On August 10, 1993, the Congress enacted the Omnibus Budget Reconciliation Act of 1993 (OBRA 1993, P.L. 103-66), which established the EZ/EC program’s eligibility criteria, designation procedures, and benefits. The act specified that an area could not be selected for the program unless it (1) met specific criteria for characteristics such as geographic size and poverty rate and (2) prepared a strategic plan for implementing the program. The act also authorized the Secretary of Housing and Urban Development and the Secretary of Agriculture to designate the EZs and ECs in urban and rural areas, respectively; limited the number of designations that could be made; set the length of the designation at 10 years; required that nominations be made jointly by the local and state governments; and authorized the Secretaries to prescribe any regulations needed to carry out the program. The act also amended title XX of the Social Security Act to authorize the special use of SSBG funds for the EZ program. The use of SSBG funds was expanded to cover a range of economic and social development activities. Like other SSBG funds, the funds allotted for the EZ program are granted by HHS to the state, which is fiscally responsible for the funds. HHS’ regulations covering block grants (45 C.F.R. part 96) provide maximum fiscal and administrative discretion to the states and place full reliance on state law and procedures. HHS encouraged the states to carry out their EZ funding responsibilities with as few restrictions as possible under the law. After the state grants the funds to the EZ or the city, the EZ can draw down the funds through the state for specific projects over the 10-year life of the program. In January 1994, the Clinton administration announced the nominating procedure and required that nominations be received by June 30, 1994. After collaborating with other federal agencies including HHS, HUD and the U.S. Department of Agriculture (USDA) jointly issued an application guiderequiring each applicant to submit its nomination along with a strategic plan that had been developed with input from community stakeholders, such as residents, businesses, financial institutions, service providers, and state and local governments. The plan was to describe the community’s overall vision for revitalization, link this vision to the program’s four key principles, identify other governmental and private resources that would be committed to this program, and describe potential barriers to the successful implementation of the plan. HUD also published guidelines for developing strategic plans, conducted technical assistance workshops around the country, provided advice and technical assistance through federal employees, and contracted for technical assistance in fields such as planning and community development. The federal government received over 500 nominations, including 290 from urban communities. The nominations were reviewed by the EZ/EC task force, which consisted of federal employees detailed from many federal agencies. This task force reported on the urban applications to a review panel that consisted of three senior officials from HUD’s Office of Community Planning and Development. This panel recommended potential urban designees to the Secretary of Housing and Urban Development. The Secretary then sent his preliminary selections to the Community Empowerment Board for review. This board is chaired by the Vice President and its members include the heads of cabinet-level and other federal agencies. The board was established to offer a single point of federal coordination for communities and to facilitate one-stop access to federal resources. On December 21, 1994, the Secretaries of Housing and Agriculture designated 104 EZs and ECs—6 urban EZs, 3 rural EZs, 65 urban ECs, and 30 rural ECs. On the same day, HHS awarded the first half of the SSBG to the EZs and ECs, as provided for in the authorizing legislation.Subsequently, HHS provided information to the designees to clarify the uses of and controls on the EZ/EC SSBG funds and advised the EZs and ECs about other HHS grants that have been awarded or are available to the EZs. All of the designated communities will receive federal assistance; however, as established by OBRA 1993 and HUD’s implementing regulation (24 C.F.R. part 597), the EZs are eligible for more assistance than the ECs. Each urban EZ was allocated $100 million, and each rural EZ was allocated $40 million, in EZ/EC SSBG funds for use over the 10-year life of the program. In addition, up to $20 million in state and local bonds—whose proceeds were to be used to provide facilities and land for businesses in the zone—would be tax-exempt. Furthermore, businesses located in the EZ would be eligible for (1) tax credits on wages paid to employees who live in the EZ and (2) increased deductions for depreciation. Each urban and rural EC was allocated just under $3 million and qualified only for the tax-exempt bonds. The federal government also made a commitment to all of the EZs and ECs to (1) give them special consideration in competitions for funds from other federal programs, (2) work cooperatively with them in overcoming regulatory impediments, and (3) allow them to make more flexible use of existing federal funds. After making the designations, HUD issued implementation guidelinesdescribing the program as one in which (1) solutions to community problems are to originate from the neighborhood up rather than from Washington down and (2) progress is to be based on performance benchmarks established by the EZs, not on the amount of federal money spent. The benchmarks are to measure the results of the activities described in each EZ’s strategic plan. These benchmarks became part of the agreement that was signed by HUD and state and local government officials for each zone. The EZ/EC task force’s members were available to assist the EZs in preparing their benchmarks. HUD also uses contractors, which HUD refers to as generalists, to provide day-to-day assistance to the EZs. All six of the urban EZs have met the criteria defined in OBRA 1993,developed a strategic plan, signed an agreement with HUD and the state for implementing the program, signed an agreement with the state for obtaining the EZ/EC SSBG funds, drafted performance benchmarks, and set up a governance structure. In addition, all of the EZs have included public housing officials and public housing residents in planning and implementing the program. However, the EZs differ in their demographic characteristics, organizational structure, and plans for using their EZ/EC SSBG funds. Also, a few public housing officials indicated that their EZ had not done enough to involve the public housing authority or public housing residents. The EZs differ in their geographic and demographic characteristics, reflecting the selection criteria. For example, Detroit’s EZ covers about 18 square miles and is over four times as large as the Philadelphia-Camden EZ. In Baltimore, Chicago, and Philadelphia-Camden, the areas included in the EZ are not contiguous, while in Atlanta, Detroit, and New York, they are contiguous. Furthermore, the Philadelphia-Camden EZ is unique because it is located in two cities and states. The population of the EZs ranges from about 50,000 in Atlanta and Philadelphia-Camden to nearly 200,000 in Chicago and New York. The poverty and unemployment rates also vary across the EZs. The overall poverty rate for the Atlanta EZ was the highest, encompassing 55 percent of the residents, while the New York and Baltimore EZs reported an overall poverty rate of about 40 percent. The poverty rates for all of the EZs are high compared with the national poverty rate of about 14 percent. Similarly, the unemployment rates in the EZs ranged from 15 percent in Baltimore to 29 percent in Detroit, while the national rate was about 6 percent. (See table 1 for details on each EZ.) Local governments have chosen different approaches to implementing the EZ program. Atlanta, Baltimore, Detroit, New York, and Camden have each established a nonprofit corporation to administer the program, while Chicago and Philadelphia are operating through the city government. At the state level, the types of agencies involved and the requirements for drawing down the EZ/EC SSBG funds differ. HHS awarded the funds to the state agency that managed the regular SSBG program unless the state asked HHS to transfer the responsibility to a state agency that deals primarily with economic development. Consequently, the funds for Atlanta and New York pass through their state’s economic development agency, while the funds for the other EZs pass through the state agency that manages the regular SSBG program. Some states, as the entities with fiscal responsibility for the EZ/EC SSBG funds, identified additional requirements that the EZ must meet before it can draw down funds. For example, one state requires the EZ to follow the guidelines established in the Office of Management and Budget’s Circular A-87, Cost Principles for State, Local, and Indian Tribal Governments. The federal government does not require the recipients of SSBG funds to follow these guidelines. Finally, each EZ has planned diverse activities to meet its city’s unique needs. All of the EZs have planned activities to increase the number of jobs in the EZ, improve the EZ’s infrastructure, and provide better support to families. However, the specific activities vary, reflecting decisions made within each EZ. According to HUD, the EZs have obligated over $170 million. However, the definition of obligations differs across the EZs. For example, one EZ defines obligations as the amount of money awarded under contracts. Another EZ defines obligations as the total value of the projects that have been approved by the city council, only a small part of which has been awarded under contracts.