3034 Federal Register / Vol. 60, No. 8 / Thursday, January 12, 1995 / Rules and Regulations

DEPARTMENT OF HOUSING AND

URBAN DEVELOPMENT

Office of the Assistant Secretary for

Community Planning and

Development

24 CFR Part 597

[Docket No. R–95–1702; FR–3580–F–03]

RIN 2506–AB65

Designation of Empowerment Zones

and Enterprise Communities

AGENCY: Office of the Assistant

Secretary for Community Planning and

Development, HUD.

ACTION: Final rule.

SUMMARY: This rule makes final an

interim rule published on January 18,

1994 that implemented that portion of

Subchapter C, Part I (Empowerment

Zones, Enterprise Communities and

Rural Development Investment Areas) of

Title XIII of the Omnibus Budget

Reconciliation Act of 1993 dealing with

the designation of urban Empowerment

Zones and Enterprise Communities. The

interim rule, consistent with the statute,

authorized the Secretary of HUD to

designate not more than six urban

Empowerment Zones and not more than

65 urban Enterprise Communities based

upon the effectiveness of the strategic

plan submitted by a State or States and

local government(s) nominating an area

for designation.

EFFECTIVE DATE: February 13, 1995.

FOR FURTHER INFORMATION CONTACT:

Michael T. Savage, Deputy Director,

Office of Economic Development, Room

7136, Department of Housing and Urban

Development, 451 Seventh Street SW,

Washington, DC 20410, telephone (202)

708–2290; TDD (202) 708–2565. (These

are not toll-free numbers.)

SUPPLEMENTARY INFORMATION:

Paperwork Reduction Act

The information collection

requirements contained in this rule

were approved by the Office of

Management and Budget (OMB) for

review under the Paperwork Reduction

Act of 1980 (44 U.S.C. 3501–3520), and

assigned OMB Control Number 2506–

0148.

I. Background—the January 18, 1994

Interim Rule

On January 18, 1994 (59 FR 2700),

HUD published an interim rule that

implemented that portion of Subchapter

C, Part I (Empowerment Zones,

Enterprise Communities and Rural

Development Investment Areas) of Title

XIII of the Omnibus Budget

Reconciliation Act of 1993 which

addresses the designation of urban

Empowerment Zones and Enterprise

Communities. Title XIII also provides

for the designation of rural

Empowerment Zones and Enterprise

Communities. As noted in the January

18, 1994 interim rule, the urban part of

the program is administered by HUD as

a Federal-State-local partnership. The

rural part of the program is

administered by the Department of

Agriculture. The Department of

Agriculture also published an interim

rule on January 18, 1994 (59 FR 2686).

(The program is hereafter referred to as

the EZ/EC program.)

The EZ/EC program is a key step in

rebuilding communities in America’s

poverty-stricken inner cities and rural

heartland. It is designed to empower

people and communities across the

nation in developing and implementing

strategic plans to create job

opportunities and sustainable

community development. The program

combines tax benefits with substantial

investment of Federal resources and

enhanced coordination among Federal

agencies.

Designated Enterprise Communities

are eligible for new Tax-Exempt

Facilities Bonds for certain private

business activities. States with

designated Enterprise Communities will

receive approximately $3 million in

Empowerment Zone/Enterprise

Community Social Service Block Grant

(EZ/EC SSBG) funds to pass through to

each designated area for approved

activities identified in their strategic

plans. Enterprise Communities will

receive special consideration in

competition for funding under

numerous Federal programs, including

the new National Service and proposed

Community Policing initiatives. The

Federal Government will focus special

attention on working cooperatively with

designated Enterprise Communities to

overcome regulatory impediments, to

permit flexible use of existing Federal

funds, and to assist these Communities

in meeting essential mandates.

Designated Empowerment Zones will

receive all the benefits provided to

Enterprise Communities and other

communities with innovative visions for

change. Empowerment Zones are

awarded substantial Empowerment

Zone/Enterprise Community Social

Service Block Grant funds, in the

amount of $100 million for each urban

Zone. An Employer Wage Credit for

Zone residents is extended to qualified

employers engaged in trade or business,

in designated Empowerment Zones.

Businesses are afforded an increased

deduction under section 179 of the

Internal Revenue Code for qualified

properties.

The preamble to the January 18, 1994

interim rule described in detail the

eligibility requirements for

Empowerment Zones and Enterprise

Communities and the nomination

process. This information is not

repeated in this final rule.

The Department also published on

January 18, 1994, a notice inviting

applications on nominations for areas as

Empowerment Zones and Enterprise

Communities (59 FR 2711). Title XIII of

the Omnibus Budget Reconciliation Act

of 1993 authorized the Secretary of HUD

to designate up to six urban

Empowerment Zones and up to 65

urban Enterprise Communities. The

purpose of this document is to make

final the interim regulations published

on January 18, 1994. The designated

Empowerment Zones and Enterprise

Communities will be announced by

separate notice published in the Federal

Register.

II. Differences Between Final Rule and

Interim Rule

This final rule makes only editorial

and technical correction changes to the

January 18, 1994 interim rule. As will be

discussed in the following section of

this preamble, HUD received several

good suggestions and recommendations

of matters that the rule should address

or expand upon, or terms that should be

defined. These changes are largely

directed to the nomination process, to

the eligibility process, to the contents of

the strategic plan or to the evaluation of

the plan. Because of the need to have

applications submitted by June 30, 1994

so that HUD and the Department of

Agriculture could make designations

within the time period set by statute,

any significant or substantial revisions

to the interim rule would have delayed

the application process, and therefore

delayed the designation process. Any

significant or substantial revisions made

at this time to the nomination process,

evaluation process, etc., would have no

effect since the designation process is

complete.

HUD anticipates that if another round

of designations is authorized by the

Congress, there will be accompanying

legislation that may make changes to the

existing EZ/EC program, and thus

require amendments to the regulations

in 24 CFR part 597. At the time of this

rulemaking, HUD will again consider

the comments received on the January

18, 1994, and if they remain applicable

to the new round of designations (the

issue of applicability depends upon the

type of legislative changes, if any, made

to the EZ/EC program by the Congress),
Federal Register / Vol. 60, No. 8 / Thursday, January 12, 1995 / Rules and Regulations 3035

these comments will be adopted in new

regulations.

The technical changes made by this

final rule are largely directed to that

section of the rule (§ 597.200(d)) which

addresses the use of EZ/EC SSBG funds

and therefore are relevant even after the

designation process is complete. The

following provides a list of the editorial/

technical changes made to the interim

rule by this final rule.

1. In § 597.3 (Definitions), the second

paragraph of the definition of ‘‘urban

area’’ inadvertently omitted the phrase

‘‘jurisdiction of the’’ before the words

‘‘nominating local government.’’ (See 59

FR 2704, second column).

2. In § 597.200 (Nominations by State

and local governments), HUD sets forth

the procedures for nominations by State

and local governments of areas for

designation as an Empowerment Zone

and/or Enterprise Community.

Paragraph (d) of that section addresses

the elements of the strategic plan which

must be developed as part of the

application for designation, and

paragraph (d)(12) specifically addresses

how the Social Services Block Grant

(SSBG) funds for designated

Empowerment Zones and Enterprise

Communities will be utilized. Several

technical errors were made in paragraph

(d)(12), and these are as follows:

a. Paragraph (d)(12)(i)(A) discusses

the commitment concerning the use of

EZ/EC SSBG funds. The rule provides

for the commitment to be made by the

‘‘applicant as well as by the State

government(s).’’ In this paragraph, HUD

inadvertently omitted reference to the

full range of nominating entities that

would have to make this commitment,

and only listed ‘‘State governments.’’

(Note that § 597.501 provides for

nomination by States and local

governments [the preamble also

discusses this at page 2701, second

column] and § 597.502 provides for

nominations by State-chartered

economic development corporations.)

Accordingly, the final rule corrects this

paragraph to include not only State

governments, but local governments and

State-chartered economic development

corporations. The final rule also

explains that the ‘‘services or activities’’

referenced in this paragraph are the

‘‘services or activities which can be

used to achieve or maintain the goals set

forth in paragraph (d)(12).’’

b. Paragraph (d)(12)(ii) provides, in

error, that Empowerment Zone or

Enterprise Community SSBG funds (EZ/

EC SSBG funds) may be used to achieve

certain goals set forth in this paragraph

by ‘‘undertaking one of the below

specified options.’’ (See 59 FR 2706,

first and second columns.) The correct

wording should provide that States and

local governments may undertake ‘‘one

or more’’ of the options set forth in the

paragraph. One option available to

States and local governments for the use

of EZ/EC SSBG funds was inadvertently

omitted from the interim rule. This

option provides for the use of EZ/EC

SSBG funds to promote the economic

independence of low-income residents,

such as capitalizing revolving or microenterprise loan funds for their benefit.

c. In paragraph (d)(12)(ii), the interim

rule provides that EZ/EC SSBG funds

‘‘may’’ be used to maintain the goals set

forth in paragraph (d)(12). (See page

2706, first column.) The rule should

have stated that the EZ/EC SSBG funds

‘‘must’’ be used to maintain the goals set

forth in paragraph (d)(12), and that the

goals ‘‘may be achieved’’ by undertaking

the program options listed in (d)(12)(ii).

d. The interim rule inadvertently

omitted the paragraph that provides

guidance concerning how designated

empowerment zones and enterprise

communities may meet the goals

specified in paragraph (d)(12). (See 59

FR 2706, middle column.) This

paragraph does not dictate how the

goals may be met, but offers guidance as

to how they may be met. This rule

makes this correction by adding a new

paragraph (iii), and the succeeding

paragraphs are redesignated

accordingly.

e. In paragraph (d)(12)(v) of the

interim rule, the Department provided

that the State must obligate EZ/EC SSBG

funds in accordance with the strategic

plan within two years from the ‘‘date of

designation of the Empowerment Zone

or Enterprise Community.’’ (See page

2706, middle column.) This time frame

is incorrect. This paragraph should have

provided that the State must obligate

funds two years from the date ‘‘the

funds are paid to the State.’’ This

paragraph is also corrected by this

document to add that ‘‘funds not

obligated must be remitted to the

Secretary of Health and Human

Services.’’ This sentence was

inadvertently dropped in the rule text.

f. Two requirements pertaining to the

strategic plan were inadvertently

omitted from paragraph (d)(12). One

requirement provides that the strategic

plan must indicate how the EZ/EC

SSBG funds will be invested and used

for the period of designation, and the

second provides that the strategic plan

must provide for periodic reporting of

information by the relevant State. These

requirements are now set forth in

(d)(12)(vii) and (viii).

g. In addition to the above corrections,

this document corrects missing or

erroneous punctuation in paragraph

(d)(12). For example, some paragraphs

ended in periods, and should have

ended in semicolons.

4. In § 597.200, paragraph (d)(17) is

corrected by removing the ‘‘and’’ which

follows the semicolon at the end of this

paragraph. (See 59 FR 2706, third

column.)

5. In § 597.200, paragraph (d)(18) is

corrected by removing the period at the

end of the paragraph, and replacing it

with a semicolon. (See 59 FR 2706, third

column.)

6. In § 597.201 (Evaluating the

strategic plan), paragraph (b)(9) should

end with a semicolon and not a period.

(See 59 FR 2707, third column.)

7. In § 597.201 (Evaluating the

strategic plan), paragraph (c)(1) should

end with a semicolon and not a period.

(See 59 FR 2708, first column.)

8. In § 597.301 (Selection factors for

designation of nominated urban areas),

paragraphs (a) (1), (2) and (3) should

each end with a semicolon instead of a

period, and the word ‘‘and’’ should

follow the semicolon in paragraph

(a)(3). (See 59 FR 2709, first column.)

The above changes are the only ones

that have been made to the interim rule

by this final rule.

III. The Public Comments

General Comments

The January 18, 1994 interim rule

provided for a 30-day public comment

period. The public comment period

expired on February 17, 1994.

Comments, however, were accepted

through March 1, 1994. By this date, a

total of 45 comments had been received.

The commenters consisted of State and

local jurisdictions (or agencies of such

jurisdictions), State legislators and nonprofit organizations. Twenty-two (22) of

the commenters were from the State of

California.

The majority of the commenters gave

the interim regulations favorable marks,

stating that, overall, the interim rule

clearly delineates the role of the State

and participating entities. As noted

earlier in this preamble, HUD received

several good suggestions and

recommendations from the commenters

that will be considered in any future

rulemaking needed for a new round of

designation. Other suggestions raised by

commenters, although equally with

merit, could not be adopted (even if

HUD were making substantive changes

at this time) given the current statutory

framework of the EZ/EC Program, and

other requests for changes or

clarification were determined to be

adequately addressed by the January 18,

1994 interim rule. The following

provides a summary of the significant
3036 Federal Register / Vol. 60, No. 8 / Thursday, January 12, 1995 / Rules and Regulations

issues raised by the public commenters,

and HUD’s response to these issues.

General Comments on the Rule

Comment. One commenter stated that

the interim rule as a whole did not

adequately address the needs of

extremely low-income persons.

Response. HUD disagrees with the

commenter. The eligibility for

designation as an Empowerment Zone

or Enterprise Community requires a

significant level of poverty, and the

strategic plan required various

descriptions of how the nominated area

would address the need of low-income

persons, for example, through the

creation of economic opportunities,

home ownership, education or other

route to economic independence for

low-income families, youth and other

individuals. (See § 597.200.)

Comment. Two commenters stated

that the rule should explicitly address

the need of areas in which military base

closures have occurred or will occur.

Response. Military base closure was

explicitly referenced in the rule. Note

that § 597.102(b)(1) of the rule provides

in relevant part that ‘‘Unemployment

shall be demonstrated by * * * (2)

Evidence of especially severe economic

conditions, such as military base or

plant closings, or other conditions

which have brought about significant

job dislocation within the nominated

area.’’

Comment. One commenter stated that

the rule should have taken into

consideration areas which have both

rural and urban characteristics.

Response. HUD strived to the extent

possible, given the statutory framework

and requirements, to be as flexible as

possible in describing eligibility for

nominated areas, and to recognize that

some urban areas will have rural

characteristics. To a significant degree,

however, this flexibility was limited by

the statutory requirements for eligible

urban areas.

Comment. One commenter stated that

the rule and program structure

perpetuate the inner city as a place for

only low-income persons to live. The

commenter stated that while EZ/EC

SSBG eligible expenditures give latitude

for communities to address social

problems, they leave little room for

needed neighborhood economic

development programs that could make

urban neighborhoods better places to

live, to raise families, to shop, to work

and to grow businesses.

Response. The entire EZ/EC program

is directed to uplifting the economic

and social environment of the

designated urban area. HUD believes

that the four key principles of the

program, set forth in § 597.200, and the

specific elements embodied in each

principle, clearly make this point.

Comments on Terms Used

Comment. One commenter stated that

the rule should have defined the terms

‘‘community’’ and ‘‘low-income.’’

Another commenter stated that the

interim rule should have defined the

term ‘‘long-term unemployed.’’

Response. HUD acknowledges the

merit of these suggestions, and

definitions for these terms will be

considered for any future rulemaking

that may be necessary for a new round

of designations.

Comment. Two commenters stated

that the term ‘‘disadvantaged’’ should be

defined in the regulation. The

commenter stated that this term should

be defined to mean household or

individual income below 30 percent or

50 percent of the area-wide income.

Response. This term appears in

§ 507.200(d)(12) which addresses the

use of EZ/EC SSBG funds. EZ/EC SSBG

funds are administered by the

Department of Health and Human

Services. Accordingly, HHS has

responsibility for defining this term.

Although this term is not defined in the

HHS regulations governing Social

Service Block Grant Funds (see 45 CFR

part 96, subpart G), HHS should be able

to provide guidance to grantees on the

meaning of this term.

Comment. One commenter stated that

the definition of ‘‘State-chartered

economic development corporation’’

was not very clear.

Response. The statute defined this

term, and the rule simply incorporated

the statutory definition.

Comments on Census Tracts and

Census Tract Data

Comment. Twenty-four (24)

commenters objected to the failure to

use census block data instead of census

tract data. The commenters pointed out

that many city boundaries do not

coincide with census boundaries, and

these cities would be disqualified. In

addition to requesting use of census

block data in lieu of census tract data,

other suggestions submitted by

commenters included: Excluding

significantly-sized public facilities from

calculation of a city’s total mileage; and

allowing an entity to request EC

designation to be extended on a case-bycase basis to coterminous properties

adjacent to an eligible poverty census

tract.

Response. HUD is unable to adopt the

suggestions of the commenters. The

statute requires the use of census tract

data, and does not permit the exclusions

or case-by-case exceptions as suggested

by the commenters.

Comment. One commenter requested

that the rule exclude portions of census

tracts incapable of development, such as

those that may be covered by water.

Response. In determining what

constitutes census tracts, and what areas

are not included or excluded in census

tracts, HUD follows existing regulations

applicable to census tracts issued by the

U.S. Census Bureau.

Comment. Another commenter stated

that census retail trade data does not

accurately characterize central business

districts. The commenter stated that the

rule excludes central business districts

(CBDs) as defined by the 1987 Census

Retail Trade unless poverty rate for each

tract in the CBD is not less than 35

percent for an EZ and 30 percent for an

EC.

Response. Central business districts

are addressed in § 597.100(f). HUD’s

rule provides some flexibility since the

last Census of Retail Trade was in 1982.

The issue of characterization of CBDs is

not a question of whether an area was

listed in the Census of Retail Trade, but

whether the area fits characteristics of

CBDs. HUD’s rule allows applicants to

demonstrate that the character of an area

has changed, and does not meet the

definition of CBD as used in the most

recent Census of Retail Trade.

Comments on Population Levels

Comment. Twelve commenters stated

that the 50,000 population limitation

excludes many cities in need of EZ/EC

assistance, and requested that the

population limit be increased to 200,000

for all urban nominated areas.

Response. The population limitation

of 50,000 found in § 597.100(a)(2) is

directly from the statute.

Comment. Another commenter said

that the rule should have excluded

prison and hospital populations from

the populations caps.

Response. This concern was

accommodated by HUD at the time of

issuance of the January 18, 1994 interim

rule. The application process allowed

cities to deduct institutional

populations or populations in group

quarters.

Comments on Pervasive Poverty and

Unemployment

Comment. One commenter stated that

the test for pervasive poverty should

meet all three criteria, not simply one,

and that a higher test should be utilized

to determine unemployment.

Response. HUD believes that each of

the three factors presented in

§ 597.102(a), in and of itself, adequately

exemplifies an area that has pervasive
Federal Register / Vol. 60, No. 8 / Thursday, January 12, 1995 / Rules and Regulations 3037

poverty. Similarly, HUD believes that

each of the two factors presented in

§ 597.103(b) adequately exemplifies an

area of unemployment. However, these

comments will certainly be considered

if another round of designations is

authorized by the Congress.

Comments on Poverty Rate

Comment. Sixteen commenters stated

that the definition of low or zero

population industrial or commercial

census tracts should be extended to

include zero population census blocks

which meet the same criteria. Two other

commenters stated that the requirement

for a non-contiguous area to separately

meet the poverty rate criteria makes no

sense where the non-contiguous area

consists of a single census tract.

Response. Poverty rate is addressed in

§ 597.103 of the rule. The existing EZ/

EC legislation provides no flexibility to

adopt the comments suggested by the

commenters.

Comment. Other commenters asked

that HUD take into consideration the

unique poverty rates of their own States

or communities due to the high cost of

living.

Response. HUD believes that the

poverty rate factors in the rule are

sufficiently broad to encompass the

unique poverty and high cost of living

characteristics of any individual State or

community.

Comments on the Strategic Plan

Comment. Three commenters stated

that the strategic plan principle

concerning employment should

emphasize job creation for low-income

persons. Another commenter stated that

the strategic plan principle concerning

employment should emphasize job

creation for minority businesses.

Response. HUD agrees with the

commenters and such emphasis will be

considered in future rulemaking that

may be necessary for any additional

rounds of designations that may be

authorized.

Comment. Two commenters stated

that the rule should require an

explanation of how participants in the

planning process are representative of

the ‘‘affected’’ community.

Response. This requirement was

included in the application, and HUD

will consider including this requirement

in the text of the regulation in any

future rulemaking that may be needed.

Comment. Two commenters stated

that the rule should emphasize that

public funds cannot be used to

encourage plant relocations or pirating

of jobs from one place to another.

Response. This issue was addressed

in § 597.200(3) of the rule, and the EZ/

EC application included a certification

to this effect.

Comment. Two commenters stated

that the rule should allow designated

communities to use funds and other

resources identified in the strategic plan

for properties directly adjacent to the

boundaries of the designated census

tracts.

Response. HUD provides flexibility on

this issue. Businesses and enterprise

communities do not receive tax

incentives and the only funding that

flows from EZ/EC designation is title 20

funding. The latter can be used outside

of the EC if the use of the funds benefits

the EC residents directly.

Comment. Two commenters stated

that the rule did not discuss the

applicability of existing plans (e.g.,

CHAS) to the strategic planning process.

Response. Although the rule does not

specifically reference the CHAS, the

rule contains reference to other local

planning efforts and to consolidated

planning efforts (See §§ 597.200(d)(15)

and 597.201(b).) Once the Consolidated

Plan final rule is published, it will bring

all plans into conformance.

Comment. One commenter stated that

the rule should require jurisdictions to

disclose areas considered for

nomination, but not selected, and to

explain why they were not selected.

Response. This issue is addressed to

some extent in § 597.201(c) of the rule,

but HUD will consider expanding on

this issue in any future rulemaking that

may be needed.

Comment. One commenter, in

response to the requirements of

§ 597.200(d) (14), (15), and (16), stated

that the rule should require applicants

to explain which existing resources

(including the amounts) will be shifted

from other geographic locations to the

EZ/EC area to fulfill the applicant’s

commitment to resources to the EZ/EC

area.

Response. HUD believes that such a

requirement would be an unwarranted

intrusion in local government processes.

Comment. Two commenters stated

that the rule should identify specific

regulatory and other impediments to

implementing the strategic plan, and

indicate whether waivers can be

accomplished administratively or

through statutory changes.

Response. HUD cannot identify

specific regulatory barriers for each

applicant. The applicant is in a better

position to advise HUD where there are

barriers and other impediments to

implementation of the plan, and HUD

asks applicants to identify such barriers

in § 597.200(d) (17) and (18).

Comment. Other commenters made

several other suggestions for the

strategic plan, including: requiring the

same standards for citizen participation

for strategic plan revisions as required

for initial development of the plan,

requiring benchmarks that identify

benefits to low-income persons and

long-term unemployed persons, and

encouraging activities that specifically

meet the needs of low-income persons.

Response. All these suggestions have

merit and HUD will consider these in

any future rulemaking that may be

needed.

Comments on Evaluation of the

Strategic Plan

Comment. Several commenters made

suggestions for changes to § 597.201

which describes how the strategic plan

will be evaluated. The suggestions

included evaluating the plan based on

the number of quality jobs provided to

low-income persons; allowing

community-based partnerships to

include labor unions; allowing

community-based partnerships to

include low-income persons, long-term

unemployed persons, and residents of

the area to be designated; providing

minimum standards for participation in

the development of the plan; and

providing for low-income persons to

monitor the implementation of the plan.

Response. All of these suggestions

will be taken into consideration in any

future EZ/EC rulemaking.

Comment. One commenter stated that

the rule must promote affordable

housing and without affordable housing

in proposed zones, the EZ/EC program

will fail.

Response. Affordable housing was

promoted through the rule. See

§§ 597.200(d)(12)(ii)(B)(3) and (g)(3),

and 597.201(b)(8).

Comment. One commenter stated that

a city’s compliance with the affordable

housing requirement may make the city

ineligible for EZ/EC designation. The

commenter stated that as a result of

compliance with this requirement, some

cities do not have concentration of

poverty described in the threshold

requirements for EZ/EC designation.

Another commenter stated that the

evaluation of a plan should have

included a review of whether a

jurisdiction is affirmatively furthering

fair housing, and also required

applicants to submit a certification that

they are in compliance with fair housing

laws. The commenter also stated that

the rule should provide for revocation of

designation as a zone or community if

the jurisdiction fails to comply with

these laws.

Response. With respect to the first

commenter’s concern, the poverty rates

set forth in the interim rule are based on
3038 Federal Register / Vol. 60, No. 8 / Thursday, January 12, 1995 / Rules and Regulations

the 1990 Census, which HUD believes

provides a fair and impartial measure of

poverty level. With respect to the

second commenter’s concern, these

suggestions will be considered in future

rulemaking.

Comments on Submission of

Nomination of Designation

Comment. Two commenters stated

that the affected community should

have access to the same information and

reports, at no cost, that are available to

HUD.

Response. Following completion of

the designation process, the information

contained in applications will be

available to the public through requests

made under the Freedom of Information

Act.

Comment. One commenter suggested

that the rule require the affected State to

receive a copy of notice of intent to

participate by the community, at the

same time the local community sends

the notice to HUD.

Response. HUD will consider

adopting this suggestion in future

rulemaking.

Comments on the Selection Factors for

Designation

Comment. One commenter stated that

the rule should include procedures for

appealing selections based on

geographic diversity. The commenter

notes the rule allows HUD to designate

a lower rated application over a higher

rated application in the interests of

geographic diversity of the designations

(see § 597.301). Another commenter

states that the geographic diversity

provision should be strengthened by

providing that each State will receive at

least one urban designation as either an

EZ or EC. A third commenter stated that

HUD should reserve two of the six

urban zone designations for small cities

with populations under 100,000.

Response. HUD is not inclined to

adopt any of these commenters’

suggestions as regulatory requirements.

These suggestions limit the flexibility

that is needed in the selection process.

However, HUD will re-evaluate these

issues at the time of any future

rulemaking.

Comments on Other Provisions

Comment. One commenter stated that

the rule should be explicit about the

eligibility of areas for designation

within the Commonwealth of Puerto

Rico.

Response. Pursuant to Title XIII, no

areas of Puerto Rico were eligible for

designation.

IV. Other Matters

National Environmental Policy Act. A

Finding of No Significant Impact with

respect to the environment was made in

accordance with HUD regulations in 24

CFR part 50, which implement section

102(c) of the National Environmental

Policy Act of 1969 (42 U.S.C. 4332) at

the time of development of the interim

rule. That Finding remains applicable to

this final rule and is available for public

inspection and copying during regular

business hours in the Office of the Rules

Docket Clerk, Room 10276, 451 Seventh

Street SW, Washington, DC 20410.

Executive Order 12866, Regulatory

Planning and Review. This rule was

reviewed and approved by the Office of

Management and Budget as a significant

rule, as that term is defined in Executive

Order 12866, which was signed by the

President on September 30, 1993. Any

changes to the rule as a result of that

review are contained in the public file

of the rule in the office of the

Department’s Rules Docket Clerk.

Regulatory Flexibility Act. The

Secretary, in accordance with the

Regulatory Flexibility Act (5 U.S.C.

605(b)), has reviewed this rule before

publication and by approving it certifies

that the rule will not have a significant

economic impact on a substantial

number of small entities within the

intent and purpose of that Act. The Act

is intended to encourage Federal

agencies to utilize innovative

administrative procedures in dealing

with individuals, small businesses,

small organizations, and small

governmental bodies that would

otherwise be unnecessarily adversely

affected by Federal regulations. To the

extent that this rule affects those

entities, its purpose is to reduce any

disproportionate burden by providing

for the waiver of regulations and by

affording other incentives directed

toward a positive economic impact.

Therefore, no regulatory flexibility

analysis under the Act is necessary.

Executive Order 12611, Federalism.

The General Counsel, as the Designated

Official under section 6(a) of Executive

Order 12611, Federalism, has

determined that, although the policies

contained in this rule may have a

substantial direct effect on States or

their political subdivisions that are

designated as Empowerment Zones or

Enterprise Communities, this effect is

intended by the legislation authorizing

the program. The purpose of the rule is

to provide a cooperative atmosphere

between the Federal government and

States and local governments, and to

reduce any regulatory burden imposed

by the Federal government that impedes

the ability of States and local

governments to solve pressing

economic, social, and physical problems

in their communities.

Executive Order 12606, The Family.

The General Counsel, as the Designated

Official under Executive Order 12606,

The Family, has determined that the

provisions of this rule will not have a

significant impact on family formation,

maintenance or well being, except to the

extent that the program authorized by

the rule will empower communities and

their residents to take effective action to

solve difficult and pressing economic,

human, community and physical

development challenges that have a

negative impact on families. Any such

impact is beneficial and merits no

further review under the Order.

Semiannual Agenda. This rule was

listed as sequence number 1851 in the

Department’s semiannual agenda of

regulations published on November 14,

1994 (59 FR 57632, 57665) under

Executive Order 12866 and the

Regulatory Flexibility Act.

List of Subjects in 24 CFR Part 597

Community development,

Empowerment zones, Enterprise

communities, Economic development,

Housing, Indians, Intergovernmental

relations, Reporting and recordkeeping

requirements, Urban renewal.

In accordance with the reasons set out

in the preamble, 24 CFR part 597 is

revised to read as follows:

PART 597—URBAN EMPOWERMENT

ZONES AND ENTERPRISE

COMMUNITIES

Subpart A—General Provisions

Sec.

597.1 Applicability and scope.

597.2 Objective and purpose.

597.3 Definitions.

597.4 Secretarial review and designation.

597.5 Waivers.

Subpart B—Area Requirements

597.100 Eligibility requirements and data

usage.

597.101 Data utilized for eligibility

determinations.

597.102 Tests of pervasive poverty,

unemployment and general distress.

597.103 Poverty rate.

Subpart C—Nomination Procedure

597.200 Nominations by State and local

governments.

597.201 Evaluating the strategic plan.

597.202 Submission of nominations for

designation.

Subpart D—Designation Process

597.300 HUD action and review of

nominations for designation.

597.301 Selection factors for designation of

nominated urban areas.
Federal Register / Vol. 60, No. 8 / Thursday, January 12, 1995 / Rules and Regulations 3039

597.302 Number of Empowerment Zones

and Enterprise Communities designated.

Subpart E—Post-Designation Requirements

597.400 Reporting.

597.401 Periodic performance reviews.

597.402 Validation of designation.

597.403 Revocation of designation.

Subpart F—Special Rules

597.500 Indian Reservations.

597.501 Governments.

597.502 Nominations by economic

development corporations or the District

of Columbia.

597.503 Use of census data.

Authority: 26 U.S.C. 1391; 42 U.S.C.

3535(d).

Subpart A—General Provisions

§ 597.1 Applicability and scope.

(a) This part establishes policies and

procedures applicable to urban

Empowerment Zones and Enterprise

Communities, authorized under

Subchapter U of the Internal Revenue

Code of 1986, as amended, relating to

the designation and treatment of

Empowerment Zones, Enterprise

Communities and Rural Development

Investment Areas.

(b) This part contains provisions

relating to area requirements, the

nomination process for urban

Empowerment Zones and urban

Enterprise Communities, and the

designation and administration of these

Zones and Communities by HUD.

Provisions dealing with the nomination

and designation of rural Empowerment

Zones and Enterprise Communities will

be promulgated by the Department of

Agriculture. HUD and the Department of

Agriculture will consult in all cases in

which nominated areas possess both

urban and rural characteristics, and will

utilize a flexible approach in

determining the appropriate

designation.

§ 597.2 Objective and purpose.

The purpose of this part is to provide

for the establishment of Empowerment

Zones and Enterprise Communities in

urban areas, to stimulate the creation of

new jobs, particularly for the

disadvantaged and long-term

unemployed, and to promote

revitalization of economically distressed

areas.

§ 597.3 Definitions.

Designation means the process by

which the Secretary designates urban

areas as Empowerment Zones or

Enterprise Communities eligible for tax

incentives and credits established by

Subchapter U of the Internal Revenue

Code of 1986, as amended (26 U.S.C.

1391 et seq.) and for special

consideration for programs of Federal

assistance.

Empowerment Zone means an urban

area so designated by the Secretary

pursuant to this part. Up to six such

Zones may be designated, provided, that

if the Secretary designates the maximum

number of zones, not less than one shall

be in a nominated urban area the most

populous city of which has a population

of 500,000 or less; and no less than one

shall be a nominated urban area which

includes areas in two States and which

has an area population of 50,000 or less.

Enterprise Community means an

urban area so designated by the

Secretary pursuant to this part. Not

more than 65 such communities may be

so designated.

HUD means the Department of

Housing and Urban Development.

Local government means any county,

city, town, township, parish, village, or

other general purpose political

subdivision of a State, and any

combination of these political

subdivisions which is recognized by the

Secretary.

Nominated area means an area

nominated by one or more local

governments and the State or States in

which it is located for designation

pursuant to this part.

Population census tract means a

census tract, or, if census tracts are not

defined for the area, a block numbering

area.

Poverty means the number of persons

listed as being in poverty in the 1990

Decennial Census.

Revocation of designation means the

process by which the Secretary may

revoke the designation of an urban area

as an Empowerment Zone or Enterprise

Community pursuant to § 597.403.

Secretary means the Secretary of

Housing and Urban Development.

State means any State of the United

States.

Strategic plan means a strategy

developed and agreed to by the

nominating local government(s) and

State(s), which have provided

certifications of their authority to adopt

such a strategy in their application for

nomination, in consultation and

cooperation with the residents of the

nominated are, pursuant to the

provisions of § 597.200(c). The plan

must include written commitments from

the local government(s) and State(s) that

they will adhere to that strategy.

Urban area means:

(1) Any area that lies inside a

Metropolitan Area (MA), as designated

by the Office of Management and

Budget; or

(2) Any area outside an MA if the

jurisdiction of the nominating local

government has a population of 20,000

or more, or documents the urban

character of the area.

§ 597.4 Secretarial review and designation.

(a) Designation. The Secretary will

review applications for the designation

of nominated urban areas to determine

the effectiveness of the strategic plans

submitted by nominating State and local

government(s) in accordance with

§ 597.200(c). The Secretary will

designate up to six urban Empowerment

Zones and up to 65 urban Enterprise

Communities.

(b) Period of Designation. The

designation of an urban area as an

Empowerment Zone or Enterprise

Community shall remain in full effect

during the period beginning on the date

of designation and ending on the

earliest of:

(1) The close of the tenth calendar

year beginning on or after the date of

designation;

(2) The termination date designated

by the State and local governments in

their application for nomination; or

(3) The date the Secretary modifies or

revokes the designation, in accordance

with §§ 597.402 or 597.403.

§ 597.5 Waivers.

The Secretary of HUD may waive for

good cause any provision of this part

not required by statute, where it is

determined that application of the

requirement would produce a result

adverse to the purpose and objectives of

this part.

Subpart B—Area Requirements

§ 597.100 Eligibility requirements and data

usage.

A nominated urban area may be

eligible for designation pursuant to this

part only if the area:

(a) Has a maximum population which

is the lesser of:

(1) 200,000; or

(2) The greater of 50,000 or ten

percent of the population of the most

populous city located within the

nominated area;

(b) Is one of pervasive poverty,

unemployment and general distress, as

described in § 597.102;

(c) Does not exceed twenty square

miles in total land area;

(d) Has a continuous boundary, or

consists of not more than three

noncontiguous parcels;

(e) Is located entirely within the

jurisdiction of the unit or units of

general local government making the

nomination, and is located in no more

than two contiguous States; and

(f) Does not include any portion of a

central business district, as this term is
3040 Federal Register / Vol. 60, No. 8 / Thursday, January 12, 1995 / Rules and Regulations

used in the most recent Census of Retail

Trade, unless the poverty rate for each

population census tract in the district is

not less than 35 percent for an

Empowerment Zone and 30 percent for

an Enterprise Community.

§ 597.101 Data utilized for eligibility

determinations.

(a) Source of data. The data to be

employed in determining eligibility

pursuant to the criteria set forth at

§ 597.102 shall be based upon the 1990

Decennial Census, and from information

published by the Bureau of the Census

and the Bureau of Labor Statistics. The

data shall be comparable as to point or

period of time and methodology

employed. Specific information on

appropriate data to be submitted will be

provided in the application.

(b) Use of statistics on boundaries.

The boundary of an urban area

nominated for designation as an

Empowerment Zone or Enterprise

Community must coincide with the

boundaries of census tracts, or, where

tracts are not defined, with block

numbering areas.

§ 597.102 Tests of pervasive poverty,

unemployment and general distress.

(a) Pervasive poverty. Pervasive

poverty shall be demonstrated by the

nominating entities by providing

evidence that:

(1) Poverty is widespread throughout

the nominated area; or

(2) Poverty has become entrenched or

intractable over time (through

comparison of 1980 and 1990 census

data or other relevant evidence); or

(3) That no portion of the nominated

area contains any component areas of an

affluent character.

(b) Unemployment. Unemployment

shall be demonstrated by:

(1) Data indicating that the weighted

average rate of unemployment for the

nominated area is not less than the

national average rate of unemployment;

or

(2) Evidence of especially severe

economic conditions, such as military

base or plant closings or other

conditions which have brought about

significant job dislocation within the

nominated area.

(c) General distress. General distress

shall be evidenced by describing

adverse conditions within the

nominated urban area other than those

of pervasive poverty and

unemployment. A high incidence of

crime, narcotics use, homelessness,

abandoned housing, and deteriorated

infrastructure or substantial population

decline, are examples of appropriate

indicators of general distress.

§ 597.103 Poverty rate.

(a) General. The poverty rate shall be

established in accordance with the

following criteria:

(1) In each census tract within a

nominated urban area, the poverty rate

shall be not less than 20 percent;

(2) For at least 90 percent of the

population census tracts within the

nominated urban area, the poverty rate

shall not be less than 25 percent; and

(3) For at least 50 percent of the

population census tracts within the

nominated urban area, the poverty rate

shall be not less than 35 percent.

(b) Special rules relating to the

determination of poverty rate. (1)

Census Tracts with no population.

Census tracts with no population shall

be treated as having a poverty rate

which meets the standards of

paragraphs (a)(1) and (2) of this section,

but shall be treated as having a zero

poverty rate for purposes of applying

paragraph (a)(3) of this section.

(2) Census tracts with populations of

less than 2,000. A population census

tract which has a population of less than

2,000 shall be treated as having a

poverty rate which meets the

requirements of paragraphs (a)(1) and

(a)(2) of this section if more than 75

percent of the tract is zoned for

commercial or industrial use.

(3) Adjustment of poverty rates for

Enterprise Communities. Where

necessary to carry out the purposes of

this part, the Secretary may reduce by

5 percentage points one of the following

thresholds for not more than 10 percent

of the census tracts, or, if fewer, five

population tracts in the nominated

urban area:

(i) The 20 percent threshold in

paragraph (a)(1) of this section;

(ii) The 25 percent threshold in

paragraph (a)(2) of this section; and

(iii) The 35 percent threshold in

paragraph (a)(3) of this section; Provided

that, the Secretary may in the

alternative reduce the 35 percent

threshold by 10 percentage points for

three population census tracts.

(4) Rounding up of percentages. In

making the calculations required by this

section, the Secretary shall round all

fractional percentages of one-half

percent or more up to the next highest

whole percentage figure.

(c) Noncontiguous areas. A

nominated urban area may not contain

a noncontiguous parcel unless such

parcel separately meets the criteria set

forth at paragraphs (a)(1), (2), and (3) of

this section.

(d) Areas not within census tracts. In

the case of an area which does not have

population census tracts, the block

numbering area shall be used.

Subpart C—Nomination Procedure

§ 597.200 Nominations by State and local

governments.

(a) Nomination criteria. One or more

local governments and the State or

States in which an urban area is located

may nominate such area for designation

as an Empowerment Zone and/or as an

Enterprise Community, if:

(1) The urban area meets the

requirements for eligibility set forth in

§§ 597.100 and 597.103;

(2) The urban area is within the

jurisdiction of a State or States and local

government(s) that have the authority to

nominate the urban area for designation

and that provide written assurances

satisfactory to the Secretary that the

strategic plan described in paragraph (c)

of this section will be implemented;

(3) All information furnished by the

nominating State(s) and local

government(s) is determined by the

Secretary to be reasonably accurate; and

(4) The State(s) and local

government(s) certify that no portion of

the area nominated is already included

in an Empowerment Zone or Enterprise

Community or in an area otherwise

nominated to be designated under this

section.

(b) Nomination for designation. No

urban area may be considered for

designation pursuant to subpart D of

this part unless the nomination for

designation:

(1) Demonstrates that the nominated

urban area satisfies the eligibility

criteria set forth at § 597.100;

(2) Includes a strategic plan, as

described in paragraph (c) of this

section; and

(3) Includes such other information as

may be required by HUD in the

application or in a Notice Inviting

Applications, to be published in the

Federal Register.

(c) Strategic plan. Each application for

designation must be accompanied by a

strategic plan, which must be developed

in accordance with four key principles,

which will also be utilized to evaluate

the plan. These principles are:

(1) Economic opportunity, including

job creation within the community and

throughout the region, as well as

entrepreneurial initiatives, small

business expansion and training for jobs

that offer upward mobility;

(2) Sustainable Community

Development, to advance the creation of

liveable and vibrant communities

through comprehensive approaches that

coordinate economic, physical,

community and human development;

(3) Community-Based Partnerships,

involving the participation of all

segments of the community, including
Federal Register / Vol. 60, No. 8 / Thursday, January 12, 1995 / Rules and Regulations 3041

the political and governmental

leadership, community groups, health

and social service groups,

environmental groups, religious

organizations, the private and non-profit

sectors, centers of learning and other

community institutions; and

(4) Strategic vision for change, which

identifies what the community will

become and a strategic map for

revitalization. The vision should build

on assets and coordinate a response to

community needs in a comprehensive

fashion. It should also set goals and

performance benchmarks for measuring

progress and establish a framework for

evaluating and adjusting the

revitalization plan.

(d) Elements of strategic plan. The

strategic plan should:

(1) Indicate and briefly describe the

specific groups, organizations, and

individuals participating in the

production of the plan and describe the

history of these groups in the

community;

(2) Explain how participants were

selected and provide evidence that the

participants, taken as a whole, broadly

represent the racial, cultural and

economic diversity of the community;

(3) Describe the role of the

participants in the creation,

development and future implementation

of the plan;

(4) Identify two or three topics

addressed in the plan that caused the

most serious disagreements among

participants and describe how those

disagreements were resolved;

(5) Explain how the community

participated in choosing the area to be

nominated and why the area was

nominated;

(6) Provide evidence that key

participants have the capacity to

implement the plan;

(7) Provide a brief explanation of the

community’s vision for revitalizing the

area;

(8) Explain how the vision creates

economic opportunity, encourages selfsufficiency and promotes sustainable

community development;

(9) Identify key needs of the area and

the current barriers to achieving the

vision for it, including a description of

poverty and general distress, barriers to

economic opportunity and development

and barriers to human development;

(10) Discuss how the vision is related

to the assets and needs of the area and

its surroundings;

(11) Describe the ways in which the

community’s approaches to economic

development, social/human services,

transportation, housing, sustainable

community development, public safety,

drug abuse prevention, and educational

and environmental concerns will be

addressed in a coordinated fashion; and

explain how these linkages support the

community’s vision;

(12) Indicate how all Social Services

Block Grant funds for designated

Empowerment Zones and Enterprise

Communities (EZ/EC SSBG funds) will

be utilized.

(i) In doing so, the strategic plan shall

provide the following information:

(A) A commitment by the applicant,

as well as by the nominating Statechartered economic development

corporation or State government(s) and

local governments, that the EZ/EC SSBG

funds will be used to supplement, not

replace, other Federal or non-Federal

funds available for financing for services

or activities which can be used to

achieve or maintain the goals outlined

in paragraph (d)(12) of this section;

(B) A description of the entities that

will administer the EZ/EC SSBG funds;

(C) A certification by such entities

that they will provide periodic reports

on the use of the EZ/EC SSBG funds;

and

(D) A detailed description of all the

activities to be financed with the EZ/EC

SSBG funds and how all such funds will

be allocated.

(ii) The EZ/EC SSBG funds must be

used to achieve or maintain the

following goals. The goals may be

achieved by undertaking one or more of

the following program options:

(A) The goal of economic self-support

to prevent, reduce or eliminate

dependencies, through one or more of

the following program options:

(1) Funding community and economic

development services focused on

disadvantaged adults and youths,

including skills training, transportation

services and job, housing, business, and

financial management counseling;

(2) Supporting programs that promote

home ownership, education or other

routes to economic independence for

low-income families, youths, and other

individuals;

(3) Assisting in the provision of

emergency and transitional shelter for

disadvantaged families, youths, and

other individuals;

(B) The goal of self-sufficiency,

including reduction or prevention of

dependencies, through one or more of

the following program options:

(1) Providing assistance to non-profit

organizations and/or community and

junior colleges that provide

disadvantaged adults and youths with

opportunities for short-term training

courses in entrepreneurial and self

employment skills and other training

that promotes individual selfsufficiency, and the interest of the

community;

(2) Funding programs to provide

training and employment for

disadvantaged adults and youths in

construction, rehabilitation or

improvement of affordable housing,

public infrastructure and community

facilities; and

(C) The goal of prevention or

remedying the neglect, abuse or

exploitation of children and/or adults

unable to protect their own interest; and

the goal of preservation, rehabilitation,

or reuniting of families, through one or

more of the following program options:

(1) Providing support for residential

or non-residential drug and alcohol

prevention and treatment programs that

offer comprehensive services for

pregnant women, and mothers and their

children;

(2) Establishing programs that provide

activities after school hours, including

keeping school buildings open during

evenings and weekends for mentor and

study programs.

(iii) Designated Empowerment Zone

and Enterprise Communities may work

to achieve or maintain the goals

outlined in paragraphs (d)(12)(ii) (A)

and (B) of this section by using EZ/EC

SSBG funds to capitalize revolving or

micro-enterprise loan funds which

benefit low-income residents of the

designated Empowerment Zones and

Enterprise Communities. Similarly, the

Zones and Communities may work to

achieve or maintain the goals outlined

in paragraphs (d)(12)(ii) (A) and (B) of

this section by using the EZ/EC SSBG

funds to create jobs and promote

economic opportunity for low-income

families and individuals through

matching grants, loans, or investments

in community development financial

institutions.

(iv) If the EZ/EC SSBG funds are to be

used for program options not included

in paragraph (d)(12)(ii) of this section,

the strategic plan must indicate how the

proposed activities meet the goals set

forth in paragraph (d)(12)(ii) of this

section and the reasons the approved

program options were not pursued.

(v) To the extent that the EZ/EC SSBG

funds are to be used for the program

options included in paragraph (d)(12)(ii)

of this section, they may be used for the

following activities, in addition to those

activities permitted by Section 2005 of

the Social Security Act (42 U.S.C.

1379d):

(A) To purchase or improve land or

facilities;

(B) To make cash payments to

individuals for subsistence or room and

board;
3042 Federal Register / Vol. 60, No. 8 / Thursday, January 12, 1995 / Rules and Regulations

(C) To make wage payments to

individuals as a social service;

(D) To make cash payments for

medical care; and

(E) To provide social services to

institutionalized persons.

(vi) The State must obligate the EZ/EC

SSBG funds in accordance with the

strategic plan within 2 years from the

date of payment to the State, or remit

the unobligated funds to the Secretary of

Health and Human Services (HHS).

(vii) The strategic plan must indicate

how all the EZ/EC SSBG funds will be

invested and used for the period of

designation of the Empowerment Zone

or Enterprise Community.

(viii) The strategic plan must provide

for periodic reporting of information by

the State in which the Empowerment

Zone or Enterprise Community is

located.

(13) Indicate how tax benefits for

designated Zones and Communities,

State and local resources, existing

Federal resources available to the

locality and additional Federal

resources believed necessary to

implement the strategic plan will be

utilized within the Empowerment Zone

or Enterprise Community;

(14) Indicate a level of commitment

necessary to ensure that these resources

will be available to the area upon

designation;

(15) Identify the Federal resources

applied for or for which applications are

planned; if a strategic plan indicates

how Community Development Block

Grant (CDBG), HOME, Emergency

Shelter Grant, and Housing

Opportunities for People with AIDS

(HOPWA) funds will be expended (for

the entire locality including the

nominated area), the strategic plan will

be considered by the Office of

Community Planning and Development

at HUD toward satisfying the

consolidated planning requirements that

will soon be issued for these programs;

(16) Identify private resources and

support, including assistance from

business, non-profit organizations and

foundations, which are available to be

leveraged with public resources; and

provide assurances that these resources

will be made available to the area upon

designation;

(17) Identify changes necessary to

Federal rules and regulations necessary

to implement the plan, including

specific paperwork or other Federal

program requirements that must be

altered to permit effective

implementation of the strategic plan;

and

(18) Identify specific regulatory and

other impediments to implementing the

strategic plan for which waivers are

requested, with appropriate citations

and an indication whether waivers can

be accomplished administratively or

require statutory changes;

(19) Demonstrate how State and local

governments will reinvent themselves to

help implement the plan, by identifying

changes that will be made in State and

local organizations, processes and

procedures, including laws and

ordinances;

(20) Explain how different agencies in

State and local governments will work

together in new responsive ways to

implement the strategic plan;

(21) Identify the specific tasks and

timetable necessary to implement the

plan;

(22) Describe the partnerships that

will be established to carry out the plan;

(23) Explain how the plan will be

regularly revised to reflect new

information and opportunities; and

(24) Identify benchmarks and goals

that should be used in evaluating

performance in implementing the plan.

(e) Prohibition against business

relocation. The strategic plan may not

include any action to assist any

establishment in relocating from one

area outside the nominated urban area

to the nominated urban area, except that

assistance for the expansion of an

existing business entity through the

establishment of a new branch, affiliate,

or subsidiary is permitted if:

(1) The establishment of a new

branch, affiliate, or subsidiary will not

result in a decrease in employment in

the area of original location or in any

other area where the existing business

entity conducts business operations;

and

(2) There is no reason to believe that

the new branch, affiliate, or subsidiary

is being established with the intention

of closing down the operations of the

existing business entity in the area of its

original location or in any other area

where the existing business entity

conducts business operations.

(f) Implementation of strategic plan.

The strategic plan may be implemented

by the local government(s) and/or by the

State(s) nominating an urban area for

designation and/or by nongovernmental

entities identified in the strategic plan.

Activities included in the plan may be

funded from any source, Federal, State,

local, or private, which provides

assistance in the nominated area.

(g) Activities included in strategic

plan. A strategic plan may include, but

is not limited to, activities which

address:

(1) Economic problems, through

measures designed to create job training

and employment opportunities; support

for business start-up or expansion; or

development of community institutions;

(2) Human concerns, through the

provision of social services, such as

rehabilitation and treatment programs or

the provision of training, education, or

other services within the affected area;

(3) Community needs, such as the

expansion of housing stock and

homeownership opportunities, efforts to

reduce homelessness, efforts to promote

fair housing and equal opportunity,

efforts to reduce and prevent crime and

improve security in the area; and

(4) Physical improvements, such as

the provision or improvement of

recreational areas, transportation or

other public services within the affected

area, and improvements to the

infrastructure and environmental

protection.

§ 597.201 Evaluating the strategic plan.

The strategic plan will be evaluated

for effectiveness as part of the

designation process for nominated

urban areas described in § 597.301. On

the basis of this evaluation, HUD may

negotiate reasonable modifications of

the strategic plan or of the boundaries

of a nominated urban area or the period

for which such designation shall remain

in full effect. The effectiveness of the

strategic plan will be determined in

accordance with the four key principles

set forth in § 597.200(c). HUD will

review each plan submitted in terms of

the four equally weighted key

principles, and of such other elements

of these key principles as are

appropriate to address the opportunities

and problems of each nominated area

which may include:

(a) Economic opportunity. (1) The

extent to which businesses, jobs, and

entrepreneurship increase within the

Zone or Community;

(2) The extent to which residents will

achieve a real economic stake in the

Zone or Community;

(3) The extent to which residents will

be employed in the process of

implementing the plan and in all phases

of economic and community

development;

(4) The extent to which residents will

be linked with employers and jobs

throughout the entire region or

metropolitan area, and the way in which

residents will receive training,

assistance, and family support to

become economically self-sufficient;

(5) The extent to which economic

revitalization in the Zone or Community

interrelates with the broader regional or

metropolitan economies; and

(6) The extent to which lending and

investment opportunities will increase

within the Zone or Community through
Federal Register / Vol. 60, No. 8 / Thursday, January 12, 1995 / Rules and Regulations 3043

the establishment of mechanisms to

encourage community investment and

to create new economic growth.

(b) Sustainable Community

Development. (1) Consolidated

planning. The extent to which the plan

is part of a larger strategic community

development plan for the nominating

locality and is consistent with broader

regional development strategies;

(2) Public safety. The extent to which

strategies such as community policing

will be used to guarantee the basic

safety and security of persons and

property within the Zone or

Community;

(3) Amenities and design. The extent

to which the plan considers issues of

design and amenities that will foster a

sustainable community, such as open

spaces, recreational areas, cultural

institutions, transportation, energy, land

and water uses, waste management,

environmental protection, and the

quality of life in the community;

(4) Sustainable development. The

extent to which economic development

will be achieved in a manner that

protects public health and the

environment;

(5) Supporting families. The extent to

which the strengths of families will be

supported so that parents can succeed at

work, provide nurture in the home, and

contribute to the life of the community;

(6) Youth development. The extent to

which the development of children,

youth, and young adults into

economically productive and socially

responsible adults will be promoted,

and the extent to which young people

will be provided with the opportunity to

take responsibility for learning the

skills, discipline, attitude, and initiative

to make work rewarding;

(7) Education goals. The extent to

which schools, religious institutions,

non-profit organizations, for-profit

enterprises, local governments and

families will work cooperatively to

provide all individuals with the

fundamental skills and knowledge they

need to become active participants and

contributors to their community, and to

succeed in an increasingly competitive

global economy;

(8) Affordable Housing. The extent to

which a housing component, providing

for adequate safe housing and ensuring

that all residents will have equal access

to that housing is contained in the

strategic plan;

(9) Drug Abuse. The extent to which

the plan addresses levels of drug abuse

and drug related activity through the

expansion of drug treatment services,

drug law enforcement initiatives and

community based drug abuse education

programs;

(10) Equal opportunity. The extent to

which the plan offers an opportunity for

diverse residents to participate in the

rewards and responsibilities of work

and service. The extent to which the

plan ensures that no business within a

nominated Zone or Community will

directly or through contractual or other

arrangements subject a person to

discrimination on the basis of race,

color, national origin, gender or

disability in its employment practices,

including recruitment, recruitment

advertising, employment, layoff,

termination, upgrading, demotion,

transfer, rates of pay or other forms of

compensation, or use of facilities.

(c) Community-Based Partnerships.

(1) Community partners. The extent to

which residents of the nominated area

have participated in the development of

the strategic plan and their commitment

to implementing it, and the extent to

which community-based organizations

in the nominated area have participated

in the development of the plan and their

record of success measured by their

achievements and support for

undertakings within the nominated

area; and the extent to which the plan

integrates the local educational, social,

civic, environmental and health

organizations and reflects the prominent

place that these institutions play in the

life of a revitalized community;

(2) Private and non-profit

organizations as partners. The extent to

which partnership arrangements

include commitments from private and

non-profit organizations, including

corporations, utilities, banks and other

financial institutions, and educational

institutions supporting implementation

of the strategic plan;

(3) State and local government

partners. The extent to which State and

local governments are committed to

providing support to implement the

strategic plan, including their

commitment to ‘‘reinventing’’ their roles

and coordinating programs to

implement the strategic plan; and

(4) Permanent implementation and

evaluation structure. The extent to

which a responsible and accountable

implementation structure or process has

been created to ensure that the plan is

successfully carried out and that

improvements are made throughout the

period of the Zone or Community’s

designation and the extent to which the

partners agree to be bound by their

commitments.

(d) Strategic vision for change. (1)

Goals and Coordinated strategy. The

extent to which the strategic plan

reflects a projection for the community’s

revitalization which links economic,

human, physical, community

development and other activities in a

mutually reinforcing, synergistic way to

achieve ultimate goals;

(2) Creativity and innovation. The

extent to which the activities proposed

in the plan are creative, innovative and

promising and will promote the civic

spirit necessary to revitalize the

nominated area;

(3) Building on assets. The extent to

which the vision for revitalization

realistically addresses the needs of the

nominated area in a way that takes

advantage of its assets;

(4) Benchmarks and learning. The

extent to which the plan includes

performance benchmarks for measuring

progress in its implementation,

including an on-going process for

adjustments, corrections and building

on what works.

§ 597.202 Submission of nominations for

designation.

(a) General. A nomination for

designation as an Empowerment Zone

and/or Enterprise Community must be

submitted for each urban area for which

such designation is requested. The

nomination shall be submitted in a form

to be prescribed by HUD in the

application and in the Notice Inviting

Applications published in the Federal

Register, and must contain complete

and accurate information.

(b) Certifications. Certifications must

be submitted by the State(s) and local

government(s) requesting designation

stating that:

(1) The nominated urban area satisfies

the boundary tests of § 597.100(d);

(2) The nominated urban area is one

of pervasive poverty, unemployment

and general distress, as prescribed by

§ 597.102;

(3) The nominated urban area satisfies

the poverty rate tests set forth in

§ 597.103;

(4) The nominated urban area

contains no portion of an area that is

either already designated as an

Empowerment Zone and/or Enterprise

Community, or is otherwise included in

any other area nominated for

designation as an Empowerment Zone

and/or Enterprise Community;

(5) Each nominating governmental

entity has the authority to:

(i) Nominate the urban area for

designation as an Empowerment Zone

and/or Enterprise Community;

(ii) Make the State and local

commitments required by § 597.200(d);

and

(iii) Provide written assurances

satisfactory to the Secretary that these

commitments will be met.

(6) Provide assurances that the

amounts provided to the State for the
3044 Federal Register / Vol. 60, No. 8 / Thursday, January 12, 1995 / Rules and Regulations

area under Section 2007 of Title XX of

the Social Security Act will not be used

to supplant Federal or non-Federal

funds for services and activities which

promote the purposes of Section 2007;

(7) Provide that the nominating

governments or corporations agree to

make available all information

requested by HUD to aid in the

evaluation of progress in implementing

the strategic plan and reporting on the

use of Empowerment Zone/Enterprise

Community Social Service Block Grant

funds; and

(8) Provide assurances that the

nominating State(s) agrees to distribute

the Empowerment Zone/Enterprise

Community Social Service Block Grant

funds in accordance with the strategic

plan submitted for the designated Zone

or Community.

(c) Maps and area description. Maps

and a general description of the

nominated urban area shall accompany

the nomination request.

Subpart D—Designation Process

§ 597.300 HUD action and review of

nominations for designation.

(a) Establishment of submission

procedures. HUD will establish a time

period and procedures for the

submission of nominations for

designation as Empowerment Zones or

Enterprise Communities, including

submission deadlines and addresses, in

a Notice Inviting Applications, to be

published in the Federal Register.

(b) Acceptance for processing. (1)

HUD will accept for processing those

nominations for designation as

Empowerment Zones or Enterprise

Communities which HUD determines

have met the criteria required by this

Part. HUD will notify the State(s) and

local government(s) whether or not the

nomination has been accepted for

processing. The criteria for acceptance

for processing are as follows:

(2) The nomination for designation as

an Empowerment Zone or Enterprise

Community must be received by HUD

on or before the time on the date

established by the Notice Inviting

Applications published in the Federal

Register. The nomination for

designation as an Empowerment Zone

or Enterprise Community must be

complete and must be accompanied by

a strategic plan, as required by

§ 597.200(c), and the certifications

required by § 597.202(b).

(c) Evaluation of nominations. In the

process of reviewing each nomination

accepted for processing, HUD may

undertake a site visit(s) to any

nominated area to aid in the process of

evaluation.

(d) Modification of the strategic plan,

boundaries of nominated urban areas,

and/or period during which designation

is in effect. Subject to the limitations

imposed by § 597.100, HUD may

negotiate reasonable modifications of

the strategic plan, the proposed

boundaries of a nominated urban area,

or the term for which a designation is

to remain in full effect, to ensure

maximum efficiency and fairness in the

provision of assistance to such areas.

(e) Publication of designations.

Announcements of those nominated

urban areas designated as

Empowerment Zones or Enterprise

Communities will be made by

publication of a Notice in the Federal

Register.

§ 597.301 Selection factors for designation

of nominated urban areas.

(a) Selection factors. In choosing

among nominated urban areas eligible

for designation, the Secretary shall

consider:

(1) The effectiveness of the strategic

plan in accordance with the key

principles and evaluative criteria set out

in § 597.201;

(2) The effectiveness of the assurances

made pursuant to § 597.200(a)(2) that

the strategic plan will be implemented;

(3) The extent to which an application

proposes activities that are creative and

innovative in comparison to other

applications; and

(4) Such other factors established by

HUD. Such factors include, but are not

limited to, the degree of need

demonstrated by the nominated area for

assistance under this part. If other

factors are established by HUD, a

Federal Register notice will be

published identifying such factors,

along with an extension of the

application due date if necessary.

(b) Geographic diversity. HUD, in its

discretion, may choose to select for

designation a lower rated approvable

application over a higher rated

application in order to increase the level

of geographic diversity of designations

approved under this part.

§ 597.302 Number of Empowerment Zones

and Enterprise Communities designated.

(a) Empowerment Zones. HUD will

designate up to six of the nominated

urban areas as Empowerment Zones,

provided: that if six such zones are so

designated, no less than one shall be

designated in an urban area the most

populous city of which has a population

of 500,000 or less and no less than one

shall be a nominated urban area which

includes areas in two States and which

has a population of 50,000 or less.

(b) Enterprise Communities. HUD will

designate up to 65 of the nominated

urban areas not designated

Empowerment Zones under paragraph

(a) of this section as Enterprise

Communities.

Subpart E—Post-Designation

Requirements

§ 597.400 Reporting.

HUD will require periodic reports for

the Empowerment Zones and Enterprise

Communities designated pursuant to

this part. These reports will identify the

community, local government and State

actions which have been taken in

accordance with the strategic plan. In

addition to these reports, such other

information relating to designated

Empowerment Zones and Enterprise

Communities as HUD shall request from

time to time, including information

documenting nondiscrimination in

hiring and employment by businesses

within the designated Empowerment

Zone or Enterprise Community, shall be

submitted promptly.

§ 597.401 Periodic performance reviews.

HUD will regularly evaluate the

progress of the strategic plan in each

designated Empowerment Zone and

Enterprise Community on the basis of

performance reviews to be conducted on

site and other information submitted.

HUD will also commission evaluations

of the Empowerment Zone program as a

whole by an impartial third party, at

such intervals as HUD may establish.

§ 597.402 Validation of designation.

(a) Reevaluation of designations. On

the basis of the performance reviews

described in § 597.401, and subject to

the provisions relating to the revocation

of designation appearing at § 597.403,

HUD will make findings on the

continuing eligibility for and the

validity of the designation of any

Empowerment Zone or Enterprise

Community. Determinations of whether

any designated Empowerment Zone or

Enterprise Community remains in good

standing shall be promptly

communicated to all Federal agencies

providing assistance or administering

programs under which assistance can be

made available in such Zone or

Community.

(b) Modification of designation. Based

on an urban area’s success in carrying

out its strategic plan, and subject to the

provisions relating to revocation of

designation appearing at § 597.403 and

the requirements as to the number,

maximum population and other

characteristics of urban Empowerment

Zones set forth in § 597.3, the Secretary

may modify designations by

reclassifying urban Empowerment
Federal Register / Vol. 60, No. 8 / Thursday, January 12, 1995 / Rules and Regulations 3045

Zones as Enterprise Communities or

Enterprise Communities as

Empowerment Zones.

§ 597.403 Revocation of designation.

(a) Basis for revocation. The Secretary

may revoke the designation of an urban

area as an Empowerment Zone or

Enterprise Community if the Secretary

determines, on the basis of the periodic

performance review described at

§ 597.401, that the State(s) or local

government(s) in which the urban area

is located:

(1) Has modified the boundaries of the

area;

(2) Has failed to make progress in

achieving the benchmarks set forth in

the strategic plan; or

(3) Has not complied substantially

with the strategic plan.

(b) Letter of warning. Before revoking

the designation of an urban area as an

Empowerment Zone or Enterprise

Community, the Secretary will issue a

letter of warning to the nominating

State(s) and local government(s):

(1) Advising that the Secretary has

determined that the nominating local

government(s) and/or State(s) has:

(i) Modified the boundaries of the

area; or

(ii) Is not complying substantially

with, or has failed to make progress in

achieving the benchmarks set forth in

the strategic plan prepared pursuant to

§ 597.200(c); and

(2) Requesting a reply from all

involved parties within 90 days of the

receipt of this letter of warning.

(c) Notice of revocation. After

allowing 90 days from the date of

receipt of the letter of warning for

response, and after making a

determination pursuant to paragraph (a)

of this section, the Secretary may issue

a final notice of revocation of the

designation of the urban area as an

Empowerment Zone or Enterprise

Community.

(d) Notice to affected Federal

agencies. HUD will notify all affected

Federal agencies providing assistance in

an urban Empowerment Zone or

Enterprise Community of its

determination to revoke any designation

pursuant to this section or to modify a

designation pursuant to § 597.402(b).

Subpart F—Special Rules

§ 597.500 Indian Reservations.

No urban Empowerment Zone or

Enterprise Community may include any

area within an Indian reservation.

§ 597.501 Governments.

If more than one State or local

government seeks to nominate an urban

area under this part, any reference to or

requirement of this part shall apply to

all such governments.

§ 597.502 Nominations by economic

development corporations or the District of

Columbia.

Any urban area nominated by an

Economic Development Corporation

chartered by the State in which it is

located or by the District of Columbia

shall be treated as nominated by a State

and local government.

§ 597.503 Use of census data.

Population and poverty rate data shall

be determined by the most recent

decennial census data available.

Dated: December 2, 1994.

Andrew Cuomo,

Assistant Secretary for Community Planning

and Development.

[FR Doc. 95–734 Filed 1–11–95; 8:45 am]

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