supports local control and the opportunity for communities to choose what is best for themselves. 

THE DIGITAL DIVIDE HAS NOT BEEN CLOSED

The attention of local leaders and the ARC to broadband access and digital literacy issues is commendable but this in no way should allow one to declare the digital divide now closed. Many residents of Appalachia still do not have access to 

broadband. When you are given statistics of how many do have access, I encourage 

you to ask how those numbers were derived. Most likely you will be told the data 

comes from Internet Service Providers (ISPs) reports to the FCC. ISPs may report 

they provide service to a zip code if they provide service to at least one customer 

with a particular zip code. In rural areas, zip code regions can be quite large. This 

is not a method by which to determine actual broadband access in the rural United 

States. To determine where broadband access in rural America actually exists, a 

true research study would need to be conducted. 

To expand broadband to all, we must not restrain broadband competition and expansion. There is much discussion currently about national franchising creating 

broadband competition. We need to keep in mind that allowing national franchising 

without equitable buildout will only provide competition in neighborhoods most likely to provide high profit margins to the providers. In addition, if we restrict the 

rights of municipalities to create their own broadband networks, we are reducing 

one more potential source of broadband access. 

We must remember that access to broadband is only half of the problem. We must 

also ensure our citizens know how to use a computer and the Internet. There are 

no focused sources of financial support for technology training. For a digitally literate workforce and citizenry, we need a continued source of funding for community 

technology programs. And we need to help local organizations create community 

technology programs in regions where there are currently none available. 

STATEMENT OF DAVID SCHOLL, PH.D., PRESIDENT AND CEO, DIAGNOSTIC

HYBRID, INC. 

I wish to thank you for allowing me to testify on this important issue that affects 

the vitality of Diagnostic Hybrids and that of other businesses trying to get a start 

or maintain their operations and growth in the Appalachian Region. 

So that I do not fail to summarize, I would like to begin at the end—operating 

as a business enterprise in a global marketplace means having ready access to: 

1) A telecommunications infrastructure capable of delivering you to the world, and 

the world to you, each and every second of the day, 24/7; and 

2) The necessary human resources to assist business operators with implementing 

productivity applications such as Enterprise Resource Programming (ERP), bar coding technology, web-enabled business applications, EDI for processing business 

transactions, e-mail, and internet security solutions. 

Diagnostic Hybrids has been successful to date for multiple reasons. Underpinning the national recognition we received in 2004 and 2005 by being named in consecutive years to Inc. 500 Magazine’s list of the Fastest Growing Private Companies 

in America are our people. Our employees are dedicated, committed and talented, 

and we attract them from within a 50 mile radius of Athens, OH. 

We invest heavily in workforce development, both inside DHI and within the community, to help us meet our projected need for talent, particularly in the specialized 

manufacturing and laboratory technician area. This commitment is paying off and 

is a great investment for our Company. 

Meeting our needs at Diagnostic Hybrids for telecommunications infrastructure is 

a bit more daunting task. Certainly, much progress has been made in focused areas 

of our region to build the telecommunications infrastructure necessary to meet the 

two primary needs I mentioned above. For example, The Ohio University Innovation 
52 

Center, a small business incubator affiliated with Ohio University, is equipped with 

broadband capability. Access to the telecommunications infrastructure provided by 

The Innovation Center is absolutely critical to our past and future growth. 

I am sure there are other good examples. 

Unfortunately, I can drive 10–15 minutes in any direction from our headquarters 

in Athens, OH where we employ nearly 170 of the best and brightest biotech employees in the world and likely be without (1) cell phone service for lengthy 

stretches, (2) wireless internet access, and (3) broadband capability. 

Not too surprisingly, the many areas of the Appalachian Region in which this 

major deficiency, or digital divide, exists are characterized by those that develop 

telecom infrastructure as rural and under-populated, and thus economically not feasible to establish proper infrastructure. 

Perhaps even more demoralizing, both personally and professionally, is to hear 

‘‘outsiders’’ characterize those people that live within these areas (including me) as 

economically and intellectually impoverished because we are ‘‘not connected’’ ? at a 

minimum, we are viewed as out-of-step with today’s global economy and perhaps 

more fundamentally, today’s world! 

The impact of this situation sooner or later ends up as a non-viable outcome for 

those without access. The impact is first felt with reduced educational aspirations 

on the part of our young people and ends with a lack of opportunity on the economic 

side ? forcing many to ‘‘move’’ to somewhere that has the infrastructure and thus 

the opportunity. 

My recommendations for you to act upon would include providing incentives or 

grants to communities and/or businesses to acquire: 

• Towers to increase the density within the region to enable DSL and wireless 

connectivity. 

• Underground cable to provide for greater access to broadband. 

• Consulting service talent to enable implementation of important productivity IT 

applications to help businesses run more efficiently and cost-effectively. 

In summary, telecommunications infrastructure has become a vital utility to the 

global educational and business community in a fashion similar to the value placed 

on water, sewer, and transportation infrastructure. Without immediate and aggressive attention paid to this regional need, residents of the very beautiful and scenic 

region known as the Appalachian Region are destined to fall behind even further. 

Thank you, and most sincerely. 

STATEMENT OF JEFF HUGHES, DIRECTOR, ENVIRONMENTAL FINANCE CENTER, 

UNIVERSITY OF NORTH CAROLINA AT CHAPEL HILL, INSTITUTE OF GOVERNMENT

My name is Jeff Hughes and I am the Director of the Environmental Finance 

Center at the University of North Carolina. We are one of nine environmental finance centers across the country created to identify and address the finance challenges related to protecting and managing our nation’s environmental resources. 

Our center currently works primarily on drinking water and wastewater infrastructure issues. We recently completed an applied research project in which we examined the current status of water infrastructure services, needs, and funding 

throughout Appalachia. Over a period of two years, we visited numerous communities; interviewed and surveyed hundreds of local, state, and federal officials; and 

analyzed needs, funding, environmental, and demographic data from throughout the 

region. 

I would like to briefly present what we uncovered, particularly in relationship to 

the type of water and wastewater support provided by the ARC. 

BACKGROUND

As you know, the way in which water and wastewater services are funded in the 

United States changed dramatically from the 1970s to the 2000s. The country 

moved from a sizable federal wastewater grant program that accompanied the passage of the 1972 Clean Water Act to a more complex system in which a smaller 

amount of funding is delivered through grants and loans administered by a wide 

variety of Federal and State Agencies including the ARC. 

Around 2000, several national studies concluded that the level of spending on 

water and wastewater services in this new, more complex system is inadequate to 

meet the nation’s needs. Some studies quantified the needs, other quantified the gap 

between the need and what was likely to be available to meet the need. These numbers were quite large and as they were intended to do, caught the attention of many 

policy makers, funding agencies, and the media. Looking at these state level and 
53 

nationwide studies, it was difficult to disaggregate the situation in a region like the 

ARC that cuts across state boundaries. 

While we began by trying to look at the 410 county ARC region as a unit independent of the rest of the country, one of the first things that became obvious to 

us was that from a water quality standpoint, the boundaries of the water resources 

of the region can not be separated from the rest of the country. The familiar saying 

‘‘What goes on in ————, stays in —————!’’ definitely can not be applied to 

water quality in the ARC. Water quality protection successes and failures flow 

downstream without regard to political boundaries. Federal policy makers should realize that Appalachia is home to the headwaters of almost all the important rivers 

of the eastern United States. Thus whatever happens to Appalachian waters has 

major consequences far beyond the 410 counties within the ARC region. 

Our work and findings revolved around a series of policy questions as follows: 

What is the Current State of Water and Wastewater Services in Appalachia? 

• Coverage by community water systems—that is, systems that provide water to 

the public for human consumption and serve at least 25-year-round residents—has 

expanded significantly in the last 15 years in Appalachia (to reach 74 percent of the 

population) but still lags significantly behind national coverage (85 percent of the 

population). Wells remain the primary source in some subregions (more than 75 percent of households in portions of the Appalachian Highlands). 

• More people in Appalachia (33 percent) are served by small and medium-sized 

systems than people in the nation (20 percent) are. In general, the smaller the system, the higher the costs. 

• Community water systems in Appalachia rely much more heavily on surfacewater sources than systems in the nation as a whole do?18 percent versus 11 percent. Systems that rely on surface water tend to have significantly higher operating 

and capital costs than systems that treat groundwater. 

• Proportionately more people in Appalachia than in the nation as a whole rely 

on onsite wastewater disposal. In 1990, the last year in which national data were 

collected by the Census Bureau, about 75 percent of U.S. households reported being 

served by public sewers, versus 52 percent of Appalachian households. 

• In the scattered Appalachian places where careful surveys have been made, 

substantial numbers of people have failing onsite systems or no wastewater treatment systems at all. In many parts of the region, some individual systems are nothing more than ‘‘straight piping’’ (discharge of waste directly into a stream). 

• Some of the highest-quality and most outstanding resource waters in the eastern United States are in Appalachia, but in many areas, surface water and groundwater are seriously impaired. For example, West Virginia has 878 impaired streams, 

covering approximately 6,170 stream miles. 

• Water and wastewater infrastructure and services in Appalachia are intrinsically linked to and influenced by the natural environment of the region. Most of the 

environmental factors in Appalachia lead to higher costs, especially in the Highlands. 

What are the Critical Infrastructure Needs in the Region? 

• Appalachia accounts for about $26 billion of the drinking water and clean water 

needs documented or projected in recent EPA surveys completed in 1999 and 2000. 

These survey numbers clearly represent a lower limit on the entire water and 

wastewater needs of the region, and even the EPA does not assume they are an accurate representation of true need. The surveys omit or underreport many needs either because of their definitions of what constitutes ‘‘need,’’ their methodologies, or 

their rate of nonparticipation. 

• This estimate does not fully include many categories of needs that are disproportionately high in Appalachia, such as improvements to failing septic systems, 

extension of service to people with inadequate or no central water and wastewater 

treatment, watershed restoration for areas impaired by historic resource extraction 

and industrial activity, and better stormwater handling. Nor does the estimate include the funds necessary to operate and maintain new facilities or facilities that 

been neglected. Including these other needs likely raises the region’s total capital 

requirements to $35?$40 billion. 

• Several states carry out needs surveys that are separate from the EPA surveys. 

Their definitions of ‘‘need’’ and their methodologies differ widely. The more comprehensive surveys that some states have carried out have uncovered needs not reported in the EPA surveys. 
54 

What Public Funding Options Are Currently Available to Meet Critical Infrastructure Capital Needs? 

• Relatively few communities in Appalachia, especially in economically distressed 

counties, have credit ratings for water and wastewater purposes from major rating 

agencies. This lack of credit worthiness limits their direct access to the private capital market. • Federally supported and coordinated programs disbursed about $3.6 billion to 

Appalachian communities for water and wastewater projects between January 1, 

2000, and December 30, 2003, and state programs disbursed about $1 billion. More 

than $1.5 billion was provided to communities as grants, and about $3.1 billion took 

the form of loans. • The special programs established by individual states accounted for 22.8 percent of the public fund investments. Such programs have been important in some 

states and nonexistent in others. States in Appalachia employ vastly different funding strategies, which lead to major differences in the types of assistance and incentives that reach local communities. • Capital funding comes from a wide variety of independent and autonomous 

sources, making planning and management of applications, and timing of grants, 

loans, and matches a significant challenge for communities. • The number of public funding programs and the amount of public funding to 

upgrade existing decentralized wastewater systems in Appalachia or build new, decentralized ones are extremely limited. 

• Funding sources for project planning and other up-front aspects of water and 

wastewater projects are relatively few. ARC remains one of the few sources of 

grants funds available for planning. 

What Types of Gaps Exist, and What Is the Capacity to Bridge Them? 

• At the system level, many small utilities have insufficient revenues to cover future cash-flow requirements, once debt repayments and increased operating costs 

linked to necessary planned facilities are taken into account. These utilities are 

characterized by small and often shrinking customer bases. In some cases, even if 

grants for capital were available, the utilities would be unable to meet the operating 

costs associated with their facilities. 

• In comparison with the nation as a whole, households in many Appalachian 

counties are paying a higher proportion of their income for water and wastewater 

services, so high in several areas for large numbers of households that asking them 

to pay more for improved service is infeasible. This household affordability gap has 

become the critical challenge for many utilities. 

• Management shortfalls in the region range widely. At one end of the spectrum, 

some small systems are unable to support trained and educated staff. At the other 

end, some large systems have yet to shift from a reaction-oriented paradigm characterized by high maintenance costs and continual capital stock crises, to a more aggressive approach that includes asset management systems, proactive investments, 

and continual staff training. 

What Financial Management and Funding Strategies Are Likely to Have the Biggest 

Impact on Service in the Region? 

• In general, no single strategy or group of strategies identified in recent national 

studies of water and wastewater infrastructure will close the gap between services 

and needs in Appalachia as a whole. Instead, strategies must be designed and deployed on the basis of particular community characteristics. 

• Regionalization?with its attendant consolidation of providers—offers widely 

varying possibilities for achieving economies of scale in Appalachia. It has helped 

some communities pool their resources and reduce costs enough to remain viable. 

However, some states have a history of regional entities and have institutional and 

regulatory frameworks favorable to regional systems. Other states have a go-it-alone 

culture, a historic model of a single provider prevalent in their system of government, and a relative lack of tested regional models. Promoting regionalization in 

these latter states requires addressing the structural obstacles. ARC funding has 

played a role in many complicated regionalization projects. 

• Appalachia has shown that many communities can contribute to meeting their 

needs but many cannot generate adequate revenue to meet future needs with price 

increases alone. The ability to implement ‘‘full-cost pricing’’—that is, setting rates 

at a level that generates sufficient revenues to cover all the capital and operating 

costs of providing service—offers only limited promise for bridging the capital gap 

in many parts of Appalachia, particularly in small and low- or negative-growth communities. Without external subsidization, many of these systems may collapse completely or slowly decline because of lack of system maintenance and investment. 
55 

• Some funding programs encourage or require communities to follow the principles of full-cost pricing to the extent possible before receiving funding. Such inducements or requirements often result in greater community contributions, showing that affordability constraints were less than previously stated. 

• Privatization offers some communities a way to attain the economies of scale 

that regionalization brings, as well as access to greater technical and managerial 

capacity than is likely in a go-it-alone approach. However, private systems often 

have few financial incentives to reach the most remote and difficult-to-serve communities in Appalachia. 

• Improved management strategies and expanded capital investments often carry 

a cost in terms of higher customer rates. ‘‘You get what you pay for’’ is a dangerous 

public health truism. 

What Steps Can Funding Agencies and Technical Assistance Providers Take to Improve and Expand Service in the Region? 

• For many communities with marginal fiscal capacity, careful manipulation of 

funding terms may offer the best hope of stretching limited public dollars. In some 

situations, long-term loans (for thirty or forty years) can make a capital project feasible for a community. 

• The degree of cooperation and coordination among different funding programs 

varies significantly across Appalachia. Some states have coordination strategies and 

institutions that streamline local funding requests and assist in matching and optimizing different funding sources. In other areas of the region, the go-it-alone approach requires individual communities to navigate the complex funding options and 

seek the best deal they can get. 

• External grant funding remains an essential component of an overall funding 

strategy. Without a significant amount of such funding, a certain number of communities would be unable to generate sufficient revenue to protect the public health 

and their surface-water quality. Some states in the region have integrated funding 

programs and strategies that rely on small amounts of grants to leverage loan 

funds, enabling communities to access the capital they need while covering the majority of the costs themselves. 

• Some individual funding programs and some groups of funding programs carefully design funding packages that include a mix of grant and loan funding. In 

states where such coordination is weak and grants are not strategically linked to 

loans, communities consistently seek out grant funding even if they clearly have the 

ability to take on loan financing. 
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59 
60 
61 
62 
63 
64 
65 
66 
67 
68 
69 

STATEMENT OF STEVE GROSSMAN, EXECUTIVE DIRECTOR, OHIO WATER

DEVELOPMENT AUTHORITY

My name is Steve Grossman, and I am the Executive Director of the Ohio Water 

Development Authority (OWDA). The Authority has existed for 38 years and is 

proud that Senator Voinovich had the insight to help create the Authority, and that 

the USEPA used the work of the Authority as its model when it created the State 

Revolving Fund Program in the mid 1980’s. Since its inception, the Authority has made over $7.3 billion in loans to Ohio communities. From 2000 to 2004, loan programs that are financially managed by the 

Authority accounted for approximately 47 percent of all funding for water and 

wastewater construction in Ohio. 

In cooperation with the leadership from several State Agencies, OWDA helped 

create the Small Communities Environmental Infrastructure Group (SCEIG), an association of Federal and State Agencies, local Governments and groups, service organizations, and educational institutions, designed to help small communities in meeting their environmental infrastructure needs. 

One of the key committees of SCEIG is the Appalachian Environmental Infrastructure Strategy Workgroup, whose mission is to strengthen an effective delivery 

of technical and financial assistance from multiple sources, to areas in Appalachia 

most in need of wastewater and water infrastructure improvements. 

It is with this background and my strong interest in knowing and understanding 

all the funding sources for water and wastewater in the state that I come before 

you today. 

Referring to Attachment 1, during the 2000 to 2004 period, approximately $4.15 

billion was invested by Ohio communities in water and wastewater projects. All the 

sources for this money are shown in Appendix 1. Of this amount, 12 percent came 

from grants, 45 percent came from loans with an interest rate that has been subsidized by a governmental body, and 43 percent came from loans at a market rate 

of interest. As noted in Attachment 1, for the preceding 10-year period, the percentages were 14 percent, 37 percent and 49 percent respectively. 

While the percentages have gone down, actual funding has increased. Attachment 

2 shows an annual average for the five year period of 2000 to 2004 to be $829.5 

million, compared to the ten year average (1990-1999) of $505.7 million. This is an 

increase of 64 percent. While there was an increase in funding of 37 percent in 

grants and 43 percent in loans at a market rate of interest, the greatest increase 

of 103 percent came from loans with an interest rate that has been subsidized by 

a governmental body. Further analysis reveals that the SRF programs, both for 

water and wastewater, primarily accounted for this increase; thus enabling the state 

to keep up with the 64 percent increase in demand. 

Having set the overall state picture, one needs to address what has happened in 

the Appalachian region of Ohio. As Attachment 3 demonstrates, the breakdown by 

funding types is significantly different in Appalachia as compared to the rest of the 

sate. Where the rest of the state received 9 percent of its funding from grants, Appalachia received 32 percent. As the rest of the state received 46 percent of its funding 

from loans at a market rate of interest, Appalachia received 15 percent. The difference for loans with an interest rate that has been subsidized by a governmental 

body is not as dramatic; the rest of the State received 45 percent compared to 53 

percent for Appalachia. 

Appalachia also is significantly different from the rest of the state in terms of program participation in funding water and wastewater projects. Historically, bonds 

issued by a local Government and the SRF Programs account for more than 75 percent of project funding outside of Appalachia. Within Appalachia (Attachment 5) 

they account for only 34 percent of funding. 

Ohio, as compared to many other states, has a relatively large variety of programs 

to assist communities in funding their water or wastewater projects. With this variety come complexities and an increased need for program coordination. This is clearly shown in Attachment 4 and 5, where the role of each program is shown. There 

is no one dominant program. Each community, with the assistance of its technical 

assistance provider and/or consulting engineer, sorts through a variety of programs, 

choosing the group of programs that the leadership of the community feels is best 

suited for its needs. 

While 5 percent of total funding (Attachment 5) comes from the Appalachia Regional Commission, Attachment 6 shows that this is 15 percent of all grant money, 

a critical component for funding projects in Appalachia. 

As one looks toward the future (and by future; assume a period of no more than 

4 years), it is clear that there will be no let up on the demand for project funding 

in Appalachia. Based upon the Ohio EPA’s intended use plans for both water and 
70 

wastewater, recent applications to the Ohio Public Works Commission, information 

entered into the Appalachia Bulletin Board (an initiative of the Appalachian Environmental Infrastructure Strategy Workgroup) and recent quarterly project planning reports submitted by communities to OWDA, there is already a demand for approximately $340 million. I believe that this is the minimum demand for funding 

that will be requested during the next four years. As noted in Attachment 2, the 

total demand has grown in the state and it will continue to grow. 

If the number of $340 million proves to be accurate for a period of four years at 

$85 million/year; it would exceed the annual average of $80 million (Attachment 3) 

for the period of 2000 to 2004. The estimates are not precise and, as I have discovered in my 17 years with the Authority; the seriousness about any one project comes 

and goes. But one thing is certain; decreases in any grant funding will provide an 

increasing financial burden on any community. 

One only has to look at the increasing water and sewer rates as compiled by the 

Ohio Environmental Protection Agency (Attachments 7 and 8) to see that user fees 

for both water and wastewater are increasing at a faster pace than inflation; and 

this increase, given today’s economic conditions and environmental demands, is only 

going to continue to increase at this higher pace. 

If one was to look at all sources of grants in the state, one would conclude that, 

at best, it will remain the same during the next four years. While grant funds from 

the Ohio Public Works Commission will increase by approximately 20 percent, this 

will not occur within the next 6 years. There is continuing pressure on the US Department of Agriculture’s Rural Development Program to reduce the percentage of 

grants it provides to communities (a decrease has been occurring in recent years), 

and the Community Development Block Grant Program is under continuous pressure to having its funding reduced. Besides the US Department of Commerce’s Economic Development Program (which plays an important but minimum role in the 

Appalachian region of the State), the only other program source of grant money is 

from the Appalachian Commission. 

Decreasing these funds would have a significant impact in Appalachia. I might 

add that a major unknown in all of this is federal appropriations (See Attachment 

6) coming from Ohio’s congressional delegation to Ohio communities, through State 

and Territorial Assistance grants and through the Army Corps of Engineer’s 594 

Program. While I recognize this is a Congressional prerogative, I believe that it is 

not going to increase. 

I think that the increase in actual demand, as demonstrated in Attachment 2, is 

going to continue. It will not be as dramatic as all the national studies proclaim it 

will be, but it will increase. Where will the funding sources to meet the demand 

come from? There only are three possible sources. 

• Debt Issued by the Community, which (See Attachment 5) infrequently occurs 

in Appalachia; 

• OWDA’s Market Rate of Interest Loan Program and its Community Assistance 

Program; or 

• The SRF Programs. 

Regardless of which of the three financial programs is selected in the future, users 

in the communities will be paying more. Obtaining a five year reauthorization of 

the ARC will be an alleviating financial factor in Appalachia. 
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STATEMENT OF KEN REED, DIRECTOR, VINTON COUNTY COMMUNITY AND ECONOMIC

DEVELOPMENT, VINTON COUNTY COURTHOUSE

My name is Ken Reed and I serve as the Development Director for the Vinton 

County Board of Commissioners. I would like to thank the committee for giving me 

this opportunity to share with you the impact Appalachian Regional Commission 

funding has made in my community. 

Vinton County is one of the most economically distressed, most rural counties in 

Ohio. For the last 16 years I have been a community and economic development 

practitioner working to improve the quality of life there. Daily, I face the challenge 

of trying to address many basic human needs with limited resources. 

Over the years, ARC funding had been an invaluable resource in implementing 

new projects in my community. Without ARC funds Vinton County would not have 

911 service, our only dental clinic would not have equipment, and many residents 

would not have a reliable, affordable source of potable water. 

Vinton County has been successful in using ARC funds to leverage additional 

State, Federal, and private funds. Without ARC funds Vinton County would not be 

able to access these additional financial resources. In a community such as mine, 

with very limited local resources, ARC has been an invaluable source of matching 

funds for many projected that would not have happened had it not been for ARC 

funds. 

Having administered a wide variety of State and Federally funded programs over 

the years, I can testify to the efficacy of ARC funding. Working in tandem with the 

State of Ohio, through the Governor’s Office of Appalachia, and the local development district, we at the local level are able to develop potential ARC projects and 

prioritize them. This local input ensures that local needs are identified and addressed by those who are most familiar with the area. 

ARC funding has had a quantifiable impact on the quality of life in Vinton County. I implore this Committee to reauthorize the ARC so that we can continue to improve conditions in my community. The Bible says ‘‘a man reaps what he sows’’. 

How true that is of the ARC. The local projects that have been seeded with ARC 

finds have resulted in a harvest of improved living conditions for the residents of 

Vinton County, If you continue to furnish us with the seeds, we at the local level 

will continue to plant, water, and cultivate, and we as a society will all reap the 

benefits. 

STATEMENT OF JEFF SPENCER, EXECUTIVE DIRECTOR, OHIO VALLEY REGIONAL

DEVELOPMENT COMMISSION

I appreciate the opportunity to express some of my views regarding the impact 

of the current program of the Appalachian Regional Commission (ARC) and regarding pending ARC reauthorization legislation. 

First of all, I am Director of the Ohio Valley Regional Development Commission 

(OVRDC) which is the largest of Ohio’s 3 Appalachian Local Development Districts 

(LDD’S) with 11 Appalachian counties and 1 non–Appalachian County. Secondly, I 

am currently the First Vice President of the Development District Association of Appalachia (DDAA) which represents 72 Development Districts throughout the 13- 

State region. 

The Appalachian program has had an enormous positive economic and community 

development impact on southern Ohio during its existence. One example that indicates this significant impact on just one distressed county, Pike County, is that ARC 

grant assistance has enabled the construction over 55 miles of rural water lines to 

thousands of residents who did not previously have a safe, reliable source of water. 

ARC has provided hundreds of miles of key waterlines to un-served rural residents 

throughout our region. In addition, all 11 of our Appalachian counties have developed at least 1 key industrial park with the help of infrastructure grant assistance 

from ARC. These industrial parks have created an average of over 200 jobs per park 

in just the last 2–3 years, which totals approximately 2,500 jobs. 

Our southern Ohio region, it is clear would not have made the economic advances 

that it has over the last 5 years without the key infrastructure grants provided by 

ARC. ARC grants have helped provided not only improvements in the traditional 

water and wastewater infrastructure but other key community infrastructure as 

well. For instance, ARC grant assistance has been key in developing several new 

comprehensive day care and child development centers in our region. Since fiscal 

year 2001, ARC grants have assisted in the development of 4 new child development 

centers. These centers have been key to providing quality day care for working parents as well as key preschool educational development skills for the regions children. 
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Another important type of critical need addressed with ARC grants is the need 

to update college and vocational school curriculum and equipment. In order for our 

southern Ohio students and residents to compete with comparable job skills with 

the rest of the state and nation it is imperative that our schools have the resources 

to update their equipment and curriculum to address the higher skill job requirements. During the last five (5) years an average of 1 education project per year has 

received ARC grant assistance to provide critical new equipment needed to keep 

courses, curriculum, and students up to date on their training and jobs skills. 

One of the important types of grant assistance which the ARC program provides 

is the Annual Administrative grants to the 72 Local Development Districts, who 

provide the regional development leadership, planning and technical assistance to 

enable their local communities to receive grants and develop resources and infrastructure. Each LDD’s is actively involved and provides staff assistance to local communities to plan and address their key community and economic development 

needs. Many small communities and villages simply do not have the financial and 

staff resources to address their key needs without the assistance of the staff of their 

LDD’s. 

These administrative grants to LDD’s allow them to support and use their staff 

to pursue other federal, state and foundations funding that will help address important needs of each region. LDD staff not only help local communities plan and secure grants, but for many small communities they will also administer the grant 

and meet all reporting requirements. A recent report developed by the DDAA cites 

a key statistic regarding federal, local and state grants administered by LDD’s: ‘‘Between 1990 and 2005, our LDD’s administered almost 7,700 grants and projects totaling more than $5.5 billion in pass through and programmatic funds.’’ These LDD 

administrative grants provide the critical support to LDD’s so that they can remain 

regional leaders and assist their communities with development needs. With increasing LDD professional staff salaries and health care costs it is important that 

these LDD Administrative grants be increased in the next few years. 

Although the region’s infrastructure and economic develop prospects have improved over the last 5 years, continued improvements are needed in southern Ohio 

in order for us to reach parity with the rest of the state and nation. Unemployment 

still remains higher in most our counties, poverty rates remain higher, average salaries in almost all sectors remain significantly lower and average educational attainment remains lower. All of these key statistics indicate that much still remains to 

be addressed in order to bring the region to a par with the nation. Therefore, ARC 

reauthorization legislation is critically needed in order for us to continue to address 

the needs of the region. 

Some of our southern Ohio counties have improved in economic conditions just 

enough during the last 4–5 years to be removed from the ARC designated list of 

distressed counties. The OVRDC region has seen the number of distressed counties 

reduced from 7 to 2 counties during this period. However, we need to look more 

closely at the statistics in order to more comprehensively assess the economic situation of these counties. Many of these counties saw improvements in poverty rates 

or per capita income of just a few percent. The changes were just enough, however, 

to move them from the ARC distressed county designation. These counties economically, however, remain closer to their sister distressed counties than the other more 

prosperous transitional counties. 

It has creating a hardship the last few years for these 5 counties that left the 

distressed county category and yet still have serious economic problems. The current 

ARC legislation requires a 50 percent match for any potential ARC projects. ARC 

has classified 4 of OVRDC counties as at-risk for fiscal year 2006 (Adams, Jackson, 

Lawrence, and Scioto) and Ohio Appalachian has 6 counties at-risk (Morgan and 

Perry also). In the 13 state Appalachian region there are 81 counties classified as 

at-risk. 

Under current ARC legislation, the at-risk counties still have to provide 50 percent local match. I am urging you to address the need of these at-risk counties in 

the ARC reauthorization legislation by enabling them to receive 70 percent grants 

with a 30 percent local match. This will make it significantly easier for our at-risk 

counties to develop ARC grants to address their critical community and infrastructure needs. 

Another need I would like to see addressed in the ARC reauthorization bill is to 

designate entrepreneurship as a special regional initiative with funds set aside for 

entrepreneurship facilitation projects. Since all national and regional economic development studies have consistently show that 80 percent of new job development 

comes from existing employers and new start-up businesses it is critical that ARC 

funds are available for entrepreneurship assistance. I realize that ARC project 

guidelines do currently allow for entrepreneurship assistance to be eligible projects. 
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However, the reality is that most entrepreneurship projects do not compete successfully with the larger industrial park infrastructure projects at the regional or state 

level. I think it is important that ARC put more emphasis on entrepreneurship assistance especially in smaller communities. A special regional initiative with a set 

aside of funds would help emphasize entrepreneurship in the region. 

In closing, I want to emphasize that the ARC program has been one of the most 

effective and successful development assistance programs in the country. It has certainly had a significant positive impact on our southern Ohio region. ARC assistance, however is still needed and I support legislation to reauthorize ARC for 5 

years. Thank you for your time and consideration. 
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