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[Federal Register Volume 76, Number 21 (Tuesday, February 1, 2011)]
[Proposed Rules]
[Pages 5501-5503]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-1937]

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Proposed Rules
                                                Federal Register
________________________________________________________________________

This section of the FEDERAL REGISTER contains notices to the public of 
the proposed issuance of rules and regulations. The purpose of these 
notices is to give interested persons an opportunity to participate in 
the rule making prior to the adoption of the final rules.

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Federal Register / Vol. 76, No. 21 / Tuesday, February 1, 2011 / 
Proposed Rules

[[Page 5501]]

DEPARTMENT OF COMMERCE

Economic Development Administration

13 CFR Chapter III

[Docket No.: 110119042-1041-01]
RIN 0610-XA04

Request for Comments: Review and Improvement of EDA's Regulations

AGENCY: Economic Development Administration, Department of Commerce.

ACTION: Notice and request for comments.

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SUMMARY: The Economic Development Administration (EDA) is an agency 
within the U.S. Department of Commerce that leads the Federal economic 
development agenda by making strategic grants-based investments. EDA's 
regulations provide the framework through which the agency administers 
its economic development assistance programs. EDA is beginning the 
process of updating the agency's regulations and is committed to 
ensuring that public feedback helps shape the revised regulations. As 
part of the Administration's commitment to open government and in 
response to Executive Order 13563 ``Improving Regulation and Regulatory 
Review'', EDA requests input from the public on any obstacles created 
by EDA's current regulations and ways to improve them to help the 
agency better advance innovative economic development in the 21st 
century. EDA expects that this process will result in an updated 
rulemaking that reflects current economic development practice to 
advance an innovative economy.

DATES: Comments must be received no later than 5 p.m. Eastern Time on 
March 9, 2011.

ADDRESSES: You may submit comments by any of the following methods. All 
comments must include ``Comments on EDA's regulations'' and Docket No. 
110119042-1041-01.
     Federal eRulemaking Portal: http://www.regulations.gov. 
Follow the instructions for submitting comments.
     Agency Web site: http://www.eda.gov/. EDA has created an 
online feature for submitting comments. Follow the instructions at 
http://www.eda.gov/.
     E-mail: regulations@eda.doc.gov. Include ``Comments on 
EDA's regulations'' and Docket No. 110119042-1041-01 in the subject 
line of the message.
     Fax: (202) 482-5671, Attention: Office of Chief Counsel. 
Please indicate ``Comments on EDA's regulations'' and Docket No. 
110119042-1041-01 on the cover page.
     Mail: Economic Development Administration, Office of Chief 
Counsel, Suite D-100, U.S. Department of Commerce, 1401 Constitution 
Avenue, NW., Washington, DC 20230. Please indicate ``Comments on EDA's 
regulations'' and Docket No. 110119042-1041-01 on the envelope.

FOR FURTHER INFORMATION CONTACT: Jamie Lipsey, Attorney Advisor, U.S. 
Department of Commerce, Economic Development Administration, Office of 
Chief Counsel, 1401 Constitution Avenue, NW., Suite D-100, Washington, 
DC 20230; telephone: (202) 482-4687.

SUPPLEMENTARY INFORMATION: Established under the Public Works and 
Economic Development Act of 1965, as amended (42 U.S.C. 3121 et seq.) 
(PWEDA), EDA's mission is to lead the Federal economic development 
agenda by promoting competitiveness and preparing American regions for 
growth and success in the worldwide economy. EDA partners with 
stakeholders throughout the United States to foster job creation, 
collaboration, and innovation. EDA's regulations, which are codified at 
13 CFR chapter III, implement the agency's six economic development 
assistance programs authorized under PWEDA, as well as the Trade 
Adjustment Assistance for Firms Program and Trade Adjustment Assistance 
for Communities Program, which are authorized under chapters 3, 4, and 
5 of title II of the Trade Act of 1974, as amended (19 U.S.C. 2341 et 
seq.).
    In an opinion published in the Wall Street Journal on January 18, 
2011, President Obama recognized that Federal regulations sometimes 
fail to strike the correct balance, placing unreasonable burdens on 
businesses that stifle innovation and have had a chilling effect on 
growth and jobs. Also on January 18, 2011, the President signed 
Executive Order 13563 ``Improving Regulation and Regulatory Review,'' 
which requires Federal agencies to review existing rules to remove 
outdated regulations that stifle job creation and make the U.S. economy 
less competitive.
    EDA is beginning the process of updating its regulations, which 
provide the framework through which the agency selects, awards, and 
administers its grant investments. Through this notice of inquiry 
(NOI), EDA requests input from the public on any obstacles created by 
EDA's current regulations and ways to improve them to help the agency 
better advance innovative economic development in the 21st century. The 
agency is particularly interested in learning of any perceived 
impediments to contemporary economic development practices that are 
produced as a cause or consequence of a particular regulation. Although 
EDA welcomes comments on all of its regulations, the agency requests 
particular input on those regulations that impact the creation and 
growth of Regional Innovation Clusters (RICs). In addition, EDA has 
identified potential issues in the area of property management on which 
the agency requests comments, as discussed below. As part of the 
Administration's commitment to open government, EDA is interested in 
broad public and stakeholder participation in this effort and strives 
to create a simplified regulatory system that balances the agency's 
fiduciary and transparency responsibilities with good, common sense 
customer service to our stakeholders and the American people.

1. Regional Innovation Clusters (RICs)

    EDA supports the development and growth of RICs as proven economic 
development tools through which American regions can create jobs and 
grow their economies. A RIC is an active network of similar, 
synergistic, or complementary organizations engaged in or with a 
particular industry sector, with active channels for business 
transactions, communications, and dialogue that share specialized 
infrastructure, labor markets, and services and that are located within 
a

[[Page 5502]]

defined geographic region. These active channels support the genesis of 
business ideas, innovations, and initiatives that create new companies 
and jobs. A RIC's region may cross municipal, county, and other 
jurisdictional boundaries. A RIC often includes catalysts of innovation 
and drivers of regional economic growth, such as local universities, 
government research centers, and/or other research and development 
resources. In addition, participants in the RIC may have strategic 
partnerships with entities outside of the RIC's geographic region. A 
successful RIC will leverage the region's unique competitive strengths 
and find ways to nurture networks for business financing, business-to-
business sales, education, and workforce development. These networks 
work in concert with local governments, venture capitalists, private 
banks, workforce investment boards, non-profit organizations, 
institutions of higher education (including community colleges), and 
other public and private agencies and institutions.
    EDA seeks information on whether its regulations appropriately 
facilitate the creation and promotion of RICs and comments on ways the 
regulations can better support RICs. EDA also seeks comments on any 
impediments the regulations present to its stakeholders as they work 
toward the creation and implementation of RICs. For example, should EDA 
define what it means by a RIC in its ``Definitions'' section at 13 CFR 
300.3 to provide stakeholders a clearer idea of what the agency seeks 
to encourage? If so, is the description above adequate as a definition? 
As another example, should EDA include a RIC analysis or strategy as 
part of the technical requirements of Comprehensive Economic 
Development Strategies as set out at 13 CFR 303.7(b)?

2. Property Management

    EDA has become aware of a potential issue with its property 
management regulations, which are set out at 13 CFR part 314. As 
trustee of appropriated taxpayer dollars, EDA safeguards the public's 
interest in grant assets, and the agency's property management 
regulations provide the framework through which this is accomplished. 
EDA takes and retains a security interest (the Federal Interest) in 
property, including real and personal property, purchased or improved 
with grant funds. See 13 CFR 314.1 and 314.2. The Federal Interest 
helps ensure that project property is used for the economic development 
purposes for which the grant was awarded. In general, EDA's regulations 
require that property purchased or improved with EDA assistance remain 
unencumbered and that the recipient hold title to the property for its 
estimated useful life. In some instances, these regulations have proved 
particularly challenging for public/private partnerships designed to 
advance a community's economic development priorities. EDA seeks input 
on innovative ways that would allow recipients to structure a project 
(and property ownership, as appropriate) to accomplish relevant 
economic development goals, while continuing to safeguard the Federal 
Interest. For example, are there practical ways to secure the Federal 
Interest without requiring the recordation of a Federal lien or other 
encumbrance, or the recipient to hold title to project property?
    In addition, EDA seeks comments on the possibility of providing for 
additional flexibility with respect to the agency's encumbrance and 
subordination requirements as set out at 13 CFR 314.6 and 314.7. When 
EDA assistance is used to acquire or improve real property, the 
recipient must provide to EDA a locally recorded security interest in 
the property improved with grant funds. Such security interest can 
include a lien, mortgage, or another enumerated form of encumbrance. In 
the event that a project fails for any reason, EDA can recover the fair 
market value of its interest in the property and use those funds to 
make additional grants that will provide further opportunities for job 
creation. When EDA approves encumbrances on real property acquired or 
approved with program grant funds, EDA generally does not allow the 
Federal Interest to be subordinated to any other interest. However, 
given the realities of project development and real estate financing, 
EDA sometimes will allow (on a case-by-case basis) the Federal Interest 
to be subordinated provided that: EDA determines to its satisfaction 
that the recipient's financial standing is strong; the recipient will 
not default on its obligations; and the project cannot happen without 
the subordination. See 13 CFR 314.6(b).
    The agency's subordination requirements provide needed flexibility 
when long-term financing is available and when the level of risk to the 
Federal Interest can be assessed at the outset. However, it has come to 
EDA's attention that the requirements may not provide the necessary 
flexibility when short-term financing is involved. Some financing tools 
available to recipients may be restricted to a relatively short period 
of time. For example, the credit allowance period under the New Markets 
Tax Credit (NMTC) Program is seven years (see IRC 45D(a)(3)). Projects 
involving NMTC investments often refinance at the conclusion of the 
credit allowance period (see the NMTC Program FAQs for more information 
on the program, which are available on the U.S. Department of the 
Treasury's Web site at http://www.cdfifund.gov/docs/nmtc/2009/NMTC%20Compliance%20Monitoring%20FAQ.pdf). Also, in some cases, short-
term financing is the only type of financing that a recipient can 
realistically obtain. In such circumstances, other project lenders 
often want EDA to agree at the time project financing is negotiated to 
subordinate its interest in the future after the short-term loan 
matures so that follow-on financing can be put into place. Because 
future market conditions are uncertain, EDA cannot make the findings 
under 13 CFR 314.6(b) needed to subordinate the Federal Interest. A 
current agreement to subordinate in the future puts the Federal 
Interest at increased risk; are there mechanisms available to make that 
risk acceptable if it allows promising economic development projects to 
go forward?
    Would it be useful for EDA's regulations to specifically provide 
for situations where short-term project financing is the only tool 
available? Specifically, should EDA agree to subordinate the Federal 
Interest in the future when future market conditions, the strength of 
the recipient, and the success of the project are largely unknown? In 
what situations should this tool be exercised? What award conditions 
should EDA require in connection with such arrangements? In some 
circumstances, EDA is able to hedge against risk by, for example, 
requiring a non-profit applicant to add a city or other local 
government body as a co-applicant. This avenue is not available in all 
cases. Given this, are there alternative mechanisms that can protect 
the Government's interest in case the project fails so that EDA can 
recover the Federal Interest to make new grants?
    Although the examples above center on how EDA's regulations affect 
RIC development and adjustments to EDA's property management 
requirements, as noted above, EDA seeks public comments on any aspect 
of the regulations. Comments that identify potential regulatory 
impediments to economic development and make corresponding 
recommendations, as well as the commenter's experiences complying with 
the regulation at issue, will be instructive.
    Comments should be submitted to EDA as described in the ADDRESSES

[[Page 5503]]

section of this notice. EDA strongly encourages the use of the online 
feature on the agency's Web site to share comments and suggestions on 
improving the agency's regulations. The feature is easily accessible on 
EDA's Web site and offers participants an opportunity to view the 
comments of others. As noted above, the online commenting feature can 
be accessed at http://www.eda.gov/. EDA will consider all comments 
submitted in response to this NOI that are received by 5 p.m. Eastern 
Time on March 14, 2011, as referenced under DATES. EDA will not accept 
public comments accompanied by a request that a part or all of the 
material be treated confidentially for any reason; EDA will not 
consider such comments and will return such comments and materials to 
the commenter. All public comments in response to this NOI must be in 
writing (including fax or e-mail) and will be a matter of public 
record. All comments submitted will be available for public inspection 
and copying at http://www.regulations.gov.

    Dated: January 25, 2011.
Brian P. McGowan,
Deputy Assistant Secretary for Economic Development and Chief Operating 
Officer.
[FR Doc. 2011-1937 Filed 1-31-11; 8:45 am]
BILLING CODE 3510-24-P
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