    [Senate Hearing 105-914]
    [From the U.S. Government Publishing Office]

                                                            S. Hrg. 105-914

                      ECONOMIC DEVELOPMENT PARTNERSHIP ACT

    =======================================================================

                                    HEARING

                                   BEFORE THE

                                SUBCOMMITTEE ON
                       TRANSPORTATION AND INFRASTRUCTURE

                                     OF THE

                                  COMMITTEE ON
                          ENVIRONMENT AND PUBLIC WORKS
                              UNITED STATES SENATE

                           ONE HUNDRED FIFTH CONGRESS

                                 SECOND SESSION

                                       ON

                                    S. 1647

     A BILL TO REAUTHORIZE AND MAKE REFORMS TO PROGRAMS AUTHORIZED BY THE
               PUBLIC WORKS AND ECONOMIC DEVELOPMENT ACT OF 1965

                                   __________

                                 JULY 14, 1998

                                   __________

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

                                   ----------

                         U.S. GOVERNMENT PRINTING OFFICE
    52-634 cc                    WASHINGTON : 1999

    _______________________________________________________________________
                For sale by the U.S. Government Printing Office
    Superintendent of Documents, Congressional Sales Office, Washington, DC
                                     20402

                   COMMITTEE ON ENVIRONMENT AND PUBLIC WORKS

                           ONE HUNDRED FIFTH CONGRESS

                     JOHN H. CHAFEE, Rhode Island, Chairman
    JOHN W. WARNER, Virginia             MAX BAUCUS, Montana
    ROBERT SMITH, New Hampshire          DANIEL PATRICK MOYNIHAN, New York
    DIRK KEMPTHORNE, Idaho               FRANK R. LAUTENBERG, New Jersey
    JAMES M. INHOFE, Oklahoma            HARRY REID, Nevada
    CRAIG THOMAS, Wyoming                BOB GRAHAM, Florida
    CHRISTOPHER S. BOND, Missouri        JOSEPH I. LIEBERMAN, Connecticut
    TIM HUTCHINSON, Arkansas             BARBARA BOXER, California
    WAYNE ALLARD, Colorado               RON WYDEN, Oregon
    JEFF SESSIONS, Alabama
                         Jimmie Powell, Staff Director
                   J. Thomas Sliter, Minority Staff Director

                                      (ii)

                                C O N T E N T S

                                  ----------
                                                                       Page

                                 JULY 14, 1998
                               OPENING STATEMENTS

    Baucus, Hon. Max, U.S. Senator from the State of Montana.........     3
    Boxer, Hon. Barbara., U.S. Senator from the State of California..     6
    Chafee, Hon. John H., U.S. Senator from the State of Rhode Island     2
    Lieberman, Hon. Joseph I., U.S. Senator from the State of
      Connecticut....................................................     4
    Warner, Hon. John W., U.S. Senator from the Commonwealth of
      Virginia.......................................................     1
    Wyden, Hon. Ron, U.S. Senator from the State of Oregon...........    16

                                   WITNESSES

    Burchell, Robert W., Center for Urban Policy Research, Rutgers
      University, New Brunswick, NJ..................................    20
        Prepared statement...........................................    43
    Daley, William, Secretary, Department of Commerce................     8
        Prepared statement...........................................    34
    Fosler, R. Scott, President, National Academy of Public
      Administration.................................................    23
        Letter, EDA activities, by Phillip Singerman.................    29
        Prepared statement...........................................    52
        Report, National Academy of Public Administration............    23
    Singerman, Phillip, Assistant Secretary for Economic Development,
      Department of Commerce.........................................    14
        Prepared statement...........................................    35
        Responses to additional questions from:
            Senator Boxer............................................    41
            Senator Warner...........................................    39
            Senator Wyden............................................    42
    Thompson, Eric P., Executive Director, Lower Savannah Council of
      Governments and President, National Association of Development
      Organizations, on behalf of the Coalition for Economic
      Development....................................................    32
        Prepared statement...........................................    71
    Villines, Floyd G., Judge/Executive, Pulaski County, Arkansas, on
      behalf of the Coalition for Economic Development, Little Rock,
      AR.............................................................    18
        Membership list, Coalition for Economic Development..........    71
        Prepared statement...........................................    54
        Report, EDA Success Story, North Little Rock, Arkansas.......    58
        Tables, EDA Investment History by State......................    66

                              ADDITIONAL MATERIAL

    Letter, Educational Association of University Centers............    77
    Statement, National Association of Development Organizations.....    73
    Text of S. 1647, Economic Development Partnership Act of 1998....    79

                 ECONOMIC DEVELOPMENT PARTNERSHIP ACT, S. 1647

                                  ----------

                             TUESDAY, JULY 14, 1998

                                           U.S. Senate,
                   Committee on Environment and Public Works,
             Subcommittee on Transportation and Infrastructure,
                                                        Washington, DC.
        The subcommittee met, pursuant to notice, at 9:35 a.m. in
    room 406, Senate Dirksen Building, Hon. John Warner [chairman
    of the subcommittee] presiding.
        Present: Senators Warner, Baucus, Lieberman, Boxer, Wyden,
    and Chafee [ex officio].

               OPENING STATEMENT OF HON. JOHN W. WARNER,
             U.S. SENATOR FROM THE COMMONWEALTH OF VIRGINIA

        Senator Warner. The hearing will come to order.
        Good morning, everyone. This morning the subcommittee will
    focus on the reauthorization of the Economic Development
    Administration under the aegis of the Department of Commerce,
    and we welcome a very celebrated and well-known Secretary at
    the moment and I think for the indefinite future.
        The Economic Development Administration has made many
    valuable contributions to communities throughout the Nation.
    EDA is a small but very, very important agency that contributes
    significantly to the economic growth and expansion all across
    our Nation.
        The Economic Development Administration maintains the task
    of saving and creating jobs in areas that are economically
    distressed. To meet these objectives, EDA provides assistance
    to distressed States and localities through grants for public
    infrastructure, economic adjustment, planning, and technical
    assistance, all of which are intended to promote a transition
    to long-term employment and growth.
        Through these programs EDA fulfills a key function in
    providing State and local Governments, nonprofit organizations,
    and public institutions with vital economic grants and
    technical assistance. These grants are given on a cost-shared
    basis, with the Federal/non-Federal ratio varying according to
    the program. EDA grants focus on a number of different programs
    administered by the Assistant Secretary, who will be testifying
    before us today as well as the Secretary. Many States, the
    Commonwealth of Virginia included, have benefited greatly from
    these programs.
        Grants provided under public works programs give seed
    moneys for infrastructure projects intended to help these
    distressed communities support private-sector investments.
    Grants allow communities to meet economic challenges in a
    variety of ways, making public works improvements to attract
    new businesses, like industrial parks, providing technical
    assistance and planning grants that allow a community to plan
    for its future.
        Since 1982, the Economic Development Administration has
    been functioning without authorization, rather through
    appropriations under the Commerce/Justice/State Appropriations
    Subcommittee. Our hearing today will focus on the need for a
    reauthorization of EDA, the future mission of the EDA in
    helping communities help themselves.
        I thank the distinguished Chairman and Ranking Member for
    supporting this subcommittee Chairman in recognizing we ought
    to try hard this year to get a reauthorization. I thank you.
        Mr. Chairman?

               OPENING STATEMENT OF HON. JOHN H. CHAFEE,
              U.S. SENATOR FROM THE STATE OF RHODE ISLAND

        Senator Chafee. Thank you very much, Mr. Chairman. I want
    to thank you as Chairman of this subcommittee for holding this
    hearing today. I'm pleased to join in the welcome that you have
    extended to Secretary Daley and Assistant Secretary Singerman.
    Secretary Daley and I go back a ways. I'll never forget when he
    was good enough in the fall of 1993 to come up to Providence,
    Rhode Island, where we conducted a rally for NAFTA in which he
    spoke very persuasively in one of our major plants. It was a
    big success. Again, Mr. Secretary, I want to thank you for
    having done that.
        Also, I'm informed that the Secretary has not one but two
    children, one graduated and another one there now, at
    Providence College in my State. So, we look at him as----
        Senator Warner. Really? Is there a shortage of institutions
    in Delaware?
        [Laughter.]
        Senator Chafee. He likes to have his children get around
    and see different parts of the country, and we're very grateful
    that he's chosen Providence College.
        Your testimony will be very helpful to the full committee
    as we consider, following the actions of this subcommittee,
    whether to proceed with the reauthorization of the EDA. As you
    all know, EDA, as the Chairman mentioned, has not been
    reauthorized since 1982. And although the Environment and
    Public Works Committee did report a bill out in 1994, it didn't
    clear the Senate and didn't end up becoming law.
        I want to be up front with everyone here as regards my
    position on EDA. I have historically not been a big fan of EDA.
    As a matter of fact, in 1985, I'm admitting this now because
    somebody else will discover it if I don't, I sponsored an
    amendment to eliminate EDA. But in recent years, I've taken
    notice of the changes in the agency, under Mr. Singerman and
    the leadership of Secretary Daley, and it's efforts to
    streamline its operations, target its efforts toward truly
    distressed communities. I've come to believe that we should
    move forward with a reauthorization bill that locks in some of
    the changes that have been undertaken.
        So over the past few weeks, I've been reviewing S. 1647,
    the legislation before us today, and have been working with the
    Chairman, and will continue to do that, with hopes that we can
    enact an EDA reauthorization bill this year. I'm for that and
    I'll do all I can to see that it gets done.
        I want to thank you, Mr. Chairman, for taking the
    leadership here.
        Senator Warner. Thank you.
        Would others care to make any opening remarks?
        Senator Baucus. Mr. Chairman?
        Senator Warner. Senator Baucus.

                 OPENING STATEMENT OF HON. MAX BAUCUS,
                 U.S. SENATOR FROM THE STATE OF MONTANA

        Senator Baucus. Thank you. Mr. Chairman, I want to thank
    you very much for holding this hearing. I want to particularly
    thank the full committee chairman for his very wise
    reevaluation of the program.
        Senator Chafee. Reformation.
        Senator Baucus. It really is a hallmark of sort of the
    ability of the Senator from Rhode Island to not be locked into
    something in an unthinking way but to look at programs on the
    merits and look at new evidence and new circumstances and do
    what's right. I really appreciate your statement, Mr. Chairman.
    It means a lot to me, as I know it does to many others on this
    committee.
        I also want to thank you for you for holding this hearing.
        Mr. Chairman, I think it's particularly important that we
    reauthorize EDA because the program has done so well for so
    many people in so many parts of the country, and because if we
    don't the program is no longer going to be in the jurisdiction
    of this committee. It's going to be basically up to the
    vagaries of the Appropriations Committee, particularly in years
    when budgets are pretty thin. For those reasons, I strongly
    urge this committee to report out a bill reauthorizing the
    Economic Development Administration.
        Since its inception in 1965, Mr. Chairman, I believe EDA
    has established a very impressive track record of helping
    communities help themselves. That's what it does--it helps
    communities help themselves. EDA programs, whether they are
    grants or loans, help communities bootstrap their own efforts
    to meet economic challenges in a variety of ways--making public
    works improvements, attracting businesses, providing technical
    assistance, planning grants, and tailoring a whole host of
    various programs to meet the specific circumstances of a
    community.
        In Montana, EDA has been a very powerful ally in responding
    to changes in economic conditions. One example is in the
    restructuring of Malmstrom Air Force Base. Through EDA,
    particularly with the Revolving Loan Fund grant, EDA has been
    helping that community undertake a defense conversion project.
    It was the single military facility in our State. Hundreds of
    jobs were lost in downsizing the Air Force Base, but the EDA
    Revolving Loan Grant fund provided for the Great Falls
    community will enable three firms to locate and employ over 750
    people.
        In this regard, I want to particularly thank Mr. Phil
    Singerman, who was in Great Falls a couple of times to see
    first-hand the needs of the community. Therefore, the community
    is in a much better position to help provide assistance. I can
    tell you, Mr. Singerman, people of Great Falls are very
    appreciative of EDA.
        I might also say, Mr. Chairman, EDA has been extremely
    helpful in supporting the development of a major new company in
    Butte, Montana. When plant construction is completed it will
    make the silicon used to make silicon wafers. EDA provided the
    seed money from the Revolving Loan Fund and enabled the
    community of Butte, Montana, to provide certain economic
    incentives. This firm will make 25 percent of all the silicon
    used in silicon wafers in the world. It's a huge new plant. I
    must say that it's not an American plant, it's a company
    setting up an American subsidiary. But this plant, which is
    much larger of the two plants--the other one will be in Idaho--
    will provide 25 percent of all the silicon used in silicon
    wafers in the world. That's largely because of EDA. EDA didn't
    build the plant, but provided the seed money for a revolving
    loan, which enabled the economic development organization in
    Butte to find the company. Because of EDA's help, no doubt
    about it, this happened.
        I could go on and list other areas in the country. For
    example, when Hurricane Andrew devastated so much of Florida,
    EDA was there. In the Midwest, EDA has been helping those areas
    affected by disastrous floods. And one small community in
    Montana called Libby----the Chairman of the subcommittee might
    have some idea of where Libby is.
        Senator Warner. I do. Very good fishing.
        Senator Baucus. I thought he did. Libby was a lumber town.
    A huge mill there is almost gone. Libby was just really
    struggling. EDA and the former Farmer's Home Administration
    provided seed money for a revolving loan fund. The community
    worked together and they are attracting new business. But were
    it not for EDA, those poor people in Libby would be facing very
    difficult plight.
        Mr. Chairman, I thank you for holding this hearing. I
    strongly urge this committee to report out a bill. We need some
    changes, obviously, to tailor it to the 1990's and the next
    century, but it's a program that's very, very worthwhile.
        Senator Warner. I thank you, Mr. Baucus. Your sincerity and
    enthusiasm are conveyed in your remarks.
        Are others wishing to speak for a minute?

            OPENING STATEMENT OF HON. JOSEPH I. LIEBERMAN,
               U.S. SENATOR FROM THE STATE OF CONNECTICUT

        Senator Lieberman. I do, Mr. Chairman. A minute? Thanks,
    Mr. Chairman. Welcome to Secretary Daley and Secretary
    Singerman. And thank Senator Chafee, too, for his statement. It
    struck me that the message there is that not only is Senator
    Chafee is getting older and wiser, which we all are familiar
    with from our service, particularly wiser, but also that EDA
    has gotten better. That's the cause for his change of feeling
    about EDA. I do think this reauthorization puts into law the
    expression of growing bipartisan congressional satisfaction
    with what EDA is doing, but also formalizes and
    institutionalizes some of the changes that have occurred that
    have been the reason for the growing support.
        It is a particularly appropriate time for us to reauthorize
    EDA after all these years without a reauthorization because of
    the remarkable state that our economy is in. It's an
    extraordinary time of growth and optimism. But there are still
    parts of our country that are not sharing in that growth and
    they need some extra help.
        I can tell you that in Connecticut we have the highest
    average per capita income in the country, but we've got some of
    the poorest cities in the country as well. I see even in those
    cities now the beginning of development and change and growth.
    And in just about every case, EDA has been there with just that
    additional investment that has made some critical growth
    possible. Secretary Singerman, I thought he only visited
    Connecticut that often. I'm very impressed that you've been to
    Montana. His in-laws live in Connecticut, so I understand why
    he comes there.
        Senator Baucus. If the Senator will yield. He very wisely
    divides his time between the State with the highest income per
    capita and the State with the lowest income per capita. This
    way it averages out a little bit.
        [Laughter.]
        Senator Lieberman. Got it. He was in Hartford a while ago.
    Here's a project called Vita Root, an old abandoned industrial
    facility, just a big old factory lying there just dragging down
    a neighborhood, and there comes along one of the Lord's true
    servants, Father Tom Berry, just a wonderful man, whose parents
    worked in that factory and he has a dream that he's going to
    revive it and bring it back and make it a center of economic
    activity and help revive the whole neighborhood. And a few
    weeks ago, Secretary Singerman came in and announced an EDA
    grant which is going to make that possible. So, thanks.
        EDA happens to be, as I look across the Federal Government,
    the only agency of the Federal Government that is focused on,
    charged with stimulating industrial and commercial growth in
    economically distressed areas. This agency is really focused on
    making that great statement of President Kennedy's true, which
    is that a rising tide raises all boats. Well, some of those
    boats stuck at the bottom need a little extra help, and I think
    that's what EDA is all about.
        So I appreciate the committee's interest in moving this
    reauthorization. I look forward to supporting it. Thank you,
    Mr. Chairman.
        [The prepared statement of Sen. Lieberman follows:]
      Statement of Hon. Joseph Lieberman, U.S. Senator from the State of
                                  Connecticut
        I would like to thank Senators Warner and Baucus for allowing me to
    speak for a few minutes this morning. I'm an enthusiastic supporter of
    EDA and its work. Phil Singerman and I were in Connecticut just 2 weeks
    ago at Veeder Root Place in Hartford where, with the help of EDA
    grants, an old factory in a run down neighborhood is being revitalized.
        Connecticut has the highest per capita income in the country, but
    has two of the poorest cities in America. We all have face problems
    with urban decay in our States. Manufacturing and industry, which used
    to be the centerpiece of economic activity and employment in our inner
    cities, have largely disappeared. Hartford has seen 30 percent of its
    factory and business sites disappear since 1986. With the loss of
    manufacturing went good jobs, wholesale trade, retail businesses and a
    large source of local tax revenues.
        We all know of one-factory towns where the factory has closed down,
    destroying the economic base of the town. When Windham Mills--mills
    built over 100 years ago that produce thread--closed down in Windham,
    Connecticut, no other industry moved in, leaving Windham with the
    highest unemployment rate in the State and forcing workers to look for
    jobs in other locales. EDA is working with the town on a $1 million
    grant to help revitalize the area.
        EDA is the only agency of the Federal Government that is charged
    with stimulating industrial and commercial growth in economically
    distressed areas of the United States. I have really appreciated their
    work in Connecticut. But most of all, I appreciate that they work with
    the community. They work with the community to help them develop a plan
    that will bring back business activity, and with it, good jobs for
    people in the community. They work with the local government to fill
    out those endless applications. They help guide them through the
    process--something at which the Federal Government does not always
    excel. With the proposed legislation, EDA is making the application
    process even easier by making eligibility: uniform for all programs and
    allowing for self-certification by applicants.
        I wanted to commend Phil Singerman and the rest of the EDA staff
    for the job they are doing. I think its time we passed reauthorization
    for EDA. Thank you.
        Senator Warner. Mr. Wyden?

                 OPENING STATEMENT OF HON. RON WYDEN,
                 U.S. SENATOR FROM THE STATE OF OREGON

        Senator Wyden. Thank you, Mr. Chairman. I'll be very brief.
    I, too, want to express my appreciation to you and Chairman
    Chafee for holding this hearing. It is an especially important
    program because it deals with the Northwest economic
    initiative.
        As you know, you recently got a letter from Senator Gorton,
    Senator Smith, Senator Murray, and myself expressing our
    concern about the funding levels for this program. In our
    State, we've got seven counties with unemployment at least
    twice the national average as a result of dislocations,
    particularly in timber and in salmon fishing. The Governors of
    our region feel very strongly that after they signed a
    Memorandum of Understanding indicating that there would be $3
    million in funding per year for this, there has been
    significantly less funding forthcoming.
        In a lot of ways, this is a great compliment to all of you
    because they think the program has been a huge success and
    they've been able to use the money very well. We're very
    hopeful, the four Senators from the Pacific Northwest, on a
    bipartisan basis, that we will be able to work it out with you
    all to get the full funding for this program.
        Finally, let me say we're especially glad to have Secretary
    Daley here. He does so much good work on so many issues, be it
    the internet or economic development, a variety of other
    issues, and we want to welcome him here this morning. I'm going
    to have to also be in an aviation subcommittee hearing this
    morning, Mr. Secretary, and I'll be submitting some questions
    to you in writing. I look forward to working with you. Thank
    you, Mr. Chairman.
        Senator Warner. Thank you.
        Yes, indeed?

               OPENING STATEMENT OF HON. BARBARA BOXER,
               U.S. SENATOR FROM THE STATE OF CALIFORNIA

        Senator Boxer. Mr. Chairman, I will speak for 1 minute, as
    I rush off to an appropriations markup on transportation, and
    would ask unanimous consent that my entire statement be placed
    in the record.
        Senator Warner. Without objection.
        Senator Boxer. I wanted just to join the praise that my
    colleagues have put out here since I arrived. This is an agency
    that is working. Some 99 percent of EDA projects completed as
    planned, 91 percent completed on time, and 52 percent under
    budget. It's really a remarkable story to tell; every $1
    million in EDA funding increasing the local tax base by $10
    million, and the number of jobs doubled in the 6-years after
    project completion. And we have story after story to tell.
        In my great State which has these pockets of prosperity and
    pockets of problems for many of the reasons, but one reason has
    been the change in the Defense Department and the shut downs of
    so many bases in California. Mr. Chairman, I'll tell you, it
    has been brutal. And so the one quick case I'll put out is the
    case of Castle Air Force Base, the biggest employer in Merced
    County with more than 5,000 military personnel and 1,000
    civilian workers. It pumped $250 million into the area's
    economy. When the base closed in 1995 the unemployment rate
    skyrocketed to 17.6 percent. At that time, California wasn't
    doing that well anyway, but this was just out of sight.
        EDA did not wait until the base was shuttered. They came in
    and they awarded Merced County $1 million for a revolving fund.
    It may not seem like a lot, but we also pumped in $2.6 million
    for sewer construction, and then another $4.3 million for the
    development of the US Aviation Discovery Exposition Center on
    the grounds of the former base as a tourist attraction. And it
    is so exciting. Forty-four businesses have been lured to the
    base, Mr. Chairman, creating 1,900 new jobs in 2 years and more
    than 90 percent of the existing buildings are leased, and the
    aviation complex is expected to draw 300,000 visitors by the
    year 2000.
        In my statement, I have other examples. But I'm very, very
    proud to have an opportunity to vote for this reauthorization.
    Thank you.
        Senator Warner. I thank the Senator.
        [The prepared statement of Senator Boxer follows:]
        Statement of Hon. BARbara Boxer, U.S. Senator from the State of
                                   California
        Mr. Chairman, thank you for the opportunity to comment on the
    reauthorization of the Economic Development Administration, or EDA.
    First, allow me to give you an example of how EDA has helped a
    community in California.
        In 1991, DOD announced the closure of Castle Air Force Base, the
    biggest employer in Merced County, CA with more than 5000 military
    personnel and 1000 civilian workers. The base pumped nearly $250
    million annually into the area's economy. When the base closed in 1995,
    the county's employment rate skyrocketed to 17.6 percent, double that
    of the State of CA.
        EDA did not wait, however, until the base was shuttered to begin
    helping with economic conversion of the facility. In 1993, EDA awarded
    Merced County $1 million for a revolving fund loan to assist in
    business development and awarded the city of Atwater $2.6 million for
    sewer construction. In 1995 and 1998, EDA awarded a total of $4.3
    million for the development of the U.S. Aviation Discovery Exposition
    Center on the grounds of the former base as tourist destination.
        So far, 44 businesses have been lured to the base creating some
    1,900 new jobs in just 2 years. More than 90 percent of the existing
    buildings are leased. And, the aviation complex is expected to draw up
    to 300,000 visitors by the year 2000.
        Over the last 33 years, EDA has invested more than $1.6 billion in
    needy communities throughout California, representing over 2700
    projects. EDA has been instrumental in California by helping
    communities rebound after a military base or manufacturing plant
    closing. EDA has helped communities in California recover from the 1990
    and 1994 earthquakes, as well as the 1992 L.A. riots. I cannot even
    begin to tell you how important economic recovery is to the emotional
    well-being of a community ravaged by natural disaster or a base
    closing.
        What is even more compelling to me is the efficiency by which the
    Agency has carried out its mission:

      99 percent of EDA projects were completed as planned;
      91 percent were completed on time;
      52 percent were completed under budget;
      327 jobs were created or retained for every $1 million in EDA
        investment;
      Every $1 million in EDA funding leveraged $10.08 million in
        private-sector investment;
      Every $1 million in EDA funding increased the local tax base
        by $10.13 million; and the number of jobs doubled in the 6-years
        after project completion;
      All government agencies should be as efficient as EDA.

        It is important to note that EDA does not bail out a community. It
    gives the community tools by which they can create their own recovery
    and security.
        EDA has given real help to the poorest communities of California.
    Mr. Chairman, I strongly support the reauthorization of the Economic
    Development Administration and urge everyone on the Subcommittee to
    support the passage of S. 1647 as well. Thank you Mr. Chairman.
        Senator Warner. Mr. Secretary, we finally come to you. I
    would want to once again acknowledge how memorable my
    experiences were working with your father in 1975-76. He left a
    profound influence on this very young aspiring political figure
    in those days. And I think you've carried the mantle with great
    humility and dignity.
        Secretary Daley. Thank you very much, Mr. Chairman, I
    appreciate those kind words.

       STATEMENT OF HON. WILLIAM DALEY, SECRETARY, DEPARTMENT OF
                                COMMERCE

        Secretary Daley. Thank you, Mr. Chairman, Chairman Chafee,
    and Ranking Minority member Baucus, Senator Lieberman, and the
    other members of the committee who were here. I thank you all
    for scheduling this hearing.
        Joining me, as you know, is Assistant Secretary of Commerce
    for Economic Development Administration, Phil Singerman, who I
    must say at this early stage in my brief remarks has done a
    remarkable job for the EDA and for the Department of Commerce.
    He represents our entire department well and we are extremely
    proud of him and the team that he's put together.
        I'm pleased to testify on behalf of the Economic
    Development Partnership Act of 1998, which does reauthorize for
    5 years the Economic Development Administration. My message is
    clear and short. This legislation is critical to our ability to
    efficiently help our Nation's distressed communities.
        It is my goal as Secretary to run a department that is
    efficient, cost-effective, and productive for the American
    people. And EDA clearly achieves all of these goals. Ninety-
    nine percent of its public works projects, as has been stated,
    have been completed as planned. Since President Clinton took
    office, the agency has cut the number of political positions
    from 14 to 5, and has cut the number of regulations by 60
    percent. This is a leaner EDA that has learned how to do more
    with less. But most importantly, it knows how to expand
    opportunities for the American citizens who need it most.
        Let's be frank, there has been criticism that this program
    is pork. That with an economy as strong as ours, communities do
    not need help developing their infrastructure or attracting new
    businesses. The fact is that these funds are predominantly
    invested in areas where the unemployment rate is 40 percent
    higher than the national average and per capita incomes are 40
    percent below average.
        The fact is that a thriving community 1 day can be a
    distressed one the next. All it takes is a military base
    closure, a defense industry downsizing, Department of Energy
    reduction, or a natural disaster. As Chairman Chafee knows
    first-hand, that happened in Narragansett overnight when
    suddenly an oil spill hurt the fishing and tourism industry.
    But within 30 days we gave a $1 million grant to get the
    community back on its feet and therefore develop recovery
    plans.
        I've also heard criticism that some of these are make-work
    projects; all they do is create short-term construction jobs.
    This is not so. These programs create permanent jobs. The fact
    is that 6 years after the projects are completed, on average,
    the number of local jobs have doubled. As Senator Boxer stated,
    for every $1 million Congress authorizes to fund an EDA
    project, that leverages $10 million in private-sector
    investment.
        EDA's programs do work. Take Grand Forks, North Dakota.
    After those terrible floods in 1997 that devastated North
    Dakota, South Dakota, and Minnesota, we came in with a $3
    million grant to construct two professional buildings in
    downtown Grand Forks. Community leaders and political leaders
    have come in and told me that if it hadn't been for this
    investment businesses would have left downtown and the people
    of Grand Forks, who had already lost so much and suffered so
    much, would have lost their central business district and,
    therefore, a central part of their lives.
        Or take the Center for Employment Training in Santa Clara,
    California. EDA grants totaling $4 million over the last few
    years were used to convert an abandoned high school in a highly
    distressed Hispanic neighborhood into one of the most
    successful vocational training facilities in California. The
    Center has now expanded its programs to include a culinary
    school, medical assistant training, and every student graduates
    into a job.
        Another example is our $2 million grant to help Portland
    State University build a distance learning center. It will link
    the University's educational programs with rural and remote
    areas of Oregon so underemployed and unemployed people there
    can have access to academic, business, and vocational training.
        I believe that in the future what we do at EDA will be even
    more important. In this new economy, the pace of globalization
    and technology development will accelerate. We will see
    constant restructuring of firms and industries and all this
    will require our Nation's communities to be more flexible,
    innovative in creating jobs and attracting private-sector
    investment. And a new EDA will be there to help.
        This agency has reformed for the better, and this
    legislation will allow it to reform even more. It will reduce
    our paperwork, it encourages State and local cooperation as has
    never been done, it simplifies the application procedures, it
    provides maximum flexibility to grant recipients, and this
    legislation will allow us to change the eligibility
    requirements for EDA assistance. Gone will be the days that
    once you are a designated area you remain one for life.
    Replacing it will be a fairer process that says simply an
    applicant is eligible based on the needs at the time he
    applies.
        So, Mr. Chairman, I believe that we have addressed the
    concerns that Congress and others have expressed over many
    years. As has been also stated, EDA has not been reauthorized
    since 1982. The time has come to do this, and I look forward to
    working with you, Mr. Chairman, and the entire committee to
    move this bill forward. Thank you.
        Senator Warner. Thank you, Mr. Secretary.
        S. 1647 declares that new employment opportunities should
    be created by developing expanding new and existing public
    works and other facilities and resources rather than by merely
    transferring jobs from one area of the United States to
    another. S. 1647 further declares that the way to do this is by
    supporting firms and industries which add to the growth of the
    Nation's economy through improved technology, increased
    exports, and the supply of goods and services to satisfy the
    unmet demand.
        These are worthy goals. How do we ensure that these goals
    are met? That is, as a practical matter, how can we be sure
    that EDA funds aren't simply used to entice businesses to
    locate in a given area or to prevent businesses from leaving,
    possibly enriching their business without adding to the growth
    of the Nation's economy? For example, section 606 of the bill
    identified the certification required for businesses receiving
    financial assistance but makes no mention of job relocation. Do
    you feel that the bill includes the authority you need to
    ensure the creation of jobs rather than the movement of
    existing jobs?
        Secretary Daley. Mr. Chairman, if I could ask Mr. Singerman
    to respond.
        Senator Warner. Certainly.
        Mr. Singerman. Thank you, Mr. Secretary. Thank you, Mr.
    Chairman. The question you raise is a very important question
    and it's one that EDA takes very seriously. Currently, our
    legislation prohibits using EDA financial assistance to assist
    businesses in relocating from one area to another. Although
    this applies to a narrow band of EDA's programs, we have
    applied this non-relocation requirement to all of our
    assistance programs. In our regulations, we further clarify the
    purpose and implementation of this criteria.
        Every applicant has the affirmative duty to inform EDA of
    any employer who will benefit from such assistance, who will
    transfer jobs in connection with the EDA grant. EDA then
    determines compliance prior to award of the grant based upon
    the information provided by the applicant.
        I'd like to put this in context. The research over the last
    20 years from the economic development field demonstrates I
    think pretty conclusively that most job growth and loss in a
    community is a function of the creation of new companies, the
    death of companies, the expansion of companies, the contraction
    of companies. A very small percentage of employment growth in
    any community is related to the in-migration and the out-
    migration of firms.
        I think you know from your experience that your communities
    in your States really are no longer competing with one another,
    but the regions within our country are competing with regions
    around the world. It's not firms moving from Rhode Island to
    Virginia, or from Connecticut to Montana, it's firms moving
    overseas or moving, as in the case of Montana, from foreign
    countries to locate in the United States. So much of what we
    see is this normal fluctuation of the economy.
        We have undertaken an independent study by the National
    Association of State Development Agencies to determine the
    effect of the incentives that States provide on firms that are
    moving into their areas. EDA doesn't allow it, but, as you
    know, many States compete with one another and we're taking a
    very serious look at this.
        I think that the procedures that we have in place, the
    legislative prohibition against this, and the care with which
    the local partners that we work with look at these issues
    provides a high level of assurance that we're not using Federal
    money to move jobs from one jurisdiction to another.
        Senator Warner. Given that we're about to have a vote, I'll
    make my question period very short, Mr. Chairman and others,
    and we can just follow along here till the vote.
        Mr. Chairman?
        Senator Chafee. Mr. Secretary, I think we all agree that
    EDA alone can't turn around a community economically. It can be
    helpful but to have it really succeed you've got to have the
    community assume the primary role. Do you think that your
    legislation----and either you or Mr. Singerman can answer this,
    however you want to do it----do you think your legislation
    recognizes enough that the real burden is on the local
    community? Yes, you can help, you can put in $2 million for a
    building or $3 million, but in the long run it's going to be
    determined by what the community does, I believe. Do you think
    your legislation reflects that?
        Secretary Daley. I feel strongly, and I'll ask Phil to also
    comment, I feel strongly that it does. We start with the same
    belief, Mr. Chairman, that it is the local community that has
    to make this succeed. And taking the example as I used in my
    statement, Grand Forks, we came up with $3 million to build the
    building but it was really the local community economic
    development group, the political structure, the community
    groups that came up with the tenants for the buildings and for
    all the development that's gone around it. That building alone
    would not have made a difference had it not been for the
    support of the local community. So there's no question. I think
    the legislation does, and Phil may want to jump in with
    particulars.
        Mr. Singerman. Secretary Daley is quite right. The
    underlying premise behind the way EDA works and what makes it
    unique among Federal programs is that we have a close working
    partnership with local economic development districts, local
    governments, local universities, and out of this partnership
    comes a strategic planning process which we support through our
    planning funds, a process that builds consensus within the
    community and identifies priorities that are necessary for the
    community's economic development growth and diversification.
        Every project that EDA supports is a project that also
    receives financial support from State and local Governments and
    other organizations in the community. These are not grants that
    we kind of give to people because we think it's good for them,
    but these are investments that are co-invested with local
    communities in projects that they determine are of the most
    importance to their communities.
        Senator Chafee. OK. Thank you very much. Thank you, Mr.
    Chairman.
        Senator Warner. Senator?
        Senator Baucus. Thanks, Mr. Chairman. First, I just want to
    tell you, Mr. Secretary, that you're doing a great job, you and
    Mr. Singerman.
        Mr. Singerman. Thank you, Senator.
        Senator Baucus. You're doing a great job in a lot of ways,
    but I know particularly in this program, the EDA, you're doing
    a terrific job. I don't know anybody who works harder,
    particularly Mr. Singerman, in working in the right way to make
    sure EDA works and works in the right way. I've seen it many
    times and I'm very impressed, and I know that people in my
    State are very impressed, too. I wish that all public servants
    would work as hard as both of you do because it would make a
    huge difference.
        My question really is this. There are some critics who
    think, gee, there are an awful lot of economic development
    programs, why do we need another one? Why is this so unique?
    Why is this so special? Why do we need it? Aren't there enough
    other economic development programs that could take care of our
    needs? I know that you do a lot of coordination in the
    communities first, but essentially I thought I'd just let you
    sound off and give you the opportunity to answer those critics,
    because, as you well know, there are some who do have that
    point of view.
        Secretary Daley. Let me just ask Phil to do it, because
    Phil ran a local economic development organization and I think
    it would be good if he put it in the perspective of having run
    that and now doing the Federal EDA.
        Mr. Singerman. Well, I think there are too many, and we
    were there first.
        [Laughter.]
        Mr. Singerman. EDA has been around since 1965. It is the
    only Federal agency that has as its unique and sole mission
    working in a collaborative partnership with local communities
    to promote their economic development. There's no other Federal
    program that I'm aware of that has that as its sole and unique
    mission.
        We work collaboratively with sister agencies within the
    Federal Government and State and local Governments to bring
    together the resources that are necessary for a community's
    economic development activity. For example, in the area of
    defense adjustment, we work very closely with the Office of
    Economic Adjustment in the Department of Defense and with the
    Department of Labor. In the area of disaster recovery, we work
    very closely with FEMA, they have the overall responsibility,
    and within that we collaborate closely both here in Washington
    and on the ground with HUD, with SBA, with the Army Corps of
    Engineers to help communities, such as Grand Forks, recover
    promptly and effectively from their disasters.
        Senator Baucus. So you're first and you're also the only
    ones who really coordinates and works with all the other
    economic development agencies as well as with the other
    departments. Is that basically it?
        Mr. Singerman. Yes.
        Senator Warner. Senator, allow me to intervene. I think
    that's very important, Senator Baucus. I've observed that not
    only in my own State but elsewhere. I'm quite familiar with the
    base closure proceedings, I have responsibilities elsewhere in
    the Senate, and it has a superb track record of working with
    those agencies. I'm glad you brought it out.
        Senator Baucus. Thank you, Mr. Chairman.
        Senator Warner. Thank you.
        Senator Lieberman, if you have a question, then we can get
    to Mr. Singerman's testimony. Our vote has been delayed, so I
    believe we can wrap them up.
        Senator Lieberman. Great. Thanks, Mr. Chairman. Gentlemen,
    in the second panel we're going to hear from the National
    Academy of Public Administration. I want to mention two
    comments/criticisms I suppose I'd say, at least comments, and
    ask you to respond to them.
        First is that, in their report, ``The present multiplicity
    of programs imposes unnecessarily high transaction costs on
    States and localities.'' I wanted to ask you what efforts are
    underway, if any, to reduce the fragmentation of the Federal
    economic development effort.
        And then the second is the comment in that same report,
    this is not directly, the meager Federal investment in an
    information sharing and technology severely constrains our
    Nation's economic development efforts. If you want to give a
    brief response to both of those.
        Mr. Singerman. Sure. These are very important issues. We
    work very closely with NAPA and found their report to be very
    helpful. We've tried to overcome this fragmentation in a number
    of ways, including some of the legislative recommendations that
    we've made in our proposed bill. In terms of the transaction
    costs, we've tried to simplify the process of working directly
    with EDA on the part of local communities. So we've created a
    single application form, and, as Secretary Daley said, we have
    reduced regulations by 62 percent. Our legislation allows us to
    accept the plans that a local community develops for another
    agency, such as the Department of Transportation, for EDA's
    economic development planning purposes. There also is in the
    legislation recognition of the importance and the need for the
    Commerce Department, through the person of the Secretary, to
    work closely with other Federal agencies and to encourage other
    Federal agencies to work with the Commerce Department in the
    area of economic development.
        In terms of information sharing, one of the results of the
    NAPA study, one of the influences on us was to completely
    revamp our research in national technical assistance programs
    to focus on identifying best practices at the State and local
    level in economic development, and then disseminating that
    information widely through publications, through national
    organizations and associations, and through our own regional
    meetings and individual contacts.
        So, both of those issues are important issues and we've
    attempted over the last 3 years to address them head-on.
        Senator Lieberman. Thanks for that very responsive answer.
        Thanks, The Chairman.
        Senator Warner. Thank you, Senator.
        Mr. Secretary, you're free to go. Thank you very, very
    much.
        Mr. Singerman, do you have some additional remarks?
        Mr. Singerman. Yes, sir.
        Senator Warner. I did not go to you immediately knowing of
    the Secretary's schedule. I wanted the opportunity for members
    to question. We have two options: One, I can stay for about
    another 6 minutes to listen to you and in time you can depart,
    or I can depart now and resume the hearing in a few minutes
    when I get back from the vote, and then go on to the second
    panel. Which would you prefer?
        Mr. Singerman. Whatever is more convenient to you, Mr.
    Chairman.
        Senator Warner. Whatever your preference.
        Mr. Singerman. OK. I will speak for 5 minutes and summarize
    my prepared written statement.
        Senator Warner. This is very important so I don't want to
    rush you. Do you believe you can do it in 5 minutes?
        Mr. Singerman. I can, I timed it. You're very gracious.
    Thank you, sir.
        Senator Warner. I think you made a very profound impact so
    far.
        Mr. Singerman. Well, everyone has left, is that why?
        Senator Warner. I've been around here 20 years. They don't
    leave if they've still got a problem.
        [Laughter.]

     STATEMENT OF HON. PHILLIP SINGERMAN, ASSISTANT SECRETARY FOR
              ECONOMIC DEVELOPMENT, DEPARTMENT OF COMMERCE

        Mr. Singerman. Mr. Chairman, I appreciate the opportunity
    to testify before this subcommittee. I would request that my
    statement be made a part of the record.
        Senator Warner. Without objection.
        Mr. Singerman. I particularly want to thank you and the
    other members and your staff for your many courtesies toward me
    and my staff at EDA.
        Senator Warner. Well, they're well earned. I think you can
    determine from the remarks this morning that we're going to put
    a head of steam behind this piece of legislation to see if we
    can get that authorization.
        Mr. Singerman. That would be so wonderful.
        Senator Warner. And to the degree we're going to have
    success, it is largely dependent on the record which you and
    others have put together. That's a strong record.
        Mr. Singerman. Thank you, sir.
        I'd like to thank, Senator Baucus left, but I'd like to
    particularly thank him and Senator Snow for introducing our
    legislation upon request.
        Senator Warner. Some 38 cosponsors of that.
        Mr. Singerman. We're up to 40 now. And I want to thank
    Secretary Daley for coming here this morning to testify before
    your subcommittee.
        Behind me are the EDA senior executive management team.
    Their names and titles are included in my prepared statement.
        Senator Warner. I think we could just take a minute to
    introduce them.
        Mr. Singerman. Thank you, sir. Ella Rusinko is our Deputy
    Assistant Secretary for Program Research and Evaluation;
    directly behind me is Chester Straub, our Deputy Assistant
    Secretary for Program Operations; next to him is Ed Levin, our
    Chief Counsel; and seated there is Mitch Laine, our new Chief
    Financial Officer. So this is the senior management of the
    agency.
        Mr. Chairman, I first appeared before you and other members
    of the committee in late 1996 when you honored me by confirming
    me to this position. I'm very proud and pleased to report to
    you today that we've accomplished a lot at EDA since then. We
    have aggressively focused on improving the management and
    operations of the agency, including implementing a strategic
    planning process, developing program performance measures, and
    strengthening our partnerships with local organizations in
    economic development.
        As a result of our work, EDA is administratively reformed,
    reinvented, and transformed, which has in place a system for
    ongoing program evaluation. We have, and you'll hear about this
    later, validation of program performance, as evidenced by
    numerous independent studies by objective evaluators. The
    management reforms that EDA has implemented are yielding more
    efficiency and effectiveness. And we are, I'm sure you'll be
    pleased to know, focused on financial operations and are
    working closely with the Inspector General in the Department of
    Commerce.
        Secretary Daley mentioned the reduction in regulations by
    62 percent. We have reduced our staff by 30 percent over the
    last 4 years, a figure that is unmatched by almost any other
    Federal agency, and our noncareer appointees by 60 percent. We
    have simplified our grants application process, and implemented
    an agency-wide reorganization approved by the Administration
    and this Congress.
        We have implemented modern management and administrative
    practices. For example, we have completed the delegation of
    decisionmaking authority to the career professionals in the
    regional offices, the people who are closest to the communities
    and know their problems best. To provide seamless interaction
    with local communities, we have instituted a team-based
    approach in our field offices.
        And as I mentioned, we have hired the first chief financial
    officer for the agency to oversee the agency's vast management
    responsibilities. For example, in addition to the funding that
    we award each year, we are responsible for well over $1 billion
    of prior awards, construction awards on military bases which
    take between 2 and 5 years to come to fruition, and during that
    time we're responsible for the fiduciary management of those
    activities. So there's a major responsibility.
        Senator Warner. I've hit my zero mark of time to get over
    and get that vote. We'll just pick up when I return after this
    vote.
        Mr. Singerman. Very good.
        [Recess.]
        Senator Warner. My apologies. We do our best around here.
    But now we have an open-ended and adequate time to receive the
    benefit of your further testimony and to receive the benefit of
    an equally important and distinguished group who will be in
    Panel II. We won't be rushed.
        Would you kindly continue.
        Mr. Singerman. Thank you very much. The Economic
    Development Partnership Act of 1997 constitutes a reform of
    existing EDA authorizing legislation. The Partnership Act
    streamlines EDA authorities, establishes consistency among
    programs, and preserves the most effective tools. For example,
    the proposed legislation implements long needed improvements by
    allowing program flexibility to the Nation's distressed
    communities, facilitates program management and oversight,
    recognizes the EDA role in long-standing activities such as
    defense adjustment and post-disaster economic recovery, and
    formalizes EDA existing policy that focuses investment in areas
    of high distress by eliminating the outmoded designation system
    and replacing it with eligibility at the time of application
    based upon clearly defined specified economic distress
    criteria----targeting our resources to communities most in
    need.
        EDA has established a record of expertise and experience in
    economic development, and has been an innovator in helping
    distressed communities create the best economic development
    practices, such as revolving loan funds and small business
    incubators. EDA's unique approach to economic development has
    proven itself over time.
        However, the next century will host a different set of
    economic challenges for American communities as they strive to
    maintain global competitiveness in an increasingly
    technologically dominated society. EDA needs to be there,
    modernized and prepared now, to help America's distressed
    communities implement their own strategies and programs for
    economic recovery and growth.
        To provide this opportunity to these deserving communities,
    the agency and its customers require long overdue stability of
    programs, flexibility of operations, and to continue to
    institutionalize the administrative reforms we have enacted, we
    request this committee's formal legislative reauthorization of
    EDA.
        Mr. Chairman, I appreciate the opportunity to testify
    before you this morning, and want to express my willingness to
    work with you and members of the committee and your staff on
    behalf of America's distressed communities. I'd be glad to
    answer any further questions that you might have.
        Senator Warner. Thank you. I do have one or two. I want to
    say that Mr. Baucus, of course, introduced the Administration's
    bill and we have, as you say, 40 cosponsors. But by tradition,
    the Chairman will work on an amended type of bill in which I
    will join him as well as Mr. Baucus. So we will require that
    type of cooperation which you just proffered here in your last
    concluding remarks to put it together.
        I just think there's a growing convergence of viewpoints
    here so that a bill very close I think to the Administration's
    approach can be crafted and expeditiously moved through this
    committee and be reported to the floor.
        Mr. Singerman. Thank you.
        Senator Warner. For that, the Secretary and yourself are
    deserving of a great deal of credit.
        But one or two thoughts here. Realizing that one of EDA's
    missions is to help communities suffering due to base
    realignment and closure proceedings, would EDA be prepared for
    additional Base Realignment and Closure (BRAC) rounds? In other
    words, I happen to be one of those who believe that we've got
    to continue with the base closure process. That next round
    could be fairly significant. Would that require extra staff,
    and I would try and get it for you, particularly if it would
    require you to subtract some of your effort to other areas? I
    think, in my own judgment, that next round of BRAC will
    probably be in 2000, so it's in the future.
        Mr. Singerman. First, we need to complete, and I'm sure
    you're aware of this----
        Senator Warner. The past BRAC round.
        Mr. Singerman. That's correct. To date, only about three-
    quarters of the approximately 120 bases that were closed or
    downsized significantly have a closure date. So there is still
    about one-quarter that are yet to be closed and some will not
    close until after 2000.
        Second, even after a base is closed, it takes the community
    2 to 3 years to develop its reuse plans. So only now are those
    bases that were closed in 1995----
        Senator Warner. I just want to make this part of the
    record. I would suggest the following. We're finishing up this
    year's authorization bill for the armed forces in which there
    is no BRAC and there will not be one. So next year, God
    willing, I'll still be around to work on the next bill and we
    may lay the foundation, I say may, for the year 2000, 2001. At
    which time I would hope that you would be in your position and
    you could follow it and, if necessary, we would put something
    in the legislation establishing the next BRAC which would
    adequately protect your area of responsibility. You have a
    willing partner that would take it into consideration.
        Mr. Singerman. Thank you.
        Senator Warner. I think we'll conclude with that, Mr.
    Singerman. I have some other questions which I'll submit for
    the record. But the next panel has very patiently waited, and I
    hope that one or more of your staff can remain so they can have
    the benefit of this important testimony.
        Mr. Singerman. I will remain as well, sir.
        Senator Warner. That's fine. We may recall you to the
    witness table.
        Senator Warner. Now let's proceed with Panel II. We have
    Mr. Robert W. Burchell, Center for Urban Policy Research,
    Rutgers University, New Brunswick, New Jersey; R. Scott Fosler,
    president, National Academy of Public Administration, here in
    the Nation's Capital; Eric P. Thompson, National Association of
    Development Organizations, Aiken, South Carolina; and the
    Honorable Floyd Villines, on behalf of the Coalition for
    Economic Development, Little Rock, Arkansas. He, I take special
    note, is a public servant, having been elected by the people of
    the great State of Arkansas.
        Judge Villines. Thank you, sir.
        Senator Warner. Why don't you lead off, Judge Villines.

     STATEMENT OF HON. FLOYD G. VILLINES, JUDGE/EXECUTIVE, PULASKI
       COUNTY, ARKANSAS, ON BEHALF OF THE COALITION FOR ECONOMIC
                   DEVELOPMENT, LITTLE ROCK, ARKANSAS

        Judge Villines. Mr. Chairman, thank you for holding this
    important hearing and for inviting us here today to discuss the
    long overdue reauthorization of an agency that is very
    important to the revitalization efforts in our economically
    distressed rural and urban areas.
        Senator Warner. Excuse me. Let me interrupt.
        Judge Villines. Yes, sir.
        Senator Warner. By unanimous consent, each of your
    statements in their entirety will be made a part of the record.
    Therefore, you can summarize those portions you think are
    important to this hearing.
        Judge Villines. Thank you, sir. I will do that.
        I represent 15 national organizations committed to
    supporting the Economic Development Administration. Our
    coalition includes national organizations representing rural
    and urban economic development practitioners, professionals and
    academics, and local elected officials. These organizations
    include the American Economic Development Council, the
    Association of University Centers, the Council for Urban
    Economic Development, the National Association of Counties, and
    National Association of Business Incubators, the National
    Association of Development Organizations, the National
    Association of Installation Developers, the National
    Association of Management and Technology Assistance Centers,
    the National Association of Regional Councils, the National
    Association of State Development Agencies, the National
    Association of Towns and Townships, the National Congress for
    Community Economic Development, the National League of Cities,
    the Public Works and Economic Development Association, and the
    U.S. Conference of Mayors.
        There are two reasons that we think it is very important
    that this be done. The first is, this agency is moving into the
    21st century with authorizing legislation that goes back to the
    early 1980's. The agency needs reinforcement with new language
    that allows it to help our rural and urban communities meet the
    continuing and ever-changing challenges of economic
    revitalization. Among those challenges will be access to and
    expertise in information age technology. Our businesses in
    small cities and rural areas will simply be unable to compete
    in the global economy without access to these information and
    marketing tools.
        Second, reauthorization will allow the agency to focus on
    its core mission and to develop multiyear plans for its
    programs rather than draining off its energy in an annual
    battle for survival.
        The Coalition's support for EDA is based on a very simple
    concept----EDA works. It is the Federal agency that does what
    it was designed to do. It serves the Federal role of levelling
    the playing field for these communities that need to become
    productive parts of the national economy rather than a drain on
    it. It is a lean, streamlined agency with a clearly defined
    mission. It supports and help revitalizes our economically
    distressed communities. And as a local government official, it
    is important to me that EDA is there to provide the seed money
    necessary for the infrastructure improvements we need to
    attract new businesses and to help existing businesses expand
    and grow.
        I want to really emphasize the point of seed money. Without
    EDA and EDA's support, many of the things that we try to do, we
    just couldn't do them. An example in our testimony that will be
    filed is our community of North Little Rock. There were two
    census tracts in 1990 that had unemployment rates of 33 and
    nearly 34 percent respectively, with no industrial or other
    potential prospects. Working with EDA, we were able to get a
    grant that was matched 50-50 by the local community that put in
    water, sewer, streets, and out of that we ultimately got a $9
    million private investment, creating some 360 jobs. Over the
    years, we believe that that has helped raise the average income
    in our county by nearly $10,000 a year. And that project would
    not have happened had it not been for EDA.
        There are several other points I'll make, and then I'll let
    you move on to the other witnesses. First, EDA network is
    important to us. It provides the assistance with the economic
    development representatives that help watch over the project,
    help us put it together, and then continue with us from the
    very beginning. The planning process is also important. The
    whole issue of bottoms-up planning, of allowing people in a
    community to identify what their needs are and to coordinate
    that with other local and Federal agencies has given us impetus
    to do what ought to be done. Too often in the past, as anyone
    in local government knows, you sometimes get in a position
    where local communities are arguing and fighting with each
    other. The planning process requiring that joint planning
    really is an asset to us.
        There are other points that are in my testimony that I
    could go through. But since it will be part of the record, Mr.
    Chairman, I will leave that to any questions that you may have.
        In conclusion, Mr. Chairman and members of the committee,
    the Economic Development Administration has earned the respect
    of all of us who have worked with it. It is time the agency was
    recognized through reauthorization, and probably that's one of
    the best reforms you could do. We at the local level really
    need to know that there is going to be an agency there because
    economic development planning is more than a 1-year process. We
    really need the assurance that we will have a partner in the
    Federal Government that will assist us.
        Again, thank you for the opportunity to appear before you.
    I also pledge our support on the part of the Coalition to work
    with you in the drafting of the bill, as you mentioned earlier.
    And if you have any questions, I'll be happy to try to answer
    them.
        Senator Warner. Thank you. And may I say to you and the
    other witnesses, it is our hope here on the committee that you
    will bring your expertise to bear on the Chafee revision of the
    Administration's bill and that you will give us your best
    advice. And others in the room may have some interest. We want
    to do a good bill, one that will go through quickly.
        With that in mind, in the course of your testimony, if any
    of you feel there are provisions in the Administration bill
    which you would like to see revised, amended, or so forth,
    please let us hear from you.
        Now, Mr. Burchell. We thank you for traveling down from New
    Jersey.

       STATEMENT OF ROBERT W. BURCHELL, CENTER FOR URBAN POLICY
        RESEARCH, RUTGERS UNIVERSITY, NEW BRUNSWICK, NEW JERSEY

        Mr. Burchell. Thank you, Mr. Chairman. I'll be brief. My
    testimony and the charts which you'll see are to be made part
    of the record.
        Senator Warner. Do you have copies of those charts?
        Mr. Burchell. They're appended to the testimony, yes.
        Basically, what I would like to do is to report to you the
    numbers, some of which you've heard already, of a series of
    studies that Rutgers and others have undertaken on various
    programs of the Economic Development Administration.
        We produced three 300-page reports that looked at these
    programs, and we spent 2 years in an in-depth look at both
    defense adjustment and public works programs. Each of the
    principals was in the field a month looking at the programs. We
    went across the United States. We visited 100 of the 400
    programs to make sure the information was coming back to us and
    coming back to us correctly. We held seminars to make sure that
    those who were reporting information understood the concepts
    that we were about to ask them, the difference between a
    permanent job and a temporary job, between a direct job and an
    indirect job, between a construction job and a permanent job.
        In addition to that, we went into regional offices and a
    variety of other places to do, we feel, a comprehensive study.
    The study was undertaken by Rutgers, the New Jersey Institute
    of Technology, Princeton University, Columbia, the National
    Association of Regional Councils, and the University of
    Cincinnati. We looked at 203 public works projects and 187
    defense adjustment projects. No one got away. It's not a
    sample. Again, we looked at every single one of the projects.
    We visited--physically visited--25 percent of those 400
    projects.
        One of the things that we found out very quickly was that
    these projects are done in very economically impacted
    environments. The public works projects, again the figure was
    used here, 25 to 40 percent above the average unemployment rate
    of the area. These projects take place in communities where the
    unemployment rate is 25 to 40 percent above State and national
    averages. With regard to both the defense adjustment program
    and the public works program, per capita income is 25 to 40
    percent below State and national averages. So these are really
    economically impacted areas.
        Let me just go through very briefly the public works
    program first and just take a look at these performance figures
    with regard to the public works projects.
        Senator Warner. Let me interrupt. This is a very impressive
    amount of private-sector work that has been done. It will be a
    valuable asset to the committee. Could you refer to us any
    other groups that have done similar studies? We want to make
    sure that we have before us all the available information.
        Mr. Burchell. We did a literature search and that's part of
    the information presented. In addition, there was another
    study, the Mount Auburn Study done in 1992, which reached
    similar conclusions as the kind of conclusions that I will
    report to you.
        Senator Warner. That was Mount----
        Mr. Burchell. Mount Auburn. They're a research firm in
    Massachusetts.
        Senator Warner. Who authorized that firm to do the work?
    Who authorized you or funded you?
        Mr. Burchell. We bid with a consortium of research
    institutions on an RFP that was put out by the Economic
    Development Administration.
        Senator Warner. I see. So EDA put it out, is that it?
        Mr. Burchell. Right. And we competitively bid that process,
    yes.
        Senator Warner. How about the other study that you cited?
        Mr. Burchell. I think that that was the same.
        Senator Warner. But yours then is more recent?
        Mr. Burchell. More recent and actually we believe more
    encompassing in terms of the number of projects looked at.
        With regard to the findings for the public works program,
    99 percent of the projects completed as planned, 91 percent
    completed on time, 52 percent completed under budget. I would
    add that when a project is completed under budget, neither EDA
    nor the grantee keeps that money. Rather it goes back to the
    Treasury. So those are very, very significant figures given
    that particular situation.
        With regard to job production--327 permanent jobs for every
    $1 million of EDA money invested, about $3,000 per job--one of
    the lowest costs in job creation that we have seen in all of
    our analysis of other programs, and $4,800 in total cost per
    job, including the matching share. In addition to that, 15
    construction jobs per $1 million of EDA funding. So not only do
    they produce permanent jobs but also construction jobs.
        Another figure that you've heard before but that has been
    duly documented in these reports, for every $1 million of EDA
    funding, $10 million in private-sector investment and $10
    million in terms of local tax base added to the community.
        With regard to defense construction projects, and they're
    different in that if you were to view a hospital, the EDA
    public works program would be the normal portion of the
    hospital, the EDA defense adjustment program is the emergency
    room. The EDA public works program operates in typically long-
    term distress areas, both urban and rural, the defense
    adjustment in sudden shock areas. And these are newer projects,
    funded only from 1992 to 1995, and not expected to have the
    kinds of results of the public works projects. But, again,
    their performance is admirable.
        In terms of projects moving to completion--97 to 100
    percent. Projects that are on time--60 to 80 percent. Projects
    that are at or under budget--90 to 100 percent. Jobs produced--
    124 for defense construction per million of EDA investment. For
    revolving loan funds, moneys given out to create businesses--
    304 per million. Almost equivalent to the bread and butter
    public works projects. So on both sides, the defense adjustment
    and the public works, about a $3,000 figure per job created.
        With regard to private-sector leverage, $2.2 million for
    every $1 million of EDA investment on the defense construction.
    And with regard to the revolving loan funds, about $2.5
    million.
        We also asked the grantees to evaluate how EDA was doing
    its job with regard to training and technical assistance. These
    are in what they call the capacity-building efforts----the
    planning, the training, technical transfer, technological
    transfer, product development, et cetera. We asked them to rate
    EDA on a scale of 1 to 10 in terms of the quality of the
    project that they helped deliver and the impact of that
    project. And for the defense adjustment strategy, EDA was given
    a rating of 8 out of 10. For technical assistance, close to 9
    out of 10. And for market analyses, feasibility studies, and
    base reuse studies, also a rating of approximately 9 out of 10.
        Our conclusions are very simple. EDA projects get done on
    time and efficiently. EDA projects create permanent jobs in the
    locations that they're found. EDA projects create significant
    amounts of private-sector leverage. And EDA also creates a
    multiplier effect of about 1.5. So all of the numbers that I
    have given you before, add 50 percent for its ripple effects to
    the economy type of impact. We did that study with a very
    sophisticated input/output model. And then finally, EDA has an
    independent effect. In other words, if somebody were asked the
    question, ``Would those jobs be created in those locations
    without EDA presence?'' The answer is, ``no.'' Through very,
    very heavy regression analysis, we determined that EDA has an
    independent effect in terms of creating jobs in local areas.
    Our overall conclusion is that EDA programs are having their
    intended effect in the locations in which they're operable.
        Senator Warner. In one sentence, it works.
        Mr. Burchell. It works.
        Senator Warner. I suppose if it ain't broke, don't try and
    fix it. But did you look at possible revision of some
    provisions of the President's bill?
        Mr. Burchell. We didn't, but we looked at EDA procedures.
    There, again, what is going on is very commendable. We made
    some recommendations, and one of the recommendations we had is
    that there should be ongoing monitoring of the public works
    projects. There is incredible monitoring of the revolving loan
    funds because a loan is given out and they monitor almost
    forever. With regards to the public works projects, there is
    informal monitoring after the project is built out. But in
    order for them to keep track of jobs created on a regular
    basis, and since those jobs increase over time, they should
    monitor those on a regular basis.
        Senator Warner. But you will follow the work of the
    committee as we move ahead with this?
        Mr. Burchell. Absolutely.
        Senator Warner. We appreciate it, because you've got a
    remarkable corporate knowledge of this entire thing. Thank you
    very much.
        Next, Mr. Fosler, President, National Academy of Public
    Administration.

     STATEMENT OF R. SCOTT FOSLER, PRESIDENT, NATIONAL ACADEMY OF
                         PUBLIC ADMINISTRATION

        Mr. Fosler. Thank you very much, Mr. Chairman. I'm here to
    testify on behalf of the Academy's panel on economic
    development. This panel was chaired by former Governor Dick
    Thornburgh, a Fellow of the Academy, and he had hoped to be
    here and was sorry that he could not come. He is out of the
    country in South Korea this week.
        As you know, the Academy is an independent, nonpartisan,
    nonprofit organization chartered by Congress to identify
    emerging issues of governance and to provide practical
    assistance to Federal, State, and local Government on how to
    improve their performance.
        Two years ago, the Economic Development Administration
    asked the Academy to take a fresh and independent look at the
    basic question, What is the appropriate future role of the
    Federal Government in economic development activities?
        The Academy convened a panel, chaired by Governor
    Thornburgh, with a diverse group of experts from local, State,
    and Federal Government and the private sector, and it reviewed
    the economic development policies and programs of all Federal
    agencies, not just of the EDA. It did not specifically address
    the question before this committee, the reauthorization of EDA,
    nonetheless, it's findings and recommendations may prove useful
    to the committee in its deliberations.
        I have a copy of the panel's report, ``A Path to Smarter
    Economic Development: Reassessing the Federal Role,'' and I
    would ask that it be entered into the record.
        Senator Warner. Without objection.
        [A copy of the executive summary of the referenced report
    follows:]
       A Dialogue on the Report: A Path to Smarter Economic Development:
               Reassessing the Federal Role, November 22-23, 1996
        On November 22-23, 1996, the National Academy of Public
    Administration convened a conference to review its recently released
    report on the Federal role in Economic Development. A Path To Smarter
    Economic Development: Reassessing the Federal Role resulted from a 1-
    year study by an Academy panel chaired by former Pennsylvania Governor
    Richard Thornburgh. The U.S. Economic Development Administration (EDA)
    and the Annie E. Casey Foundation funded the study.
        The goal of the conference was to solicit feedback on the report
    and to stimulate a national debate about the Academy panel's
    recommendations. The conference brought together more than 100 invited
    guests from across the country, representing all facets of economic
    development: State, regional local and neighborhood-based
    practitioners; Federal policy and program officials: private-sector
    leaders; and university researchers. Participants debated the panel's
    findings about the appropriate Federal role in economic development and
    its recommendations for improvements.
        The discussion was organized around four topics, each of which was
    addressed during a set of break-out sessions. The first topic was a
    broad review of the panel's findings and recommendations. The other
    three topics focused on the panel's specific findings and
    recommendations concerning reaming, leveraging and linking.
    General Comments on the Report
        Participants strongly endorsed the panel's finding that the primary
    Federal role in economic development should be to support State,
    regional, and local economic development efforts. They further agreed
    that the current Federal system does not fulfill that role well--
    little, if any, Federal leadership exists, and there is considerable
    fragmentation and duplication among Federal program activities.
        There also was strong agreement on the panel's recommendation to
    focus the Federal role on the concepts of reaming, leveraging and
    linking. There was, however, considerable support for expanding these
    concepts to encompass the idea of leadership. Many believed that
    together all four concepts would provide a national vision for economic
    development, especially by promoting a better understanding and
    application of effective economic development practices and fostering
    the use of new technologies for communication and sharing of ideas
    among development practitioners. Many of the specific ideas for a
    stronger Federal leadership in economic development echoed the panel's
    discussion on recommendations about reaming.
        Considerable discussion centered on defining economic development.
    The panel's report defined the scope of its work around a specific set
    of Federal economic development programs--those that clearly bear the
    label of economic development and are focused on specific places or
    businesses. The panel was not asked to review Federal policies that
    focus on the national economy in general (such as monetary, fiscal, or
    trade policy). Nor was the panel asked to review the large number of
    policies or programs which, while contributing to economic opportunity,
    are directed toward goals that are separate national pursuits
    themselves (such as transportation, defense, and environmental
    protection).
        The panel also noted that the diversity among local economies
    precluded any single definition of effective economic development. The
    panel did acknowledge the importance for the Federal Government to
    coordinate the very broad range of Federal programs that impact
    directly or indirectly upon State and local economic conditions.
        The focus of the panel on Federal economic development programs per
    se generated lively debate. Some participants believed this approach
    fostered an unfortunate separation between economic and community
    development, while others believed it did not go far enough in
    distinguishing between the two. Others argued that without a broader
    Federal definition of effective economic development, it was impossible
    to define the Federal role in reaming, leveraging, linking and
    leadership; in essence, it was difficult to advance the practice of
    economic development without knowing which direction to take. For
    example, many participants said the report should have examined more
    closely the technology programs as well as the role of universities in
    economic development.
        The issue of the proper definition of economic development was not
    resolved during the conference, although all acknowledged that it must
    be more clearly addressed as steps are taken to implement the panel's
    recommendations.
    Reaction to Findings and Recommendations About Learning
        The most strongly supported recommendations in the panel's report
    were those concerning the Federal role in advancing the knowledge base
    of economic development. Many argued that this should be the most
    important Federal role. An important element of the discussion was the
    belief of some that the Federal role in learning must be driven by a
    benchmark definition of economic development, which should be used to
    change the habits or practices of economic development practitioners.
        Regarding specific panel recommendations. there was:

      strong agreement with the need to advance the state-of-the-
        art by giving a higher priority to federally financed research,
        evaluation and demonstrations. As important, however, was the
        identified need to build reaming networks across the country to
        convey information about economic development. Participants noted
        that economic development practices are more often driven by
        anecdotes than by data, and that learning networks are an effective
        tool for conveying the lessons derived from such experiences,
        anecdotes, and information.
      lively debate regarding increasing attention to the costs and
        benefits of recruitment. Some believed the report did not go far
        enough in pointing out the negative consequences of recruitment,
        such as overly generous subsidies, while others thought the report
        unfairly singled out this strategy. The issue clearly provoked
        strong feeling among participants and divergent views on how it
        should be addressed at the Federal level. Most agreed, however,
        that excessive expenditures on recruitment deals is an
        embarrassment to economic development professionals and that, in
        general, the public and elected of finials need better information.
      strong agreement with the panel's recommendations about the
        need to improve Federal data collection and analysis. Participants
        were particularly concerned that Federal data be more useful for
        State and local practitioners. There was some skepticism among the
        group, however, about consolidating Federal data organizations.
        Most participants did not believe this is politically feasible and
        did not want to expend the political capital on a very uncertain
        outcome.
    Reaction to Findings and Recommendations About Leveraging
        Conference participants endorsed the panel's idea that Federal
    economic development resources generally should be used to influence
    policy directions at the State and local level. Considerable
    discussion. however, ensued around the panel's critique of short-term
    deals and its concern that projects rather than strategies drive the
    development process. Many participants supported the panel's criticism
    of ``projectitis,'' and there was broad agreement that strategic
    analysis and planning are essential. However. panel members and
    participants agreed that such criticism should not undermine the
    importance of projects per se, which can be a central element of many
    economic development activities.
        Although many participants believed that project decisions are best
    made at the State and local level some felt that the Federal
    Government--both executive and legislative branches--would continue to
    earmark funds for specific projects. Other participants, however,
    supported the panel's call for a reduced Federal role in making
    individual project.
        Regarding specific panel recommendations, there was:

      agreement with the idea of using Federal resources to
        encourage State and local development organizations to focus their
        development efforts on regional solutions. It also was suggested
        that the Federal Government should make a concerted effort to
        identify and remove Federal barriers to local cooperation.
      strong endorsement of targeting Federal resources to the
        development needs of distressed places. both urban and rural.
        Participants also noted the need to ensure linkages between Federal
        policies that target distressed areas and those that target
        distressed populations.
      firm support for Federal assistance for capacity building.
        They noted that Federal policy efforts depend on the implementation
        abilities of local development professionals and public and private
        leaders. The group supported allowing institutional frameworks to
        evolve from the bottom up rather than being imposed from the top
        down.
    Reaction to Findings and Recommendations About Linking
        As noted earlier, there was strong agreement among conference
    participants that the current Federal approach to economic development
    did not support State and local economic development well. Most
    participants agreed with the panel's finding that the duplication and
    fragmentation among Federal programs imposed high transaction costs for
    State and local development efforts.
        There was lively debate on how to address this issue. Some
    participants believed State, regional and local efforts were solving
    the problem of fragmentation. Development officials have become
    proficient at coordinating efforts and packaging various program
    resources. Other participants noted that although there were many
    positive examples of effective local coordination and resource
    packaging, it was unfortunate that practitioners spent so much time on
    grant and administrative entrepreneurship rather than on innovative
    problem solving for their communities. These same participants further
    noted that although Federal administrative waivers had gained great
    currency, the need for waivers represented a failure in policy and
    program design. Participants vigorously debated whether fragmentation
    could be addressed better at the Federal level or whether current
    coordination models, such as the State Rural Development Councils and
    the new performance partnerships of the Metropolitan Planning
    Organizations under the Department of Transportation, were the more
    appropriate solutions to the problem of fragmented Federal programs.
        Regarding specific panel recommendations:

      many participants strongly disagreed with the panel's
        recommendation for wholesale consolidation of Federal economic
        development programs. Instead, they suggested an incremental
        approach that would involve restructuring Federal program
        activities around a geographical focus--rural programs and urban
        programs--or around substantive development areas such as business
        development, international trade, or infrastructure development.
        Others advocated focusing on administrative consolidation, such as
        eliminating duplicative planning requirements, conflicting grant
        cycles, or repetitive reporting requirements. A key concern about
        consolidation was the perceived difficulty of overcoming the vested
        authorities and interests of congressional subcommittees and
        executive branch agencies. Most participants were wary of expending
        political capital for what they believed would be a futile effort.
      although most participants supported the panel's
        recommendation for overall Federal policy guidance, most did not
        see a viable mechanism for such effort or the political feasibility
        of one group asserting authority over others in the Federal system.
        Participants regretted that the National Performance Review's
        recommendation for a Federal coordination council for economic
        development was never implemented. Many participants believed that
        the most viable option for policy coordination was at the State
        level through a mechanism similar to the rural development
        councils.
      there was general agreement on the panel's recommendations to
        foster interfirm linkages by forming industry associations and
        reducing legal and regulatory barriers to collaborations among
        firms.

        Although participants agreed with the panel's findings that the
    current Federal approach to economic development did not support State
    and local development efforts, there was no consensus on the best ways
    to improve the system. Many participants expressed concern that efforts
    to reform could open the door to cuts in funding for Federal programs.
    A Strategy for Implementing the Report
        Conference participants were asked to consider next steps beyond
    the Academy report. A key issue is whether the economic development
    community will seek to influence the nature of that change or simply
    let it happen. Two levels of response followed: EDAs reaction to the
    panel's findings and recommendations, and the suggestions by conference
    participants for implementing the study results.
    EDA's Agenda
        Philip Singerman, assistant secretary of commerce for economic
    development, addressed the conference at its end, presenting his
    personal reaction to the panel's study. Overall, he felt very positive
    about the panel's findings and supports the spirit and intent of all
    the recommendations. He noted that he and other staff had the
    opportunity to observe the panel's deliberations over the past year
    and, as a result, already had taken actions consistent with several key
    panel recommendations.
        Of particular note is the agency's commitment to focus its research
    and technical assistance efforts on producing better information about
    economic development issues identified by the panel. Specifically, EDA
    is already focusing on:

      measurement and evaluation, by supporting a national study to
        develop a methodology for evaluating its economic development
        programs
      distressed areas, by supporting a study to examine the
        effectiveness of State science and technology strategies on the
        needs of disadvantaged communities
      clusters, by examining the Federal role in cluster
        development
      recruitment, by sponsoring research to develop legitimate
        methodologies that will enable local communities to assess better
        the costs and benefits of such economic activities
      infrastructure finance, by cooperating with the Office of
        Economic Adjustment and the Department of Defense, the agency is
        identifying innovative approaches for financing the infrastructure
        critical for areas responding to a base closure or defense industry
        downsizing.

        Assistant Secretary Singerman concluded by encouraging the Academy
    to make the results of this study known to national policymakers and
    noted that this is a special opportunity to engage the administration
    as it defines policy agendas for the next 4 years.
    Suggestions for Next Steps by Conference Participants
        Conference participants stressed the necessity of an aggressive
    campaign to have the report taken seriously and its recommendations
    adopted. Noting the Academy's institutional prohibition against
    lobbying, participants identified steps that they, State and local
    officials and other interested parties, could take including:

      distributing the report widely to leaders in Washington, DC,
        States, regions, and communities convening associations of
        practitioners, policymakers and interest groups to develop a
        coalition to pursue implementation
      identifying champions/groups to pursue specific
        recommendations
      bringing ``bottom-up'' pressure on legislators to implement
        the recommendations
      encouraging the National Economic Council, the Office of
        Management and Budget, the National Performance Review, or a
        similar entity, to embrace the panel's recommendations
      educating business associations on the panel's findings and
        encourage their active involvement in pursuing its recommendations
        asking EDA to take the lead in building demand for better data
      encouraging agencies to work cooperatively to address the
        fragmentation and duplication of program planning and reporting
        requirements, as well as other administrative barriers to more
        efficient performance.

        The Academy agreed to distribute its report broadly, as well as to
    make panel members available for presentations and testimony on the
    study findings and recommendations. A number of conference participants
    agreed to present the study to their respective colleagues and to
    pursue efforts to implement the panel's recommendations.
         executive summary of a path to smarter economic development:
                          reassessing the federal role
        Over the past three decades, Federal agencies have invested
    hundreds of billions of dollars to help States and communities create
    jobs and economic opportunities. In light of severe pressures on the
    Federal budget and new economic opportunities and challenges, Members
    of Congress, citizens and economic development professionals are
    asking, ``What is the appropriate future role of the Federal Government
    in economic development activities?''
        The following report of a panel of experts recommends rethinking
    the basic premises for Federal economic development activities at the
    State, local, and regional levels. It offers a coherent and experience-
    based conception of how our national government might organize and
    carry out genuinely effective development assistance to regions,
    States, and communities.
        Historically, Federal development efforts have tried to increase
    overall national productivity and to help economically distressed and
    poor communities gain a share of the country's general prosperity.
    Toward these ends, the Federal Government has built and sustained a
    variety of organizations involved in economic development at every
    level of society. They include development agencies at the State and
    local level, multi-county development districts, and community based
    development corporations, not to mention various non-profit
    organizations, banks, industrial associations, and other private-sector
    partners.
        The panel met over the course of a year, interviewed economic
    development experts and Federal officials, and closely examined eight
    communities (both rural and urban) for insights into what works and
    why.
        Among the panel's findings:

      The fundamental economic influences of the private sector and
        market forces must be incorporated into successful economic
        development plans.
      Federal investments in development efforts are critical to
        many States and localities, but not all.
      No single Federal program is appropriate in all communities;
        however, the present multiplicity of programs imposes unnecessarily
        high transaction costs on States and localities and exacerbates
        inherent weaknesses in their approaches.
      The meager Federal investment in information sharing and
        technology severely constrains our nation's economic development
        efforts.

        In response, the panel has proposed a new approach to meet economic
    development needs. It urges the Federal Government to help States and
    localities learn through better information, leverage all available
    resources, and link multiple Federal initiatives to assist local
    communities.
        The panel's report concluded with 10 specific recommendations for
    improving economic development programs and practices in America. The
    Federal Government should:

      Help States and communities learn about state-of-the-art
        economic development practices;
      Act to reduce the economic losses resulting from unrestrained
        bidding war among States and localities to recruit or retain
        businesses;
      Improve the quality of economic development decisionmaking
        and the assessment of policies and programs at all levels by
        gathering and disseminating State, regional, and local economic
        statistics and by reducing the fragmentation of the nation's
        statistical system;
      Give States and communities incentives to design and
        implement effective regional or inter-jurisdictional development
        strategies;
      Encourage investment in development strategies that offer
        opportunities to generate jobs and income over the longer term,
        rather than in high-visibility projects;
      Give special assistance to States and communities seeking to
        create economic opportunities in distressed communities;
      Substantially reduce the fragmentation of the Federal
        economic development effort;
      Establish a permanent mechanism to provide overall policy-
        level guidance to other Federal activities such as work force
        training, environmental protection. technology and research. and
        other endeavors that contribute to economic development outcomes;
      Reorient Federal programs. especially business finance
        programs, toward strategies that address the underlying obstacles
        to obtaining credit; and
      Encourage States and localities to stimulate links among
        businesses to enhance overall economic performance.

        The nation's economic development programs will be a critical
    factor in two of the most significant domestic policy challenges of the
    coming decades: America's adjustment and response to an increasingly
    competitive global economy, and the recent transformation of social
    policy from one based on dependency to one that stresses opportunity
    and personal responsibility. A reformed Federal approach to economic
    development will help States and communities make real and far greater
    contributions to addressing these issues.
        Mr. Fosler. Briefly, the report recommends a rethinking of
    the basic premise of Federal economic development activities at
    the State, local, and regional levels. The panel felt strongly
    that economic development programs should be grounded in the
    fundamental influence of the market, geared toward engaging the
    power of the private sector, and tailored to specific
    conditions of regions and communities. And to this end, it
    proposed a three-pronged approach by which the Federal
    Government could best support State and local economic
    development efforts that were designed by the States and
    localities themselves.
        First, the Federal Government should help States and
    localities learn about state-of-the-art economic development
    practices in order to improve the quality of economic
    development decisionmaking and the effective implementation of
    policies and programs. They could do this, in part, also by
    gathering and disseminating State, regional, and local economic
    statistics and by reducing the fragmentation of the Nation's
    statistical system.
        Second, the Federal Government should leverage resources
    committed to economic development by giving States and
    communities incentives to design and implement effective
    regional or interjurisdictional development strategies, and by
    encouraging strategies that emphasize long-term pay-off over
    high visibility projects.
        And third, the panel felt that the Federal Government
    should make it easier for States and localities to link Federal
    resources by substantially reducing the fragmentation of
    Federal economic development efforts. For example, it might
    establish a mechanism to provide overall policy level guidance
    to other Federal activities, such as work force training,
    environmental protection, and technology and research that
    contribute to economic development outcomes.
        EDA does not have authority to implement all of the panel's
    recommendations. For example, it would take an action by the
    Congress and leadership by the President to substantially
    reduce the fragmentation of Federal economic development
    programs. However, the Academy has been pleased at many of the
    steps EDA has taken to implement the panel's recommendations.
    Assistant Secretary Singerman recently sent us a letter
    detailing these steps, and I would ask that a copy of his
    letter be entered into the record.
        Senator Warner. Without objection.
        [A copy of the referenced letter follows:]
                                 U.S. Department of Commerce,
                           Economic Development Administration,
                                    Washington, DC 20230, July 7, 1998.

        DeWitt John,
        National Academy of Public Administration,
        1120 G Street, NW, Suite 850,
        Washington, DC 20005.

        Dear DeWitt: I want to give you an update on EDA's activities in
    regard to the NAPA Report, ``A Path to Smarter Economic Development:
    Reassessing the Federal Role'' (November, 1996). First, let me once
    again thank Panel Chair Dick Thornburgh, the members of the panel,
    Scott Foster, and the NAPA staff for their excellent work on this
    important subject. As you will see from the following, NAPA's report
    had a substantial influence on the development of EDA's policy and
    reformulation of its programs.
        Attachment I is the fiscal year 1998 Policy Guidance for the
    Economic Development Administration, issued in March 1998. The Guidance
    highlights NAPA's findings, stating that ``EDA recognizes that economic
    development is a local process and understands the importance of sound
    local economic development planning.''
        EDA's new mission statement stresses the importance of Federal
    assistance to distressed communities through local partnerships:
    ``EDA's mission is to stimulate employment and increased income in
    distressed communities. EDA's role is to assist local communities to
    develop and diversify their economies through effective partnerships
    and strategic investments of resources.''
        NAPA's recommendations were organized in terms of learning,
    leverage and linkage.
    A. Learning
        Recommendation 1 was that the Federal Government should help States
    and communities learn about state-of-the-art economic development
    practices.
        Perhaps the most significant result of the NAPA study was the
    revitalization of EDA's national technical assistance and research
    programs. Influenced by the NAPA process, EDA reformed its process
    through focussed solicitations, competitive reviews, careful
    management, and targeted efforts. Independent, recognized research
    institutions were selected for analytic evaluations. Emphasis was
    placed upon evaluations of economic development programs and
    dissemination of results. Major studies included:
      Public Works Program: Performance Evaluation--Rutgers
        University et al.
      Defense Adjustment Program: Performance Evaluation--Rutgers
        University et al.
      The Impact of Incubator Investments--University of Michigan,
        et. al.
      Performance Measurement and Evaluation of Economic
        Development Initiatives: An Annotated Bibliography--Nexus
        Associates
        Dissemination efforts included presentations at EDA regional
    conferences and support of information outreach through the Council for
    Urban Economic Development, National Association of Development
    Organizations, the National Association of Regional Councils, Public
    Works and Economic Development Association, and other national
    associations.
        Recommendation 2 directed the Federal Government to address bidding
    wars by States to recruit or retain businesses.
        As a first step, EDA has commissioned an evaluation of State
    incentives, conducted by the National Association of State Development
    Agencies, to develop a methodology to assess the costs/benefits of
    State incentives. The hope is to institutionalize this effort in a
    joint Federal-local effort.
        Recommendation 3 addressed the need for useful economic statistics
    to support local decisionmaking.
        EDA has commissioned Andrew Reamer & Associates to review the
    socioeconomic data needed for economic development practitioners, and
    to prepare a list of recommendations for the Federal statistical
    agencies, with the long-term goal of facilitating ongoing dialog
    between data users and the statistical agencies.
    B. Leverage
        Recommendation 4 was Federal encouragement of regional development
    strategies.
        EDA has reaffirmed its commitment to its local partners for
    capacity building for economic development. To support this commitment
    EDA has recommended additional funding to stabilize and enhance its
    local partnership network of planning districts, university centers,
    trade adjustment assistance centers, State and local planning
    organizations, and Native American tribes.
        To ensure quality performance, EDA is undertaking the first
    comprehensive review of its local planning and technical assistance
    programs in years:
      Evaluation of the Overall Economic Development Program
        Planning Process--Corporation for Enterprise
      Performance Measures for EDA's Planning and Local TA
        Programs--Applied Development Economics
      Peer Review of EDA University Centers--National Association
        of Management and Technical Assistance Centers
      Evaluation of Trade Adjustment Assistance Program--The Urban
        Institute
        In addition, EDA has commissioned studies of ``cluster-based''
    economic development by Information Design Associates as a vehicle for
    regional cooperation.
        Finally, as part of EDA's proposed reauthorization legislation,
    cooperative agreements between States are encouraged.
        Recommendation 5 is to encourage investments in development
    strategies that offer opportunities to generate jobs and income over
    the longer term.
        The results from the evaluations already completed are being
    utilized by EDA in development of program priorities. In addition to
    the studies already completed, EDA is looking at the following
    programs:
      Microenterprise as an Economic Adjustment Tool--Rutgers
        University
      Impact of Revolving Loan Fund Investments--TBD
      Cutting-Edge and Innovative Techniques in Economic
        Development--TBD
      Technology Transfer and Commercialization Efforts--TBD
      Effective Indian Economic Development Projects and
        Practices--TBD
        Recommendation 6 is to give special assistance to distressed
    communities.
        EDA has explicitly reaffirmed its policy of focussing its resources
    on distressed communities.
        EDA's Policy guidance states that ``EDA programs will give priority
    to projects that address the economic needs of highly distressed
    communities.'' During fiscal years 1996 and 1997 EDA Public Works
    Projects were concentrated in communities with high unemployment and
    low per capita income.
        In order to further refine its understanding of distress, EDA
    commissioned a study of outmigration/population loss as an indicator of
    economic distress by the University of North Carolina. in addition, EDA
    asked the State Science and Technology Institute to assess how State
    technology strategies were addressing the needs of distressed
    communities, and to recommend how States and the Federal Government
    could leverage science and technology investments to benefit distressed
    areas.
        In its proposed reauthorization legislation, EDA has prescribed
    specific quantitative measures of distress to determine eligibility of
    communities for Federal assistance, to be determined at the time of
    application.
    C. Linkage
        Recommendation 7 proposes substantial reduction of the
    fragmentation of the Federal economic development effort.
        Within its area of responsibility, EDA has attempted to ensure
    collaboration among Federal agencies. In 1997, EDA was asked to take a
    leading role in assisting communities affected by international trade.
    Accordingly, EDA has convened meetings with the Departments of Labor
    and Treasury to ensure a coordinated response in trade impacted areas.
    EDA has 17 Memoranda of Understanding with other Federal agencies to
    support joint efforts; in particular, EDA has been an active
    participant in overall Federal efforts to assist disaster affected
    localities and base closure communities. On July 21, 1998, EDA will
    convene a meeting of representatives of Federal agencies who have a
    direct interest in community economic development planning, to discuss
    greater coordination of community planning requirements between Federal
    agencies.
        In its proposed reauthorization, EDA includes specific language
    ensuring that the agency actively coordinates its activities with other
    organizations, and restates the importance of the National Public
    Advisory Committee on Regional Economic Development, to include
    representatives of other Federal agencies.
        Recommendation 8 suggests a permanent mechanism to provide overall
    policy-level guidance, linking work force training, technology, and
    research to economic development.
        EDA has reached out to the Commerce Department's Technology
    Administration and National Institute of Standards and Technology to
    bring together economic development and technology deployment. A number
    of joint activities are currently under consideration.
        Recommendation 9 addressed the need to overcome obstacles to
    obtaining credit in Federal business finance programs.
        EDA is exploring a number of innovative financing techniques to
    ensure optimal use of Federal funds for business finance. Commonwealth
    Development Associates is studying ways to leverage capital for defense
    adjustment infrastructure. In addition, EDA is working closely with the
    Corporation for Enterprise Development in their study of local
    revolving loan funds, and as mentioned above, is studying the impact of
    EDA revolving loan fund investments. Finally, EDA is examining the use
    of ``securitization'' techniques to bring private capital into loan
    funds for distressed communities.
        Recommendation 10 suggests the encouragement of States and
    localities to stimulate links among businesses.
        This recommendation is not one that falls squarely within EDA's
    traditional area of responsibility.
    Next Steps: Fulfilling the Promise
        NAPA recommended that as a next step interested parties engage in a
    serious and extended conversation about their recommendations. In
    response to this suggestion, in January 1997, EDA convened the first
    national economic development forum at the Department of Commerce,
    where the concepts proposed by NAPA were discussed. EDA is currently
    organizing the second forum, scheduled for January 1999.
        I cannot emphasize enough the positive influence and reinforcement
    that NAPA has had on EDA's perspectives regarding economic development.
    We thank you for your efforts and look forward to continuing our
    productive relationship.
                Sincerely,
                                          Phillip A. Singerman.
        Mr. Fosler. While we have not formally studied or assessed
    EDA's actions in this regard, it is clear that the agency has
    taken the panel's recommendations seriously and has taken very
    useful steps, especially in the area of technical assistance
    and training. For example, Mr. Singerman's letter informs us
    that EDA is working to develop a methodology to assess the cost
    and benefits of State incentive programs, they've engaged a
    contractor to assess how Federal statistical agencies can
    better serve the needs of economic development practitioners,
    and, as you've heard here, they've commissioned independent
    evaluations of the agency's own programs.
        Hopefully, this will be a step toward encouraging States,
    localities, and regions to do similar kinds of evaluations of
    their own efforts. Thoughtful, sound evaluations can be
    tremendously useful to economic development efforts in sifting
    the wheat from the chaff, sharing good ideas, and finding
    better ways that EDA and other Federal agencies can support
    their work.
        For many years EDA has been at risk of being terminated.
    When we were doing the research for our study we were told
    repeatedly about the chilling affect that this had on the moral
    and the capability of the agency. EDA is now working hard to
    revitalize itself. We're pleased that the Academy report has
    been of some use to the agency in this process, and hope that
    the committee will also find the report useful in its own
    deliberations.
        Thank you, Mr. Chairman. I would be happy to answer any
    questions.
        Senator Warner. Thank you very much.
        Last, now Mr. Thompson. We thank you for making the trip up
    from South Carolina to provide us with your views.

       STATEMENT OF ERIC P. THOMPSON, EXECUTIVE DIRECTOR, LOWER
        SAVANNAH COUNCIL OF GOVERNMENTS AND PRESIDENT, NATIONAL
      ASSOCIATION OF DEVELOPMENT ORGANIZATIONS, ON BEHALF OF THE
                   COALITION FOR ECONOMIC DEVELOPMENT

        Mr. Thompson. Thank you, Mr. Chairman, and thank you for
    the opportunity to testify before the committee on the
    extremely important subject of reauthorization of EDA. I am
    testifying on behalf of the Coalition for Economic Development.
    I am, as you mentioned, Eric Thompson, Executive Director of
    the Lower Savannah Council of Governments, a economic
    development district headquartered in Aiken, South Carolina. In
    other words, I'm out there where the rubber hits the road when
    it comes to economic development and EDA. As President of the
    National Association of Development Organizations, I'm pleased
    to join with other members of our coalition in offering strong
    support for EDA reauthorization.
        Incidently, it's good be among friends here this morning.
    We've heard some very good comments and very good support. My
    fellow coalition member Judge Villines has given an excellent
    overview of the importance of EDA programs to rural and urban
    communities. I would like to focus on an issue of greater
    importance to my region, the State of South Carolina and other
    places throughout the country affected by defense industry
    contract cuts and base closures.
        Despite the small size of EDA, the agency has always
    provided flexible programs and funding needed in times of
    sudden economic distress. EDA's defense adjustment programs
    help communities impacted by base closures and/or defense
    contract reductions to rebuild and diversify their economies
    and move further away from defense related dependency.
        In the State of South Carolina there have been two major
    base closings and significant cutbacks at the Department of
    Energy Savannah River Site, a DOE facility located in my
    region. In the Lower Savannah region, the Savannah River Site
    produced material for nuclear weapons used in the U.S. defense
    program. It is the largest single employer in the State of
    South Carolina. With the end of the cold war, the Department of
    Energy downsized the facility, resulting in a loss of over
    10,000 jobs in the last 5 years, increasing unemployment
    causing real estate values to stagnate and essentially halting
    new home starts.
        In 1997, a majority of the counties of the Lower Savannah
    region, which there are six, had unemployment rates above the
    State average. Three of those were listed one, two, and three
    in the State as far as having the highest unemployment rate.
        In order to help the Lower Savannah region adjust to this
    drastic cutback, the Department of Energy needed a Federal
    agency to administer DOE funds which are provided for community
    transition projects. Using the existing EDA system and grant
    process, DOE transferred funds to EDA to administer and now
    requires that EDA approve all requests for community adjustment
    assistance from DOE's Office of Work and Community Transition.
    DOE is not in the economic development business. It needed an
    agency who was and EDA was that agency.
        One of EDA's greatest strengths is the ability to use the
    existing networks of 320 economic development districts, such
    as the Lower Savannah COG, for defense adjustment, disaster
    relief, and overall economic development assistance. These
    regional development organizations provide local governments
    with professional and technical assistance. Districts, the core
    of EDA's delivery systems, are multi-county public-private
    partnerships whose boards are composed of local elected
    officials, private sector, and minority representatives. They
    are critically important in small metropolitan and rural
    regions where professional and technical assistance is limited
    or nonexistent.
        Of the Nation's 39,000 units of general local government,
    33,000 have populations of less than 3,000 people, and 11,500
    local governments have no employees. Larger cities and counties
    have professional staffs including engineers and planners to
    assist elected officials in the decisionmaking process.
    However, in most of the counties' small and rural communities,
    economic development district employees are the only
    professional staff who are able to navigate the mountains of
    red tape, regulations, and application forms necessary to apply
    for Federal and State assistance.
        It is through EDA's planning grants to the districts that
    distressed communities gain access to professional capacity and
    technical expertise to plan for the future. Today, EDA's small
    planning grants to districts support an overall economic
    development program for the communities served. OEDPs are
    blueprints providing a comprehensive plan for sustainable
    community growth and economic development.
        I have with me today a map of our six county region. This
    map indicates the location of EDA assisted projects which have
    resulted in over 11,000 new jobs. That map has 6 counties and
    45 incorporated areas, almost every one of which has been
    assisted by EDA projects.
        EDA is extremely effective both in helping communities cope
    with long-term economic disasters and natural disasters. It is
    important to remember that not all of the base alignment and
    closure of BRAC listed installations are yet closed. It takes
    several years to actually shut down a facility, so the need for
    EDA's defense adjustment programs will continue. We strongly
    urge EDA to once again assume the leadership role in the
    transition. How can we best help America's poor and
    disadvantaged? By providing them a job so that they can buy
    their own shelter, their own food, their own clothing. It's
    hard to pull yourself up by your bootstraps when you have no
    boots. EDA has helped provide the bootstraps.
        On behalf of the members of the Coalition for Economic
    Development, I urge the committee to work with EDA to update
    the authorizing legislation so that the Nation's distressed
    communities will continue to have this vital Federal partner as
    we move into the next century. I can assure you that those of
    us who work in economic development at the local level will do
    everything we possibly can to help make EDA more effective and
    more efficient.
        In the South, Senator, as you said earlier, we have a
    saying, ``If it ain't broke, don't fix it.'' Well, the only
    thing broke with EDA is that it needs to be legitimized through
    authorization legislation. So I urge you to fix EDA and
    reauthorize this very needed and very much appreciated Federal
    agency. Thank you, sir.
        Senator Warner. That's very helpful. All of the
    contributions by this panel are very helpful.
        I would just summarize my own views on this. And that is
    people in communities like yours, Mr. Thompson, and elsewhere
    cannot cope with the extraordinary weather changes we've had
    now and disasters. I read this morning of I've forgotten now
    how many inches of rain in Tennessee in 48 hours. The stories
    are extraordinary. I think the Government has a role coming
    through the Federal disaster programs to help victims as a
    consequence of our unusual weather patterns. I don't recall,
    and I've lived on Planet Earth I think a little longer than
    about everybody in this hearing room, I just don't remember
    hearing of El Ninos as a small person.
        The second thing is that as we downsize Government and
    particularly downsize the U.S. military, therein again
    communities that have loyally and faithfully supported their
    local military bases are suddenly faced with extraordinary
    readjustment. On the whole, I think most of those situations
    have worked out for the ultimate benefit of the community.
        I was one of the coauthors of the first BRAC bill, the
    second BRAC bill, so I've been pretty close to this process. I
    know how strongly Members of Congress defend their communities
    and hope that the bases will stay open, but it just doesn't
    happen in many instances. Somebody has got to accept the fact
    that we don't have the need for the large base structure that's
    currently in place to support the level of men and women
    serving in the Armed Forces.
        All of that to say that I think there's a vital need for
    this EDA to continue, and you have my support.
        I once again thank this panel and those others in
    attendance who have come to indicate their support for this
    program.
        Thank you very much. The hearing is concluded.
        [Whereupon, at 11:30 a.m., the subcommittee was adjourned,
    to reconvene at the call of the Chair.]
        [Additional statements and the text of S. 1647 follow:]
      Statement of Secretary William M. Daley, U.S. Department of Commerce
        Chairman Chafee, Subcommittee Chair Warner, Ranking Minority Member
    Baucus, and distinguished members of the subcommittee: thank you for
    scheduling this hearing.
        Joining me today is the Assistant Secretary of Commerce for
    Economic Development Phillip Singerman. Following my brief testimony,
    Dr. Singerman will make a statement and be available to answer any
    technical questions.
        I am pleased to testify on S. 1647, the Economic Development
    Partnership Act of 1998, which would reauthorize, for 5 years, the
    Economic Development Administration. My message is clear: this
    legislation is critical to our ability to efficiently help our nation's
    distressed communities.
        It is my goal as Secretary to run a department that is efficient,
    cost-effective, and productive for the American people.
        EDA clearly achieves all of these goals.
        Ninety-nine percent of its public works projects have been
    completed as planned. Since President Clinton took office, the agency
    cut the number of political positions from 14 to 5, and reduced
    regulations by 60 percent.
        This is a leaner EDA that has learned how to do more with less.
        Most importantly, it knows how to expand opportunities for
    Americans who need it most.
        Let me be frank. I have heard the criticism that this is pork, that
    with an economy as strong as ours, communities do not need help
    developing their infrastructure or attracting new business.
        The fact is these funds are predominantly invested in areas where
    the unemployment rate is 40 percent higher than the national average
    and per capita incomes are 40 percent below average.
        The fact is a thriving community one day can be a distressed one
    the next. All it takes is a military base closure, a defense industry
    downsizing, a Department of Energy reduction, or a natural disaster. As
    Chairman Chafee knows first hand that happened in Narragansett,
    overnight, when suddenly an oil spill hurt the fishing industry. But
    within 30 days, we gave a $1 million grant to get the community back on
    its feet and develop recovery plans.
        I also have heard the criticism that some of these are make work
    projects: all they do is create short-term construction jobs. That is
    not so. They create permanent jobs.
        The fact is 6 years after projects are completed, on average, the
    number of local jobs have doubled. And for every $1 million Congress
    authorizes to fund an EDA project, that leverages $10 million in
    private-sector investment.
        EDA's programs work.
        Take Grand Forks, North Dakota, after those terrible floods in 1997
    that devastated North Dakota, South Dakota, and Minnesota. We came in
    with a $3 million grant to construct two professional buildings in
    downtown Grand Forks. Community leaders have told me, if it hadn't been
    for that investment, businesses would have left downtown. And the
    people of Grand Forks, who had already lost too much, would have lost
    their central business district.
        Or take the Center for Employment Training in Santa Clara County,
    California. EDA grants totaling $4 million over the past few years were
    used to convert an abandoned high school in a highly distressed
    Hispanic neighborhood into one of the most successful vocational
    training facilities in California. The Center has now expanded its
    programs to include a culinary school and medical assistant training--
    and every student graduates into a job.
        Another example is our $2 million grant to help Portland State
    University build a distance learning center. It will link the
    university's educational programs with rural and remote areas of
    Oregon. So underemployed and unemployed people there can have access to
    academic, business, and vocational training.
        I believe that in the future, what we do at EDA will be even more
    important. In this new economy, the pace of globalization and
    technology development will accelerate. We will see constant
    restructuring of firms and industries. All of this will require our
    nations communities to be more flexible and innovative in creating jobs
    and attracting private-sector investment.
        And a new EDA will be there to help. This agency has reformed for
    the better, and this legislation will allow it to reform even more.
        It lets us reduce paperwork. It encourages State and local
    cooperation. It simplifies the application procedures. It provides
    maximum flexibility to grant recipients.
        And this legislation will allow us to change the eligibility
    requirements for EDA assistance. Gone will be the days that once you
    are a designated area, you automatically remain one for life. Replacing
    it will be a fairer process that says simply: an applicant is eligible
    based on needs at the time it applies.
        So, Mr. Chairman, I believe we have addressed the concerns that
    Congress and others have expressed over the years.
        EDA has not be reauthorized since 1982. The time has come. And I
    look forward to working with you, as the bill moves forward.
        Thank you.
                                   __________
      Statement of Phillip A. Singerman, Assistant Secretary for Economic
                      Development, Department of Commerce
        Chairman Chafee, Senators Warner and Baucus, and distinguished
    Members of the Subcommittee, thank you for convening this important
    hearing. I appreciate the opportunity to testify before this
    subcommittee. Know of my sincere appreciation for the many courtesies
    and considerations that you and Members and staff of the Committee have
    extended to me and my staff. In particular, we acknowledge Senators Max
    Baucus and Olympia Snowe for introducing the Administration's
    legislation by request. We are grateful for the opportunity of working
    with you to reauthorize the Economic Development Administration (EDA).
        Allow me to next thank Secretary of Commerce William M. Daley for
    his testimony today on behalf of EDA reauthorization and for his
    exemplary leadership at the Department of Commerce. Leadership that has
    resulted in a comprehensive management review of the operations of the
    Department, implementation of improved communications throughout the
    Department, focus on a Department-wide strategic planning effort, and
    guidance that set forth Departmental themes, goals and objectives that
    integrate bureau missions.
        The Secretary and I are accompanied today by the EDA Executive
    Management Team and I take this opportunity to introduce them to you:
    Chester Straub, Jr., Deputy Assistant Secretary, Office of Program
    Operations; Ella M. Rusinko, Acting Deputy Assistant Secretary for
    Program, Research and Evaluation and Director, Office of Communications
    and Congressional Liaison; Mitchell L. Laine, Chief Financial Officer,
    Edward M. Levin, Chief Counsel, and, Kimberly Cain, my Special
    Assistant.
    A Case for EDA
        Mr. Chairman, the first time I appeared before you and Members of
    the Committee was at a confirmation hearing in late 1996. Since then, I
    am proud and pleased to report to you today that we have accomplished a
    great deal at EDA. We have aggressively focused on:

      the management and operations of the agency,
      implementing a strategic planning process that complements
        the Department's plan,
      ensuring that our mission combines with Departmental themes,
        developing and implementing program performance measures in
        compliance with the Government Performance and Results Act of 1993
        with validated results; and,
      partnerships in economic development.

        Our outcomes are tangible and EDA is an administratively reformed
    and reinvented Federal agency.
        Distressed communities across America face tremendous economic
    development challenges as we approach the year 2000 and a new age of
    technology. As Secretary of Commerce William M. Daley has stated, ``We
    continue to make trade and the development of our economy the most
    important piece of the Department.'' The EDA mission fully supports
    that objective as EDA remains focused on assisting rural and urban
    distressed communities in developing a sustainable economic base which
    will be both competitive in tomorrow's world marketplace and productive
    in the creation of local jobs and in the leveraging of private-sector
    investment. EDA continues to operate under the fundamental principle
    that economic development is a local process. EDA provides strategic
    assistance with which local communities in a public/private process
    build the capacity to understand their economic challenges, develop the
    consensus strategies necessary to create positive economic change and
    implement their plans with specific actions or milestones for economic
    growth. EDA cooperates with and fosters partnerships with State and
    local governments, regional economic development districts, public and
    private nonprofit organizations, and Indian tribes to sustain and
    promote economic development across the country. EDA programs continue
    to be needed to assist local, State and regional efforts to improve
    economic conditions.
    The Reform and Transformation of EDA
        EDA is doing more with less and is a leaner, streamlined Agency
    having:

      to reduced regulations by over 60 percent;
      over a 2-year period reduced Agency staff by 30 percent and
        the number of non-career positions from 14 to 5, or by 60 percent;
      reduced Washington staff by 25 percent in Fiscal year 1996;
      simplified the grants application process, including its pre-
        application and application forms to better serve EDA customers;
        and,
      implemented an agency reorganization approved by the
        Administration and the Congress.

        EDA has implemented sound management and administrative practices
    that include:

      continued delegation of authority to Regional Offices for the
        approval of grants;
      instituted a team-based approach to program delivery in the
        field with remaining Economic Development Representatives in
        individual States receiving greater support from Regional offices;
      moved toward an automated on-line application process;
      focused Headquarters staff on policy direction and program
        evaluation;
      developed a Strategic Plan that reflects Administration
        Initiatives and Department of Commerce themes and sets forth goals
        and objectives for EDA's economic development program;
      implemented program performance measures to comply with the
        Government Performance and Results Act of 1993 (GPRA);
      accelerated resolution of outstanding Inspector General audit
        issues;
      hired a Chief Financial Officer to oversee the agency's
        financial management responsibilities; and,
      utilized resources in an optimum manner to reduce its
        contingent liability for past program activity as well as to manage
        increasing workloads, many the result of recent supplemental
        appropriations. The agency currently manages close to a $1 billion
        portfolio of approved construction projects that require
        monitoring, servicing and accounting before closeout.
    EDA Evaluations and Program Performance Measures
        EDA has validated, robust results of the public works and defense
    economic adjustment programs. In the public works evaluation,
    researchers found that:

      99 percent of the projects were completed as planned;
      91 percent were completed on time;
      52 percent were completed under budget;
      327 jobs were created or retained for every $1 million in EDA
        investment (an EDA job cost of $3,058);
      every $1 million in EDA funding leveraged $10.08 million in
        private-sector investment;
      every $1 million in EDA funding increased the local tax base
        by $10.13 million;
      the number of local jobs doubled in the 6-years after project
        completion; and, at project locations the unemployment rate was 30
        percent higher than the State average unemployment and 40 percent
        higher than the national average unemployment, per capita income
        was 40 percent less than the State and national averages, and 40
        percent more were below the poverty level than in the State or
        nation.

        We plan to continue evaluating the balance of our programs. Thus
    far, completed studies include:

      Post-Disaster Assistance: Hurricane Andrew conducted by
        Aguirre International;
      The Impact of Incubator Investments conducted by the
        University of Michigan, National Business Incubator Association,
        Ohio University and the Southern Technology Council;
      Public Works Program: Performance Evaluation conducted by
        Rutgers University, the New Jersey Institute of Technology,
        Columbia University, Princeton University, the National Association
        of Regional Councils and the University of Cincinnati;
      Defense Adjustment Program: Performance Evaluation conducted
        by the Rutgers University-led consortia of research entities; and
      Public Works Program: Multiplier and Employment--Generating
        Effects conducted by the Rutgers University-led consortia of
        research entities.

        Studies Underway or for which a Request for Proposal has been
    announced include:

      Evaluation of the Midwest Flood Program Implementation by
        Aguirre International;
      Evaluation of the Overall Economic Development Program by the
        Corporation for Enterprise Development;
      Evaluation of the Trade Adjustment Assistance Program by the
        Urban Institute; and, Evaluation of EDA Revolving Loan Fund
        Program.
      EDA plans to apply research information to our continued,
        evolving analyses of program performance. We continue to focus on
        refining reporting requirements established under the Government
        Performance and Results Act of 1993 (GPRA).

        The Department of Commerce Inspector General's March 1998
    Semiannual Report to Congress states, ``In examining the overview of
    EDA's financial statements, we found that it appropriately (1) links
    EDA's programs with the Department's strategic plan, (2) identifies
    management actions taken to address internal control deficiencies, and
    (3) reflects EDA's progress in meeting GPRA requirements.''
        The report also cites areas where EDA can improve reporting results
    and presentation of performance data, and we are committed to
    implementing changes that comply with the Inspector General's
    observations.
    Why Reauthorize EDA
        As EDA looks to the future, we continue to focus on our mission and
    how to better serve the Nation's distressed communities in an expanding
    global economy that is more technology oriented. Many of America's
    communities are leaders in global competitiveness, but for every
    community in this category, antitheses exist. Lagging areas of the
    country may lack the technical prowess and expertise yet possess
    untapped, unique and marketable resources. American communities need to
    reap the benefits that local resources offer, and to do so requires
    viable strategies for economic sustenance, growth and prosperity that
    creates jobs. Community strategies for economically needy areas will
    require thoughtful investments in infrastructure and technology
    capacity in order to effectively keep pace with the rapidly changing
    environments of a world economy. And, EDA is facing the economic
    challenges of today for a better tomorrow.
        To maintain and continue the EDA momentum in helping the Nation's
    distressed communities, to complete the agency's reform process, and
    for national public policy purposes, the agency needs reauthorization.
    EDA has not been reauthorized since 1982 and the Public Works and
    Economic Development Act, as amended, needs to be updated, streamlined
    and brought into the fast-approaching 21st Century.
    The Economic Development Partnership Act
        The Administration's proposal (S. 1647), the Economic Development
    Partnership Act (EDPA) of 1997 was transmitted to Congress on March 31,
    1997 and seeks a 5-year reauthorization of EDA. The legislative
    proposal was drafted over the course of more than a year and
    thoughtfully weighed and considered reauthorization legislation
    previously considered by the 103d and 104th Congresses. EDPA adheres to
    the reform principles developed in legislation considered during the
    104th Congress. EDPA constitutes an entire rewrite of the agency's
    current authorizing legislation, the Public Works and Economic
    Development Act of 1965, as amended. It encourages cooperation among
    Federal agencies and complements EDA management initiatives focused on
    the efficiency and effectiveness of the EDA mission.
        EDPA facilitates program management and oversight by allowing
    transfers of funds from other Departments and Agencies; requiring grant
    recipients to maintain records that adhere to sound financial record
    keeping practices that are available for audit; adding the Inspector
    General for the Department of Commerce to the list of authorized
    individuals with access to records for examination and audit; and,
    permitting self-certification by applicants, as appropriate. Also, the
    proposed legislation eliminates duplication through the establishment
    of an overall economic development strategy for economic adjustment and
    public works projects.
        EDPA provides for long-needed improvements that strengthen EDA
    economic development tools through changes that lessen burdens on
    applicants, facilitate program delivery and enhance program flexibility
    to address the needs of the Nation's most distressed communities. The
    proposed legislation eliminates the designation system which under
    current law means once an area is designated as ``distressed'' it
    retains that designation regardless of improving economic conditions.
    S. 1647 replaces the process with one that requires eligibility for EDA
    assistance at time of application based on clearly defined economic
    distress criteria that includes high unemployment riotously per capita
    income levels, or out-migration.
        Other improvements include:

      updating the requirement for the preparation and adoption of
        a comprehensive economic development strategy as a basis for EDA
        development assistance;
      allowing minor changes to the purpose and scope of projects
        which allow recipients to enhance the economic development area;
      permitting recipients of EDA approved grants to use project
        underrun funds for same project enhancements as a recognition of
        grantees' prudent management of Federal dollars;
      enabling assistance for projects on military or energy
        installations without requiring that the recipient have title or a
        leasehold interest in the property for a specified term which
        solves a current legal obstacle to the implementation of projects
        in affected areas; and,
      affirmation of the EDA role in other long-standing activities
        or programs, such as in defense conversion, post-disaster economic
        recovery and support of University Centers.

        EDPA makes many Improvements, but it carefully preserves safeguards
    and protective provisions, such as prohibiting EDA assistance that
    would ( 1 ) promote or extend unfair competition or tend to create
    excess capacity in a given industry or (2) relocate firms from one part
    of the country to another.
    Conclusion
        Mr. Chairman, in conclusion, EDA has transformed itself and
    instituted a system for on-going self-analyses. As such, EDA has a
    tremendous opportunity to actively utilize public policies and public
    investments to promote American ingenuity that culminates in economic
    growth and job creation. EDA has validation of program performance as
    evidenced by recent studies. The management reforms that EDA has
    implemented are yielding more efficiency and effectiveness in program
    management and delivery. EDA is focused on its financial management
    operations and is working closely with the Inspector General for the
    Department of Commerce to achieve an unqualified financial statement,
    which we were just shy of obtaining for 1998.
        EDA has an established record of expertise and experience in
    economic development and has been a pioneer helping distressed
    communities create economic development best practices, such as
    revolving loan funds and small business incubators. EDA works. EDA
    programs work.
        The next millennium will host a different set of economic
    challenges for American communities: How to maintain and improve global
    competitiveness in an increasingly information-dominated, technology-
    oriented society where distance is becoming obsolete. EDA needs to be
    there, helping America's distressed communities implement their own
    targeted strategies and programs for economic recovery and growth. In
    so doing, we continue to strengthen the Nation's economy which is a
    product of innovation rooted in American creativity and spirited by the
    American Dream.
        Mr. Chairman, I reiterate my appreciation for this hearing and take
    the opportunity to express our willingness to work with you on behalf
    of America's rural and urban distressed communities. I would be glad to
    respond to any questions which you and Members of the Subcommittee may
    have on EDA. Thank you.
                                     ______

      Responses by Phillip Singerman to Additional Questions from Senator
                                     Warner
        Question 1: In an era of greater accountability and insistence on
    results, many agencies are struggling with devising ways to
    meaningfully measure the outcome of their programs. EDA is no
    exception. Indeed, G?4(9 has reported that no definitive conclusions
    can be reached from the limited research that has been done to assess
    the overall impact of EDA's assistance on economic development.
        More recently, the GAO noted that there are no measurable
    performance goals for four of the seven strategic objectives listed for
    the EDA in its annual performance plan.
        What can you tell the committee about recent analysis to measure
    the impact of EDA's programs on economic development?
        With regard to performance goals, what is EDA doing to ensure that
    it has measurable performance goals for all of its strategic
    objectives? Could you describe how you plan to measure performance for
    each? Can all of these be measured in the upcoming year? I understand
    that for several measures, the plan does not allow for assessment for 6
    to 10 years.
        Response: In April, 1996, GAO issued a report entitled Limited
    Information Exists on the Impact of Assistance Provided by Three
    Agencies that included the Economic Development Administration, the
    Appalachian Regional Commission, and the Tennessee Valley Authority.
    Since the issuance of that report, EDA has undertaken systematic,
    rigorous evaluations of EDA program activities to develop, test and
    refine performance measures and to establish benchmarks for program
    performance. In addition, EDA research and national technical
    assistance studies are focused on different types of activities
    supported by EDA programs. Recently completed evaluations and studies
    include:
      Public Works Program Performance Evaluation (Rutgers
        university, et al.)--1997
      Defense Adjustment Prog. Performance Eval. (Rutgers
        university, et al.)--1997
      Science and Technology Strategic Planning (State Science &
        Tech. Inst.)--1997
      Impact of Business Incubator Investments (University of
        Michigan, et al.)--1997
      Cluster-based Economic Development ( Information Design
        Associates)--1998
      Evaluation of the Midwest Flood Recovery (Aguirre
        International)--1998
      Public Works Program: Multiplier& Employment Effects
        (Rutgers, et al.) -1998
        Studies underway and planned include:
      Overall Economic Development Prog. Eval. (Corp. for
        Enterprise Dev.)--1998
      Planning Performance Measures (Applied Development
        Associates)--1998
      Trade Adjustment Assistance Program (Urban Institute)--1998
      Microenterprise Development (Rutgers University)--1998
      Univ. Center Peer Review (Natl. Assoc. of Manuf. & Tech.
        Asst. Ctrs.)--1998
      State Incentive Programs (Natl. Assoc. of State Development
        Agencies)--1998
      Revolving Loan Fund Program--Proposed for fiscal year 1998
      Technology Transfer & Commercialization--Proposed for fiscal
        year 1998
      Brownfields/Air Quality--Proposed for fiscal year 1998
      Native American Program--Proposed for fiscal year 1998
      State International Trade Programs--Proposed for fiscal year
        1999
      Trade-Impacted Communities--Proposed for fiscal year 1999
        Recently completed evaluations of the performance of EDA's Public
    Works and Defense Adjustment programs were conducted by Rutgers
    University with the New Jersey Institute of Technology, Columbia
    University, Princeton University, and the National Association of
    Regional Councils and the University of Cincinnati. The Public Works
    Program Performance Evaluation, completed in May, 1997 shows:
        For every $1 million invested by EDA:
      327 jobs created or retained
      $10 million private-sector investment
      $1 million in other public/non-profit investment
      $10 million increase in local tax base $3,058 cost per job
        EDA investments target distressed communities:
        Unemployment of 9.6 percent (median 24-month average)
        Per capita income of $7,666 (median) Residents 18 percent below
    poverty level (median)
        Residents 11 percent minority
        Quality Project Results
      99 percent of projects completed as planned
      91 percent of projects completed on time
      52 percent of projects completed under budget
      Permanent private-sector jobs doubled within 6 years of
        completion.
        In 1996, EDA developed core performance measures for all EDA
    programs (public works, economic adjustment, planning and technical
    assistance, and trade adjustment). These core performance measures,
    first applied to fiscal year 1997 grant awards, focus on important
    program outcomes such as job creation, private-sector investment,
    increased tax base, local planning and community participation, and
    partnerships with State and regional economic development
    organizations.
        EDA established performance goals for EDA programs as part of the
    fiscal year 1999 Congressional Budget submission. Measurable goals were
    developed by analyzing research findings (e.g., Rutgers) and adjusting
    for variables that effect performance in different years, such as
    variations in the mix of project types and changes in economic
    conditions. EDA will continue to use research and program evaluations--
    such as those now underway for planning, university centers, and trade
    adjustment assistance centers--to improve the way EDA measures
    performance and manages programs.
        EDA will use recent research findings (see list above) to develop
    measurable goals for all strategic objectives, including technology-
    based economic development, disaster assistance, conversion of military
    installations to civilian uses, and sustainable development. EDA will
    solicit feedback from grantees, Agency stakeholders and other
    development practitioners prior to implementing new performance goals
    and measures in fiscal year 2000.
        Consistent with guidance from GAO, EDA performance goals and
    measures focus on program outcomes, rather than outputs. The Rutgers
    studies show that outcomes for economic development projects increase
    over time and, typically, are not fully realized until 6 to 10 years
    following project completion for infrastructure projects. Such projects
    may require 3 years to complete construction and, once completed,
    continue to create jobs, attract investment, increase tax base, and
    diversify local economies as businesses locate and expand in EDA funded
    industrial parks, incubators, and areas served by road, water and
    sewer, technology and training facilities.
        For revolving loan funds, jobs are generated shortly after project
    approval, but projects continue to generate jobs and investment as new
    loans are made from principal repayments in subsequent years. EDA
    tracks the cumulative results for revolving loan fund projects,
    including increases in the capital base.
        EDA established requirements to report on performance (e.g., jobs
    created and saved, private dollars invested, additional public and
    private dollars leveraged, increased tax base) starting with fiscal
    year 1997 grant awards. Public works grantees will report at project
    completion and 3 and 6 years following completion. Revolving loan fund
    grantees will report at 3, 6 and 9 years following project approval.
    Planning and technical assistance grantees will report annually or at
    project completion.
        As stated above, some program activities will require from 6 to 10
    years following project completion to fully realize projected outcomes.
    To address this gap, EDA will review the performance of construction
    and revolving loan projects that are at least 6 years old. During
    fiscal year 1999, EDA will review projects completed in 1993 (6 years
    ago) to validate findings from the Rutgers studies for public works and
    revolving loan fund projects. This process will be repeated to test
    benchmarks, validate performance goals and measures, and provide a more
    accurate and complete understanding of the performance of EDA programs.
        Question 2: Section 202 of the bill allows the amount of grants to
    be increased to help cover increases in construction costs. This
    provision would not increase the percentage offending EDA provided to a
    project. How would EDA implement his provision?
        Do you believe that the provision could result in applicants
    initially underestimating construction costs knowing that later EDA
    will cover increases in construction costs?
        How would EDA guard against such practices?
        Response: EDA would implement the provisions of proposed section
    202 in a manner consistent with its current practice of awarding funds
    for construction cost increases in public works projects, authorized by
    section 107 of the Public Works and Economic Development Act of 1965,
    as amended (42 U.S.C. 3137), as implemented by regulation in 13 CFR
    305.10. EDA has averaged less than six such amendments per year over
    the last 2 years.
        Based on EDA's experience, there appears to be little risk that
    applicants would underestimate costs in anticipation of obtaining a
    cost increase award amendment later. Such amendments are not automatic,
    they are in EDA's discretion and would assuredly be denied if it
    appeared an applicant had misstated its estimated costs in its initial
    application. Applicants could never ``know'' that later EDA would cover
    cost increases. EDA would guard against the risk that an applicant
    nevertheless might attempt to obtain an increased award through such an
    exercise, by confirming from documentation submitted by the applicant
    that the cost of the project has in fact increased, and that an
    increase of the amount of the grant is in fact necessary for the for
    the satisfactory completion and operation of the project.
        Question 3: I understand that about 90 percent of the nation's
    population resides in EDA designated eligible areas. Once an area has
    been added to the EDA list, it cannot be dropped from it even if it no
    longer meets the designation criteria.
        However, EDA has the discretion to direct assistance to areas that
    need it most. How does EDA determine which areas are most needy?
        Are legislative changes needed in the eligibility criteria for EDA
    programs?
        Response: EDA currently determines which areas will receive major
    EDA assistance according to the same criteria as appears in the
    proposed legislation--low per capita income (80 percent or less of the
    national average), a high unemployment rate (a rate for the previous 24
    months 1 percent or more higher than the national average), or severe
    sudden or long term economic dislocation (e.g., defense conversion,
    loss of a major employer, natural or other disaster). Areas that remain
    designated as redevelopment areas because they were once (but no longer
    are) economically distressed, and are therefore technically eligible
    for public works grant assistance, do not receive such assistance.
        Legislative changes are not necessary to continue this EDA
    practice, but they would confirm this policy, give it Congressional
    blessing, and preclude misunderstandings on the part of prospective
    applicants that might otherwise expect to receive assistance?
                                     ______

      Responses by Phillip Singerman to Additional Questions from Senator
                                     Boxer
        Question 1: As you know, California has been hard hit by military
    base closings. EDA has funded over 90 defense conversion projects in
    California so far, but much more is still to be done. Some military
    bases are not scheduled for closure until the year 2001. Does EDA plan
    to increase the number and scope of these vital projects?
        Response: Of the 115 base closures/realignments, EDA has actual
    closure dates for 115. Of the 115 scheduled base closures 83 have
    already closed including 20 bases in California. Over the course of
    1999 (9) bases will close, 2000 (10) bases will close and 2001 (6) base
    will close. Of the I 15 bases scheduled to close, we have assisted 90
    through 206 EDA grants (as of 9130/97).
        Based on EDA experience, it takes communities an average of 2 years
    to put a together an economic adjustment strategy, usually funded by
    DoD's Office of Economic Adjustment. Many of the subsequent community
    strategy/reuse plans call for as much as 3-5 year initial
    implementation phases, with total redevelopment in 10 or 20 years.
    Therefore, EDA expects many BRAC 95 bases to begin to implement their
    conversion strategies in fiscal year 1998, along with the other BRAC
    bases that will be coming to EDA for additional funds to complete their
    initial implementation strategies.
        EDA expects that the bulk of its defense adjustment efforts will
    continue to be associated with closing military bases and the vast
    majority of that activity such as you are well familiar with in
    California will be concentrated on base reuse infrastructure projects.
    Such projects may range in size from several hundred thousand dollars
    to several million dollars.

        Question 2: How does EDA interact with other Federal agencies Such
    as the Department of Defense, the Department of Labor, and the
    Department of Housing and Urban Development) that are working on base
    closure and what can be done to increase communication and cooperation
    smith these agencies to better help local communities?
        Response: The Economic Development Administration (EDA) is the
    experienced economic development agency of the Federal Government. EDA
    works in partnership with State and local governments, regional
    economic development districts, public and private non-profit
    organizations, and Indian tribes. EDA has had an ongoing partnership
    with The Department of Defense Of rice of Economic Adjustment (DoD)
    which operates as the lead agency for the formation of local reuse
    organizations and the funding of such plans. Similarly, EDA partners
    with the Department of Energy in assisting communities affected by
    downsizing of Energy facilities, and the FAA's Military Airports
    Program with jointly funded projects at closing bases.

        Question 3: California has, in recent history, been hard hit by
    several natural disasters including the earthquakes of 1990 and 1994,
    and El Nino storms of the past year. What has EDA been doing to help
    communities to recover from natural disasters and how does EDA interact
    and coordinated with the Federal Emergency Management Agency (FEMA)?
        Response: In the last 5 years, EDA's Disaster assistance program
    has received over $500 million in supplemental appropriations for long-
    term economic recovery assistance in 30 States and 4 territories and
    commonwealths. Overall, over 80 percent of the EDA funds were used for
    infrastructure construction projects, about 15 percent were for
    revolving loan funds and less than 5 percent were used for economic
    recovery planning and technical assistance.
        EDA has worked cooperatively with FEMA for some time in post-
    disaster program operations at the field level with EDA often co-
    locating in FEMA disaster field offices. More recently, EDA has been
    involved more closely in partnership with FEMA at the policy level in
    headquarters in updating the Federal Response Plan to incorporate a
    recovery component, serving on FEMA-lead Federal Recovery Task Force
    groups in response to specific disasters, and supporting the economic
    components of new FEMA mitigation initiatives such as ``Project
    Impact'' Building Resistance Communities'' to encourage local actions
    to make communities safer and to reduce the cost and impact of future
    disasters.
        In support of this FEMA mitigation initiative, EDA has continued
    its economic focus and is committing resources to safeguard jobs and
    insulate economic growth from the impacts of future disasters in
    disaster-prone areas of the country to help create ``Disaster Resistant
    Jobs''. On June 29, 1998 EDA and FEMA announced a Memorandum of
    Agreement to cooperatively develop and deliver a ``Disaster Resistant
    Jobs Training'' to help communities safeguard existing jobs and
    accelerate post-disaster economic recovery. In addition, EDA and FEMA
    are finalizing a Memorandum of Understanding to formalize the Project
    Impact partnership which will help outline the form and structure of
    cooperative activity for each agency in support of the Project Impact
    Initiative and Project Impact communities.
        EDA has been tasked by FEMA with a Mission Assignment for the
    Florida fires to conduct analyses of the economic impact on the local
    communities, and an analysis of the insurance coverage in meeting the
    residents/businesses needs.
                                     ______

      Responses by Phillip Singerman to Additional Questions from Senator
                                     Wyden
        Question 1: The Administration committed to provide $3 million for
    the Northwest Economic Adjustment Initiative under a memo of
    understanding with the Northwest Governors. Does the Administration
    plan to live up to that commitment?
        Response: EDA has proposals in the fiscal year 1998 pipeline
    totaling approximately $5.8 million responding to timber impacted
    communities which are competing for funding this fiscal year. EDA's
    forest initiative awards for FY 98 are expected to exceed $3.0 million.
    Between 1994 and 1997 EDA has funded timber related projects totaling
    approximately $42.0 million.

        Question 2: Congress provided $2 million more for the Title IX
    program in FY 98 than the Administration requested. You can 't say a
    shortage of funds is preventing you from fully funding the NW
    Initiative. What 's the holdup in providing the funding?
        Response: EDA's Seattle regional office has received $2.0 million
    in addition to its regular formula base allocation for Title IX to
    assist the timber impacted communities--all of which is expected to be
    awarded in fiscal year 1998.

        Question 3: Although this is supposed to be the fast year of the NW
    Initiative, Oregon still has 7 counties in the State with unemployment
    at least twice the national average as a result of dislocations of
    workers in timber and salmon fishing (Coos, Harney, Hood River,
    Jefferson, Lake, Morrow and Wallowa). What continuing commitment does
    EDA plan to provide the Northwest to help these workers and communities
    get back on their feet?
        Response: EDA has been and will continue to be supportive in its
    efforts in assisting timber impacted communities. EDA's intent is to
    continue normal levels of assistance to these communities to help guide
    them through the planning and adjustment process. EDA's participation
    in the Memorandum of Understanding was intended to help offset
    immediate economic impacts and to begin a short-term development
    strategy. EDA maintains that the remaining long-term economic
    development needs related to the Forest Initiative, are best handled
    through its regular programs.
                                   __________
       Statement of Robert W. Burchell, Ph.D., Distinguished Professor,
       Principal Investigator, Center for Urban Policy Research, Rutgers
                     University, New Brunswick, New Jersey
             section i: public works program performance evaluation
    Study Overview
        The purpose of the research described here was to evaluate all 205
    Economic Development Administration (EDA) Public Works Program projects
    that received their last payment in fiscal year 1990. This means that,
    as of that date, the projects were completed and structures associated
    with them either occupied or soon to be occupied. Thus, at the time of
    this research--6 years later--these projects had been sufficiently
    established to make their evaluation possible.
        Since 1965, EDA's mission has been to promote the long-term
    recovery of economically depressed areas by assisting local governments
    via public works project grants in generating and retaining jobs and in
    stimulating commercial and industrial growth.
    Study Procedures
        The study was undertaken from November 1996 through March 1997 by
    research teams from five universities and a major professional
    organization. All principals of the research teams have extensive
    experience in both economic development and infrastructure studies.
    Each principal spent significant time in the field researching
    individual projects and talking to grantees. Each principal and
    affiliated staff participated in some aspect of research analysis and
    in writing the final report. All concur with the findings presented
    below.
        The research team contacted by mail and telephone 205 grantees of
    public works projects. To help the grantees better understand the
    purpose and types of information necessary to undertake the evaluation,
    all grantees were invited to attend seminars conducted by the research
    team at 13 locations nationally. Sixty (60) project sites were visited
    to conduct in-depth discussions with grantees to learn more about their
    individual projects' impacts and to validate the information that they
    were in the process of providing.
        The analysis uses performance measures developed by EDA
    specifically to evaluate public works projects. Performance measures
    relate primarily to numbers of various types of jobs created or
    retained and amounts of private- and public-sector funds leveraged.
    Project Type and Context
        From a universe of 205 EDA public works projects receiving a
    closeout payment in fiscal year 1990, all 205 were successfully
    contacted.
        The composition of the 203 completed \1\ public works projects is
    as follows:
    ---------------------------------------------------------------------------
        \1\ Two projects aborted and were not constructed because of local
    financial or market reasons.

                            Distribution of Projects
    ------------------------------------------------------------------------
                                                         Number    Percent
    ------------------------------------------------------------------------

    Buildings.........................................       27         13.3
    Industrial Parks..................................       59         29.1
    Roads.............................................       17          8.4
    Water/Sewer.......................................       87         42.8
    Marine/Tourism....................................       13          6.4
        TOTAL.........................................      203        100.0
    ------------------------------------------------------------------------

        In terms of the context of the above projects, EDA public works
    projects take place in locations where levels of unemployment and
    percents of the population below the poverty level are 40 percent
    higher than State and national averages. These are also locations where
    per capita income is typically 40 percent lower than averages at the
    State and national levels.
    Project Completion
        Of those public works projects contacted by the research team, 99
    percent (203) were completed as planned. Ninety-one percent (185) of
    the projects were completed on time.
        Fifty-two percent (105) were completed under budget.
    Project Impacts
                Project-Related Direct Impacts
        Ninety-six percent (195) of the public works projects produced
    permanent jobs 6 years after completion. Eighty-four percent (171)
    leveraged private-sector investment over the period. On average, each
    public works project produced 327 direct permanent jobs for every $1
    million of EDA funding.
        Based on average EDA funding of $660,557 per project, $3,058 in EDA
    funds was spent per job created or retained. Total cost (all sources of
    funding, including EDA) per job created or retained was $4,857.
        Not including public projects, for every $1 million of EDA funding,
    $10.08 million was leveraged in private-sector investment.
        For all projects, for every $1 million of EDA funding, another $1
    million was leveraged in Federal, State or local investment.
        15.0 FTE (full-time-equivalent) construction jobs were created per
    $1 million of EDA funding, carrying out solely the grant-supported
    component of capital infrastructure.
                Nonproject-Related Direct and Indirect Impacts
        Nonproject-related direct or indirect jobs (those that occur
    because of the project or the project's jobs) were found to be present
    in 30 and 35 percent, respectively, of all public works projects.
        Considering all projects' ability to generate nonproject-related
    direct or indirect effects, for every $1 million of EDA funding, an
    additional 50 jobs and $1.18 million in private-sector investment were
    generated in nonproject-related direct effects, and an additional 64
    jobs and $126,180 were generated in indirect effects.
        Except in cases where the project was tax-exempt, public works
    projects increased the local tax base at a level of $10.13 million per
    $1 million of EDA funding.
    Project Impacts (General)
        Public works projects' economic impacts generally increase with
    time. Jobs resulting 6 years after completion were, on average, twice
    the number witnessed at project completion.
        EDA public-sector economic stimuli create private-sector jobs at
    high levels of success and low levels of cost.
    Conclusions
        Most of the public works projects achieved EDA's objective of
    providing communities with the necessary infrastructure to expand their
    economic base.
        Jobs and private investment have occurred in many areas that would
    not have experienced these benefits without EDA assistance.
        EDA offices as an instrument of government, and EDA field
    representatives who interact with grantees, are well-regarded by their
    constituencies.
                                   section ii
               defense adjustment program performance evaluation
    Study Overview
        The purpose of the research described here is to evaluate all (190)
    Economic Development Administration (EDA) Defense Adjustment Program
    grant projects approved during the period fiscal year 1992 through
    fiscal year 1995. The primary objective of this program and its
    projects is the restructuring of local economies to diversify away from
    dependence on former defense bases or defense contractors impacted by
    closure or cutback.
        Direct appropriated funding to EDA for the Defense Adjustment
    Program began in fiscal year 1994. From 1992 to 1994, EDA received
    transfers of funds for defense projects from the Department of
    Defense's Office of Economic Adjustment (OEA). The program, therefore,
    is relatively young, and as of 1997, the defense construction, capacity
    building (planning and technical assistance), and revolving loan fund
    (RLF) projects analyzed here were just taking hold. While their
    relative recentcy does not allow for an evaluation of these projects at
    full maturity, their accomplishments at this early phase can certainly
    be quantified.
        As indicated above, the Defense Adjustment projects, even if
    completed, have had only a short time to mature. With time, the
    permanent jobs that they create will increase and the cost per job
    created will decrease. The present evaluation provides a snapshot view
    of the projects' effects during an early phase of their existence. A
    concurrent EDA study of the Public Works Program and other similar
    studies have shown that the effects (both direct and indirect) of these
    projects will increase substantially over time.
    Study Procedures
        The study was undertaken from November 1996 through September 1997
    by research teams from five universities and a major professional
    organization. All principals of the research teams have extensive
    experience in both economic development and infrastructure studies.
    Each principal spent significant time in the field researching
    individual projects and talking to grantees. Each principal and
    affiliated staff participated in some aspect of research analysis and
    in writing the final report. All concur with the findings presented
    below. The research team contacted by mail and telephone 190 grantees
    of defense adjustment projects. To help the grantees better understand
    the purpose and types of information necessary to undertake the
    evaluation, all grantees were invited to attend seminars conducted by
    the research team at 13 locations nationally. Forty-two project sites
    were visited to conduct in-depth discussions with grantees to learn
    more about their individual projects' impacts and to validate the
    information that they were providing.
        The evaluation is undertaken using performance measures developed
    by EDA specifically to assess the productivity of defense adjustment
    projects. Performance measures for defense construction and revolving
    loan fund projects primarily involve numbers and types of jobs created
    or retained and amounts of private-sector funds leveraged. For
    capacity-building projects, the performance measure is a grantee self-
    rating of the quality and impact of the EDA capacity-building effort.
    Project Type and Context
        From a universe of 190 EDA defense adjustment projects that were
    approved from fiscal year 1992 through fiscal year 1995, all 190 were
    contacted.
        The 187 grant-funded projects analyzed in this study \2\ include
    162 single-element projects, 20 double-element projects, and 5 triple-
    element projects. These sum to 217 total project elements funded via
    the 187 EDA grants.
    ---------------------------------------------------------------------------
        \2\ Three projects were never funded due to grantee financial
    problems (2) or cross purposes between the grantee and the EDA regional
    office (1).
    ---------------------------------------------------------------------------
        Since 1987, approximately 2.5 million defense-dependent jobs have
    been lost due to defense downsizing. EDA's Defense Adjustment Program
    is a direct response to base closures, base downsizing, and/or reduced
    defense contracting. Cutbacks are often sudden and severe for their
    host communities. In addition, projects are in locations where minority
    populations and percents of the population below the poverty level are
    20 percent higher than State and national averages. These are also
    locations where per capita income is 25 percent lower than averages at
    State and national levels.
    Project Completion
        Of those 190 defense adjustment projects contacted by the research
    team, 98.5 percent (187) were initiated as planned.
        Of those undertaken, about 97 and 98 percent of defense
    construction and capacity-building projects, respectively, moved to
    completion; 100 percent of the RLFs moved to completion.

                                                   Context of Projects
                                At Time of Application (Medians) (187 Initiated Projects)
    ----------------------------------------------------------------------------------------------------------------
                                                                                        Ratio to
                                                                            Median       State      Ratio to Nation
    ----------------------------------------------------------------------------------------------------------------
    Unemployment Rate (percent)........................................          7.0         0.98               1.02
    Per Capita Income ($)..............................................       13,034         0.72               0.73
    Below Poverty Level (percent)......................................         15.5         15.5               1.18
    Minority (percent).................................................         27.3         1.21               1.39
    ----------------------------------------------------------------------------------------------------------------

        Of those undertaken and completed, 80 and 81 percent of the defense
    construction and RLFs, respectively, were completed on time. About 56
    percent of the capacity-building projects were completed on time.
        Of those undertaken and completed, about 90 percent of defense
    construction projects came in at or under budget; the figures for
    capacity building and RLFs are 97 percent and 100 percent respectively
    \3\.
    ---------------------------------------------------------------------------
        \3\ RLFs, by their nature, cannot come in over budget. They lend
    what they have.
    ---------------------------------------------------------------------------
    Project Impacts \4\
    ---------------------------------------------------------------------------
        \4\ As projects age and mature, project accomplishments will likely
    increase over time.
    ---------------------------------------------------------------------------
        Project-Related Direct Impacts: Defense Construction On average,
    completed defense construction projects (49) have produced 30,870
    permanent jobs to date, or 124 jobs per $1 million of EDA funding.
    These jobs were produced at an EDA cost of $8,052 per job and a total
    cost (all sources of funding) of $12,045 per job.
        Defense construction projects produced 18.0 FTE \5\ construction
    jobs per $1 million of EDA funding.
    ---------------------------------------------------------------------------
        \5\ Full-time-equivalent.
    ---------------------------------------------------------------------------
        Completed defense construction projects (43)\6\ leveraged $722
    million in private-sector investment, or $2.2 million per $1 million of
    EDA funding. \6\ Forty-three of 49 defense construction projects have
    private-sector investment. Six projects are public sector and have no
    private-sector investment.
    ---------------------------------------------------------------------------
        \6\ Forty-three of 49 defense construction have private-sector
    investment. Six project are public sector and have no private-sector
    investment.

      Defense Construction and Capacity-Building Projects: Permanent Jobs:
                                    (Medians)
        (49 Completed Defense Construction and 31 Completed TA* Capacity-
                               Building Projects)
    ------------------------------------------------------------------------
                                                                   Capacity
                                                      Defense      Building
                                                   Construction      (TA)
    ------------------------------------------------------------------------

    Jobs Per $1M EDA.............................           124           63
    EDA Cost Per Job.............................        $8,052      $13,633
    Construction/Professional Jobs...............      18.0 FTE     13.7 FTE
    Private-Sector Investment Per $1M of EDA             $2.2 M          N/A
     Funding.....................................
    ------------------------------------------------------------------------
    *Technical Assistance

    Capacity Building
        Capacity-building projects, by their definition and design, are not
    intended to create jobs directly, but to increase the planning,
    organizational, and technical skills needed for local economic
    development. Nevertheless, some jobs result as an indirect byproduct of
    those project goals. Completed capacity-building (technical assistance)
    projects (31) have produced 63 permanent jobs per $1 million of EDA
    funding at an EDA cost of $13,633 per job and a total cost of $19,393
    per job \7\.
    ---------------------------------------------------------------------------
        \7\ Direct job creation is an incidental benefit of capacity-
    building projects, which generally support subsequent projects having
    direct job creation.
    ---------------------------------------------------------------------------
        Permanent jobs coming from capacity-building technical assistance
    projects reflect developments such as stalled businesses being matched
    with new markets, workers being more employable due to training, and
    businesses generating more money because they have been made more
    efficient.
        Completed capacity-building (technical assistance) projects have
    produced 13.7 FTE professional consultant jobs for every $1 million of
    EDA funding.
        Completed capacity-building projects have, in addition, produced
    adjustment strategies, heightened community involvement and planning,
    created workable implementation strategies, and undertaken market/
    feasibility studies. EDA capacity-building efforts have been rated by
    grantees as seen in the following table:

              Grantee Rating of Capacity--Building Projects (Means)
      (70 Completed Capacity-Building Projects)* (Scale of 1-10; 10 = best)
    ------------------------------------------------------------------------

    ------------------------------------------------------------------------
    Quality of Adjustment Strategy.............................        8.2
    Extent of Community/Business/Government Participation......        8.5
    Consistency of Implementation Efforts and the Adjustment           7.8
     Strategy..................................................
    Quality of Technical Assistance Effort.....................        8.8
    Impact of Technical Assistance Effort......................        8.9
    Quality of Feasibility/Market Study........................        9.1
    Impact of Feasibility/Market Study.........................        8.7
    ------------------------------------------------------------------------
    *These include all types of capacity-building projects, not just
      technical assistance.

    Grantee Observations:
        Across the board, grantees report that the products they are
    delivering with EDA oversight are both well done and have a significant
    impact.
        Capacity building empowers local areas to respond in a proactive
    and forward-moving way to the adverse impacts on their economies.
        Grantees further report the following:
        Capacity-building projects are responsible for significant
    networking among various forms and levels of economic development
    agencies. This enables greater use and leveraging of public and
    nonprofit funds.
        Capacity-building projects comprise technology transfer efforts
    wherein sophisticated methods of enhanced productivity are used to
    measure business adjustment to new technology.
    Revolving Loan Funds
        With regard to revolving loan funds (RLFs), 304 jobs have been
    created per $1 million of EDA funding for 16 completed projects (fully
    loaned); for
        those projects in process (21), there are 247 \8\ jobs created. EDA
    cost per job is $3,312 for completed RLF projects and $4,079 for
    projects that are in process.
    ---------------------------------------------------------------------------
        \8\ In-process RLF projects can be analyzed in the same fashion as
    completed projects because they behave similarly from the time of their
    first loan onward.
    ---------------------------------------------------------------------------
        Completed RLF projects have leveraged $115 million in private-
    sector investment, or $2.5 million per $1 million of EDA funding. In-
    process RLF projects have leveraged $42 million in private-sector
    investment, or $2.8 million per $1 million of EDA funding.
        Other statistics for RLFs include combined default and write-off
    rates for completed projects of 13 percent and for RLF projects in
    process of 1.9 percent \9\. For both completed and in-process projects,
    jobs produced per business assisted are about 22 and 24, respectively.
    In 50 percent of the cases the RLF involves a business expansion (as
    opposed to startup or retention), and in 67 percent of the cases it
    involves the funding of manufacturing firms (as opposed to commercial
    or service firms).
    ---------------------------------------------------------------------------
        \9\ A 12-15 percent combined default and write-off rate is well
    within industry standards for this type of loan.
    ---------------------------------------------------------------------------
    Project Impacts (General)
        Due to the recentcy of defense adjustment projects, their results
    are just beginning to become evident. Most will likely contribute
    significant additional employment growth in the long term.
        Defense construction, as well as RLF projects, are nonetheless
    producing permanent jobs at relatively low costs; capacity-building
    technical assistance projects are producing smaller numbers of
    permanent jobs at somewhat higher costs. Capacity-building planning
    efforts and market/feasibility/reuse studies are perhaps more
    importantly laying the groundwork for both defense construction and RLF
    projects. Capacity-building projects could easily be given credit for
    jobs produced under these two other types of implementation activities.

                     Revolving Loan Fund Projects (Medians)
                      (16 Completed and 21 In-Process RLFs)
    ------------------------------------------------------------------------
                                                     Completed    In Process
    ------------------------------------------------------------------------
    Jobs Per $1M EDA..............................          304          247
    EDA Cost Per Job..............................       $3,312       $4,079
    Private-Sector Leverage Per $1M EDA...........       $2.5 M       $2.8 M
    Default/Write-off Rates.......................   13 percent  1.9 percent
    Jobs Created/Business.........................           22           19
    ------------------------------------------------------------------------

    Conclusions
        As reported by grantees, EDA defense adjustment projects are one of
    the few avenues of flexible assistance available to communities faced
    with base closures.
        EDA funding is critical to most of these types of activities and is
    usually the primary source of initial funding.
        The lower rate for in-process loans reflects almost no write-offs
    at this stage of the loan.
                                  section iii
     multiplier and employment-generating effects of public works projects
    Study Overview
        The research described here evaluated the job-producing results of
    public works investments. It employed nearly 200 input-output and
    regression analyses to document the effects of Economic Development
    Administration (EDA) public works projects on the employment growth of
    their host counties. Comparisons were also made to counties where EDA
    projects did not take place. Both the input-output and regression
    analyses sought similar answers: Did public works projects produce
    attributable permanent jobs in counties where these projects took
    place? Did the resulting jobs, in turn, produce other jobs? The two
    analyses are different in that the input-output analysis is constrained
    by current conditions, whereas the regression analysis allows the
    current structure of economic activities to change. The first presents
    a static view of job-creation impacts; the second, a more dynamic view.
    Both types of analyses are rigorous and standard econometric procedures
    for determining relationships between public investment and permanent
    job growth.
    Input-Output Analysis Findings
        This research examined the role of EDA-funded direct permanent
    employment and private-sector investment in producing total (direct,
    indirect, and induced) permanent employment and private-sector
    investment in counties throughout the United States. In other words,
    what are the direct employment and private-sector investment multiplier
    effects? The analysis was undertaken using the IMPLAN Model to generate
    indirect and induced effects from direct effects, the latter obtained
    from a national survey of public works grantees. Thus, the national
    survey generates direct permanent employment and private-sector
    investment; the IMPLAN Model generates indirect and induced permanent
    employment and private-sector investment. The sum of direct, indirect,
    and induced employment and private-sector investment yields total
    employment and private-sector investment.
        Total employment and private-sector investment divided by direct
    employment and private-sector investment produce ``multipliers'' of the
    two direct effects.
        Two sets of multipliers are shown in Table 1. These relate to two
    forms of direct effects--project-related and nonproject-related. The
    set of lower multipliers expresses total permanent employment and
    private-sector investment as a function of both forms of direct
    permanent employment and private-sector investment. The set of higher
    multipliers expresses total permanent employment and private-sector
    investment as a function of the solely project-related form of direct
    permanent employment and private-sector investment. The lower
    multiplier for permanent employment and private-sector investment is
    the multiplier effect of permanent employment and private-sector
    investment at the site that the EDA grant specified, as well as other
    direct employment that located nearby; the higher multiplier for
    permanent employment and private-sector investment is the multiplier
    effect of permanent employment and private-sector investment solely at
    the site that the EDA grant specified.
        The multipliers shown in Table 1 are medians for five categories of
    projects and a weighted median for all projects. The overall median
    ratio for total permanent employment to both forms of direct permanent
    employment (project and nonproject related) is 1.50; the equivalent
    median for total private-sector investment is 1.44. Thus, if an EDA
    public works project creates 200 direct permanent jobs and $6 million
    in direct private-sector investment, total permanent jobs (direct,
    indirect, and induced) amounts to 300 and total private-sector
    investment to $8.64 million. For employment, there is some minor
    variation by type of project: Industrial parks exhibit the highest
    multipliers; water/sewer projects exhibit the lowest. For private-
    sector investment, there is much more variation by type of project:
    Buildings have by far the highest multipliers; tourism/marine projects,
    the lowest multipliers.

        The multipliers for total permanent employment and private-sector
    investment versus only project-related direct permanent employment and
    private-sector investment are 5 percent higher for employment and 10
    percent higher for private-sector investment. This finding indicates
    the relatively small amount of nonproject-related direct permanent
    employment and investment compared to project-related direct permanent
    employment and investment identified in the grantee survey.
    Regression Analysis Findings
        This research evaluated the role of EDA public works investments in
    the creation of permanent private-sector employment and in enhancing
    employee compensation in U.S. counties.
        Current models of the effect of infrastructure investment on
    private-sector productivity have yet to establish a firm connection
    between the two. Studies using these models often fail to control for
    the potentially important effect of variations in factor prices,
    especially wages, in response to public investments. A comprehensive
    model of county employment effects is provided in this study as a basis
    from which to view impacts.
        The analysis reported here was undertaken using information from
    the Public Works Program--Performance Evaluation to specify the level
    of EDA investment in a public works project in a county. The resulting
    jobs produced in a county reflect the numbers of jobs counted annually
    as reported by County Business Patterns. Additional regression
    variables, taken from both County Business Patterns and the U.S. Census
    of Population and Housing, were used to help identify the independent
    effect of EDA investment on county employment growth.
        The analysis employed multiple regression as the primary
    econometric technique, with separate equations constructed for both
    employment and compensation. Variables are expressed in their
    logarithmic form, reducing the influence of extreme values and enabling
    a closer fit of the regression planes and higher R2s in both equations.
    Regressions explain between 80 and 85 percent of the variation in
    county employment and about 70 percent of the variation in compensation
    levels.
        Empirical results include the following:
        EDA investments have a statistically significant and positive
    effect on county total employment levels (see Table 2).
        EDA investments have no statistically discernible effect on
    compensation per employee. Thus, the resulting EDA jobs are produced at
    the average wage of all jobs locally.
        The elasticity of total employment with respect to EDA investment
    is estimated at approximately .0074: that is, a 10 percent increase in
    EDA investment in a typical county ($4,650) is estimated to be
    associated with an increase of 4.2 jobs. Thus, a $10,000 EDA investment
    produces approximately 9 permanent jobs.
        The cost per job for the EDA program is estimated at just over
    $1,100 (in 1997 dollars), counting all permanent jobs generated by the
    facility or the increase in productivity that the facility offers
    (direct, indirect, induced, and intangible). This estimate is
    comparable to the findings in both the Public Works Program--
    Performance Evaluation and the input-output analysis, which found that
    the cost of a direct permanent job was about $3,000 and that the
    multiplier for total jobs was about 1.5. But the input-output analysis
    considered only jobs created by the EDA facility. There are also other
    jobs created by the new assets themselves, leading to changes in the
    structure of county economies. Thus, the overall jobs multiplier might
    be even higher, bringing the cost per job more in line with the
    regression analysis.
    Conclusions
        This study found that EDA's Public Works Program does indeed
    produce permanent private-sector employment at a relatively low cost.
    The estimates clearly suggest that the program is having its intended
    effect. EDA appears to have converted its resources into permanent jobs
    at prevailing wages in its target counties. These counties are better
    off than similar counties where this type of effort is not taking
    place.

                                   __________
      Statement of R. Scott Fosler, President, National Academy of Public
                                 Administration
        Mr. Chairman and Members of the Subcommittee: I am R. Scott Foster,
    President of the National Academy of Public Administration. I am here
    to provide testimony on behalf of the Academy's panel on economic
    development. Former Governor Dick Thornburgh, the chair of this panel
    and an Academy Fellow, wished to be here, but he is on a trip to South
    Korea.
    National Academy of Public Administration
        The Academy is an independent, nonpartisan, nonprofit organization
    chartered by Congress to identify emerging issues of governance and
    provide practical assistance to Federal, State, and local government on
    how to improve their performance.
        To carry out this mission, the Academy draws on the expertise of
    more than 400 Fellows, who include current and former Members of
    Congress, cabinet secretaries, senior Federal executives, State and
    local officials, business executives, scholars, and journalists. Our
    congressional charter is one of two granted to research organizations.
    The other is held by the National Academy of Sciences which specializes
    in scientific research. The Academy's emphasis is on the design and
    management of government operations and programs.
    The Academy Report
        Two years ago, the Economic Development Administration of the
    Department of Commerce asked the Academy to address the question,
    ``What is the appropriate future role of the Federal Government in
    economic development activities?'' The Annie E. Casey Foundation also
    provided support for the project.
        The Academy convened a diverse panel of experts from the local,
    State and Federal levels and also from the private sector. Some members
    of this panel have had distinguished careers specifically in economic
    development, and others have had experience in economic policy or
    related areas.
        We reviewed the economic development policies and programs of all
    Federal agencies, not just the programs of the Economic Development
    Administration. Our staff conducted field work in eight communities,
    including rural and urban areas. We interviewed economic development
    experts and studied the extensive literature on economic development
    including evaluations of Federal and State programs. The panel then
    prepared its report, and convened a national meeting of economic
    development professionals from all parts of the country to discuss it.
        I have brought copies of the report today, and ask for it to be
    entered into the record.
        The panel did not address the specific issue before this
    Committee--reauthorization of the Economic Development Administration.
    Nonetheless, its findings and recommendations may provide useful
    information for the Committee as it considers such legislation.
        Briefly, the report recommends a rethinking of the basic premises
    for Federal economic development activities at the State, local, and
    regional levels.
        Historically, Federal development efforts have tried to increase
    overall national productivity and to help economically distressed and
    poor communities gain a share of the country's general prosperity.
    Toward these ends, the Federal Government has built and sustained a
    variety of organizations involved in economic development at every
    level of society. They include development agencies at the State and
    local levels, multicounty development districts, and community-based
    development corporations, not to mention various nonprofit
    organizations and working relationships with banks, industrial
    associations, and other private-sector partners.
        Among the panel's findings are the following:

        The fundamental economic influences of the private sector and
    market forces must be incorporated into successful economic development
    plans.
        Federal investments in development efforts are critical to many
    States and localities, but not all.
        No single Federal program is appropriate in all communities;
    however, the present multiplicity of programs imposes unnecessarily
    high transaction costs on States and localities and exacerbates
    inherent weaknesses in their approaches.
        The meager Federal investment in information sharing and technology
    severely constrains our nation's economic development efforts.
        The panel proposed a new approach to meet economic development
    needs. It urges the Federal Government to help States and localities
    learn through better information, leverage all available resources, and
    link multiple Federal initiatives to assist local communities.

        In order to promote learning, the Federal Government should:

        Help States and communities learn about state-of-art economic
    development practices.
        Act to reduce the economic losses resulting from unrestrained
    bidding wars by States and localities to recruit or retain businesses.
        Improve the quality of economic development decisionmaking and the
    assessment of policies and programs at all levels by gathering and
    disseminating State, regional, and local economic statistics and by
    reducing the fragmentation of the nation's statistical system.

        In order to leverage State and local efforts, the Federal
    Government should:

        Give States and communities incentives to design and implement
    effective regional or interjurisdictional development strategies.
        Encourage investment in development strategies that offer
    opportunities to generate jobs and income over the longer term, rather
    than in high-visibility projects.
        Give special assistance to States and communities seeking to create
    economic opportunities in distressed communities.

        In order to make it easier for States and localities to link
    Federal resources, the Federal Government should:

        Substantially reduce the fragmentation of the Federal economic
    development efforts.
        Establish a permanent mechanism to provide overall policy-level
    guidance to other Federal activities such as work force training,
    environmental protection, technology and research, and other endeavors
    that contribute to economic development outcomes.
        Reorient Federal programs, especially business finance programs,
    toward strategies that address the underlying obstacles to obtaining
    credit.
        Encourage States and localities to stimulate links among businesses
    to enhance overall economic performance.

        The nation's economic development programs will be a critical
    factor in two of the most significant domestic policy challenges of the
    coming decades: America's adjustment and response to an increasingly
    competitive global economy and the recent transformation of social
    policy from one based on dependency to one that stresses opportunity
    and personal responsibility. A reformed Federal approach to economic
    development will help States and communities make real and far greater
    contributions to addressing these issues.
        EDA does not have the authority to implement all of the panel's
    recommendations. For example, it would take action by the Congress and
    leadership by the President to substantially reduce the fragmentation
    of the Federal economic development effort.
        However, EDA has taken the panel's recommendations to heart. On an
    informal basis, we have been watching EDA's actions to implement the
    recommendations under its statutory authority and have been pleased at
    many of the steps they have taken. Phillip Singerman, Assistant
    Secretary for Economic Development, recently provided to us a detailed
    list of these steps, and I ask that a copy of his letter be entered
    into the record. While we have not formally studied or assessed EDA's
    actions, it is clear that the agency has taken the panel's
    recommendations seriously and has taken some useful steps -- especially
    in the area of technical assistance and training, or as the panel put
    it, learning.
        For example, Mr. Singerman's letter informs us that EDA is working
    to develop a methodology to assess the costs and benefits of State
    incentive programs. EDA has engaged a contractor to assess how Federal
    statistical agencies can better serve the needs of economic development
    practitioners. EDA is seeking to strengthen the planning processes of
    the States and regions that it works with. And EDA has commissioned
    independent evaluations of its own programs, hopefully as a step toward
    encouraging the States and regions with which it works to evaluate
    their own efforts. Thoughtful, sound evaluations can be tremendously
    useful to economic development efforts in sifting the wheat from the
    chaff, sharing good ideas, and finding better ways that EDA and other
    Federal agencies can support their work.
        For many years, EDA has been at risk of being terminated. When we
    were doing the research for our study, we were told repeatedly about
    the chilling effect this had on the morale and the capabilities of the
    agency. EDA is now working hard to revitalize itself. We are pleased
    that the Academy report has been of some use to the agency in this
    process and hope that the Committee will also find the report useful in
    its work.
    Conclusion
        Mr. Chairman, this concludes my prepared statement. I would be
    pleased to answer any questions. Thank you.
                                   __________
      Statement of Floyd G. ``Buddy'' Villines, Judge/Executive, Pulaski
                                County, Arkansas
        Mr. Chairman, distinguished members of the Panel: Thank you for
    holding this important hearing and for inviting us here today to
    discuss the long overdue reauthorization of an agency that is very
    important to revitalization efforts in our economically distressed
    rural and urban areas.
        My name is Floyd Villines. I'm Judge/Executive of Pulaski County,
    Arkansas and a former Mayor of Little Rock. I'm here today on behalf of
    the Coalition for Economic Development, a group of fifteen (15)
    national organizations committed to supporting the Economic Development
    Administration.
        Our coalition represents national organizations representing rural
    and urban economic development practitioners, professionals and
    academics, and local elected officials. These organizations include the
    American Economic Development Council, the Association of University
    Centers, the Council for Urban Economic Development, the National
    Association of Counties, the National Association of Business
    Incubators, the National Association of Development Organizations, the
    National Association of Installation Developers, the National
    Association of Management and Technology Assistance Centers, the
    National Association of Regional Councils, the National Association of
    State Development Agencies, the National Association of Towns and
    Townships, the National Congress for Community Economic Development,
    the National League of Cities, the Public Works and Economic
    Development Association and the U.S. Conference of Mayors.
        Members of the coalition applaud your efforts and the efforts of
    Committee Chairman John Chafee to produce a reauthorization bill that
    continues the reforms that have been underway at the Economic
    Development Administration for several years. We also pledge our
    support to work with you to reauthorize EDA.
        Members of the coalition believe that reauthorization of the
    Economic Development Administration is critical because:
        The agency is moving into the 21st Century with authorizing
    legislation that goes back to the early 1980's. The agency needs
    reinforcement with new language that allows it to help our rural and
    urban communities meet the continuing and ever-changing challenges of
    economic revitalization. Among those challenges will be access to and
    expertise in information age technology. Our businesses in small cities
    and rural areas will be unable to compete in the global economic
    without access to these information and marketing tools.
        Reauthorization will allow the agency to focus on its core mission
    and to develop multi-year plans for its programs, rather than draining
    off its energy in an annual battle for survival.
        The coalition's support for EDA is based on a very simple concept:
    EDA works. It is a Federal agency that does what it was designed to do.
    It serves the Federal role of leveling the playing field for those
    communities that need to become productive parts of the national
    economy, rather than a drain on it. It is a lean, streamlined agency
    with a clearly defined mission. It supports and helps revitalize our
    economically distressed communities. As a local government official, it
    is important to me that EDA is there to provide the seed money
    necessary for the infrastructure improvements we need to attract new
    business and help existing businesses expand and grow.
        I emphasize ``seed money'' because that is what EDA support is.
    It's a boost, a leg up. It requires local governments to provide as
    much as 50 percent in matching funds, although for extremely distressed
    communities, this match can be reduced. Often, however, EDA funds are
    the linchpin that allows us to leverage other financial resources and
    to buy down loans, making those loans affordable for particularly
    distressed areas. For example, in my own county, two census tracts In
    the vicinity of North Little Rock were facing a 33.4 percent and a 36.7
    percent unemployment rate. There was no industrial park in the area and
    no attractive place to locate industry that could provide jobs to these
    unemployed residents.
        Through the efforts of the North Little Rock Industrial Development
    Corporation and the Central Arkansas Planning and Development District,
    an appropriate site was found. With a $462,000 grant from EDA and a
    $300,000 plus match from North Little Rock, water, sewer and an access
    road were constructed to reach the industrial park site.
        Soon after completion, three companies moved in, providing 323 new
    jobs, a payroll in excess of $3.1 million, with private investments of
    approximately $4.4 million. We now have 13 tenants, employing 365
    people, with an annual payroll of $4.1 million and private investments
    totaling $9.5 million.
        We believe economic development efforts in this area contributed
    significantly to a $10,000 average household income increase in Pulaski
    County between 1990 and 1995.
        This project could not have been completed without the assistance
    of EDA.
        Following are but a few examples, selected from across the country,
    of what EDA investments have meant to our distressed communities.
        A project in cooperation with the State of Maine to build a Fish
    Pier at Stonington, on Deer Isle in East Penobscot Bay. As a result of
    the new pier, 100 new jobs were created and 262 jobs retained in the
    fishing community. Since its completion, a seafood company with three
    trailers has opened, along with smaller businesses for fish sorting.
    The city has benefited as owner of the Pier through user fee charges.
    The pier, called ``the Cadillac of piers'', is expected to last for 300
    years.
        Increase in sewage treatment capacity for the Borough of Berwick,
    Pa., enabled the town to retain 506 jobs, part of a plant operation
    that was a heavy user of the sewage facility. The company has expanded
    its work force, creating about 450 new jobs. Cost to EDA was $1
    million; cost to the community was $4.5 million. Private sector
    investment was $14.250 million.
        The Rochester Science Park in Rochester, N.Y., helped boost a
    sagging economy that had few jobs for entry level workers. The Science
    Park, funded at $1 million by EDA and $2.12 million from other sources,
    has created 534 jobs and retained another 55 jobs and resulted in a
    private-sector investment of $13.175 million.
        The Martin Luther King Industrial Park in St. Louis is completely
    filled and has generated a total of 600 new jobs while retaining 600
    more. The park has attracted $50 million in private-sector investments.
        --A regional business development system created by the Association
    of South Central Oklahoma Governments, Duncan, in cooperation with the
    city of Lawton. This is an example of a rural area taking a model
    developed by a metropolitan area. The program integrated a ``going into
    business and business plan preparation'' courses and seminars in
    conjunction with a Vocational Technical School. The development
    district worked with its member communities to pull together twelve
    revolving loan funds. The program provided course work for Fort Sill
    employees when the defense facility was going through a reduction in
    force; has helped hundreds of individuals in their business creation
    and expansion efforts and has helped course graduates that have gone
    into business.
        A project in a deteriorating area in inner Philadelphia that has
    brought back to life the old American Bandstand Building and turned it
    into a center for business incubation. The center is the brain child of
    the Wharton Small Business Development Center at the University of
    Pennsylvania. The center's 10 year goal is to create 200 new
    businesses, 3,500 new jobs and leverage $660 million in private
    investment.
        Esperanza Unida (New Hope) business incubator center that serves a
    predominantly Hispanic area in southside Milwaukee has been in
    existence since 1971, but its efforts were redoubled in the early
    1980's when all of the factories in which people worked in the
    neighborhood closed down. In response, the center started an auto
    repair training business, but over the years, it has expanded into 11
    different training centers, all starting around market niches where
    there were jobs and wages adequate to support a family.
        These are but a few of the successful economic revitalization
    projects in which the Economic Development Administration has played a
    major role. Numerous other successful efforts can also be documented.
        As I mentioned earlier, EDA is an agency that works. We believe
    there are several reasons why:

        The EDA network EDA's regional offices and State economic
    development representatives assist local governments and other
    recipients of funding. These regional office people and EDRs are
    available to assist with any problems that arise. They watch over the
    projects, make sure there are no problems and help us get projects
    completed on time.
        The EDA planning process. EDA requires an overall economic
    development strategy that engages the community, various organizations
    and local governments in a process to assess needs and to determine
    goals. That plan is a realistic road map that keeps us focused. That
    plan is developed on a regional basis, with specific input from local
    governments in the economic development district, citizens and others.
    The process allows us to identify our strengths and weaknesses and work
    to build on those strengths and eliminate or reduce our weaknesses. It
    allows us an opportunity to look at where we, as local governments, can
    be working together, rather than competing, for economic growth.
        The academic connection. EDA has a network of university centers
    that can provide economic development practitioners with academic
    research to assist them in planning and project management. In our
    State, the center at the University of Arkansas-Little Rock is
    currently collecting and acting as the repository for a consistent set
    of data that can be used by all economic development districts in
    developing their overall plans. These university centers can also
    operate over a broader base than one economic development district.
        The revolving loan fund program. EDA's revolving loan fund has
    assisted thousands of entrepreneurs in establishing their businesses
    and has kept thousands of other small businesses in operation. These
    loan funds serve those that do not meet the criteria for loans from
    traditional lending institutions. We all know that small businesses are
    providing the majority of new jobs in America. The EDA loan fund allows
    us at the local and regional level to invest in our communities by
    assisting businesses that are home grown and are more likely to stay at
    home.
        EDA's Trade Adjustment Program. EDA's network of 12 Trade
    Adjustment Assistance Centers provide vital help to businesses impacted
    by our changing trade policy and the growing global competition. The
    program is designed to help those businesses that receive certification
    as truly impacted businesses to develop an adjustment proposal that
    includes the firms recovery strategy and technical assistance needs.
        EDA's eligibility criteria. The agency's emphasis is on the most
    economically distressed areas in rural and urban America and on the
    most viable projects. The criticism that too much of America is
    eligible to receive EDA finding in not valid. While many areas that
    were designated as economic development districts over the years remain
    as ``designated'' districts, they receive no finding because they no
    longer meet the eligibility criteria.
        EDA's job creation focus. The emphasis in EDA programming is on job
    creation. EDA grants are tied to job retention and the creation of new
    jobs, either through new companies or expansion of existing companies.
        EDA's willingness to listen. EDA has demonstrated a willingness to
    change. EDA has listened to its grantees about the timeframe for
    processing grant applications and for simplifying the process and has
    corrected many of the problems of the past by moving decisionmaking to
    the regional level. EDA has demonstrated a willingness to reform. EDA,
    in actuality, has been reforming itself. The agency has listened and
    responded to criticism and suggestions from Congress and from its
    grantees.
        All of you are aware, I'm sure, that many communities that are
    struggling to comply with welfare reform. That means we must find ways
    to increase the number of jobs available, and in many parts of the
    country, communities are faced with an ongoing struggle to attract
    enough job opportunities. EDA is the one Federal agency that places all
    its program emphasis on job creation and job retention, and it is the
    agency already positioned to help those rural and urban communities
    struggling to respond to welfare reform requirements. In my own county,
    EDA assistance has meant that we have been able to add living wage jobs
    for many of our citizens. EDA has been there through the years to
    assist us with our struggle for economic revitalization.
        In conclusion, Mr. Chairman and members of the Panel, the Economic
    Development Administration has earned the respect of all of us who have
    worked with it. It is time the agency was recognized through
    reauthorization for the lasting benefits it has contributed--and will
    continue to contribute--to our communities.
        Again, thank you for the opportunity to appear before you today.
    The longer coalition testimony submitted for the record includes
    numerous examples of the investments EDA has made in America's
    economically distressed rural and urban areas. We have also included a
    tabulation of the investments EDA has made in every State since the
    agency started in 1965.
        In addition, we have included a list of coalition member contacts.
    Please feel free to call any of them with any questions you may have
    specific to their areas of expertise.
        I'll be happy to answer any questions. And again, I want to assure
    you, Mr. Chairman, and other members of the panel that you may rely on
    members of the coalition to assist you in any way we can.

                                   __________
    Statement of Eric P. Thompson, Executive Director of the Lower Savannah
      Council of Governments, Aiken, South Carolina, and President of the
      National Association of Development Organizations on behalf of the
                       Coalition for Economic Development
        Mr. Chairman and Mr. Baucus, thank you for inviting me to testify
    on reauthorization of the Economic Development Administration (EDA) on
    behalf of the Coalition for Economic Development. I am Eric Thompson,
    Executive Director of the Lower Savannah Council of Governments
    headquartered in Aiken, South Carolina. As President of the National
    Association of Development Organizations (NADO), I am pleased to join
    the other members of our coalition in offering strong support for EDA
    reauthorization.
        My fellow coalition member Judge Villines has given an excellent
    overview of the importance of EDA programs to rural and urban
    communities. I would like to focus on an issue of great importance to
    my region, the State of South Carolina and other places throughout the
    country affected by defense industry contract cuts and base closures.
        Despite the small size of EDA, the agency has always provided
    flexible programs and funding needed in times of sudden economic
    dislocation. EDA's Defense Adjustment Program helps communities
    impacted by base closures and/or defense contract reductions to rebuild
    and diversify their economies and move away from defense dependency.
        EDA is the only Federal agency with flexible program tools to help
    communities implement base reuse plans. The agency allows local
    communities to establish their own priorities and use EDA grants to
    fill funding gaps. EDA investments require local commitment and
    funding. This creates a true public-private partnership to address long
    term strategic needs. Working with their local partners, economic
    development districts, EDA funds are highly leveraged and targeted to
    areas of greatest need.
        In the State of South Carolina there have been a number of base
    closings and significant cutbacks at the Department of Energy (DOE)
    Savannah River Site located in the Lower Savannah region.
        In April 1996 the Charleston Naval Base was closed resulting in the
    loss of 21,902 direct jobs with $644 million in annual payroll. When a
    base closes, there is a need for a regional approach to provide a
    transition to other jobs for dislocated workers and to increase
    economic diversity for long-term sustainability. Military base reuse is
    important, but meaningful defense adjustment must focus on the
    structural recovery of defense impacted communities and not just base
    reuse. EDA's programs and funding are critical in order to achieve
    structural adjustment because they allow local communities to establish
    their own priorities. Working with the local Economic Development
    District, the Berkeley-Charleston-Dorchester Council of Governments,
    EDA funds have been invested in infrastructure, a revolving loan fund
    and a regional marketing plan to create and retain jobs in the region.
    EDA funds significantly leveraged private-sector investment and have
    resulted in the creation and retention of 12,800 jobs.
        In the Lower Savannah region the Savannah River Site produced
    material for nuclear weapons used in the US defense program. It is the
    largest employer in the State of South Carolina. With the end of the
    cold war, the Department of Energy (DOE) downsized the facility,
    resulting in a loss of over 10,000 jobs, increasing unemployment,
    causing real estate values to stagnate and essentially halting new home
    starts. In 1997, all six counties in the Lower Savannah COG--Aiken,
    Allendale, Bamberg, Barnwell, Calhoun and Orangeburg--had unemployment
    rates above the State average. The rural counties of Allendale,
    Bamberg, and Orangeburg have almost twice the State average and are the
    three highest unemployment counties in the State.
        In order to help the Lower Savannah region adjust to this drastic
    cutback, the Department of Energy needed a Federal agency to administer
    DOE funds provided for community transition. Using the existing EDA
    system and grant process, DOE transferred funds to EDA to administer
    and now requires that EDA approve all requests for community adjustment
    assistance from DOE's Office of Worker and Community Transition.
        While defense spending cuts appear to be bottoming out, the defense
    adjustment challenge remains. Consolidation and mergers in the defense
    industry and additional base closures will continue to require EDA's
    support and participation in defense adjustment activities. Used for a
    variety of purposes, EDA funds are tailored to meet the needs of local
    communities; they are not based on rigid Federal directives and
    guidelines.
        One of EDA's greatest strengths is the ability to use the existing
    network of 320 Economic Development Districts, such as the Lower
    Savannah COG, for defense adjustment, disaster relief and overall
    economic development assistance. These regional development
    organizations provide local governments with professional and technical
    assistance. Districts, the core of EDA's delivery mechanism, are multi-
    county public-private partnerships whose boards are composed of local
    elected officials, private-sector and minority representatives. They
    are critically important in small metropolitan and rural regions where
    professional and technical assistance is limited or nonexistent. Of the
    nation's 39,000 units of local government, 33,000 have populations of
    less than 3,000 and 11,500 governments have no employees.
        Larger cities and counties have professional staff including
    engineers and planners to assist elected officials in the
    decisionmaking process. However, in most of the country's small and
    rural communities, Economic Development District employees are the only
    professional staff who are able to navigate the mountains of red tape,
    regulations and application forms necessary to apply for Federal and
    State assistance. It is through EDA planning grants to districts that
    distressed communities gain access to professional capacity and
    technical expertise to plan for the future. Today, EDA's small planning
    grants to districts support an Overall Economic Development Program
    (OEDP) for the communities served. OEDPs are blueprints providing a
    comprehensive plan for sustainable community and economic development.
        EDA is extremely effective both in helping communities cope with
    long-term economic disasters such as resource-dependent economies
    facing the decline of coal or timber industries or sudden economic
    crises caused by plant and base closings and natural disasters. It is
    important to remember that not all of the Base Realignment And Closure
    (BRAC) listed installations are yet closed. It takes several years to
    actually shut down a facility so the need for EDA's defense adjustment
    programs will continue.
        EDA has demonstrated its effectiveness and has earned the right to
    be reauthorized. Under the leadership of Assistant Secretary Phillip
    Singerman, EDA has streamlined its operations and significantly
    reformed and reinvented itself. Now is the time to provide the agency
    with legislative tools and congressional guidance to bring EDA into the
    21st century. It is particularly important that America's distressed
    communities be prepared to compete in the global marketplace through
    state-of-the-art technology. We strongly encourage EDA to once again
    assume a leadership role during this transition.
        On behalf of the members of the Coalition for Economic Development,
    I urge the committee to work with EDA to update the authorizing
    legislation so that the nation's distressed communities will continue
    to have this vital Federal partner as we move into the next century. I
    can assure you that those of us who work in economic development at the
    local level will do everything we can to help make EDA more efficient
    and effective.
                                     ______

     Statement of National Association of Development Organizations (NADO)
        The members of the National Association of Development
    Organizations (NADO), strongly support reauthorization of the Economic
    Development Administration (EDA). EDA is the only Federal agency that
    has the program tools necessary to address the broad range of economic
    development challenges facing America's distressed communities. Whether
    through infrastructure grants, strategic planning or economic
    adjustment assistance, EDA helps distressed communities compete
    economically and enter the mainstream. During the past 30 plus years,
    the agency has created or retained more than 2.8 million jobs resulting
    from 39,000 assistance projects throughout the country; generated $1.9
    billion in private-sector capital through revolving loan funds that
    have supported more than 7,000 businesses; and leveraged more than $10
    in private-sector investment for every Federal dollar invested.
        The National Association of Development Organizations is a public
    interest group founded in 1967 to help professionals and local elected
    officials build communities and create jobs. The association is the
    leading advocate for a regional approach to economic and community
    development in America's small metropolitan and rural communities.
    Economic distress and development needs transcend jurisdictional
    boundaries, and solutions to rural distress are most effective when
    implemented at the substate regional level. NADO members provide
    community, economic and rural development technical assistance to local
    governments and the private sector. The members of NADO directly serve
    over 1,800 counties and 15,000 cities and towns.
        NADO members are regional development organizations, known
    variously as economic development districts, planning and development
    councils, councils of governments, area development districts and
    regional councils. Regional development organizations draft long-term
    strategic economic development plans, offer a wide range of technical
    assistance and provide small business financing. EDA supports these
    regional planning and development efforts through the economic
    development district program.
        There are four major reasons why Congress should pass
    reauthorization legislation for the Economic Development Administration
    this year.
    1. Public Investment in Infrastructure Is Essential for Private Sector
            Job Creation
        For distressed communities outside the economic mainstream, EDA's
    public works grants are the major source of infrastructure funding for
    projects related directly to the creation of private-sector jobs. Among
    the projects funded are water and sewer facilities serving industry and
    commerce; access roads to industrial parks or sites; port investments;
    and business incubator facilities. While these are not glamorous
    projects, they play an essential role in the process of upgrading and
    expanding the nation's aging public infrastructure which directly
    impacts communities' ability to develop new businesses, retain and
    expand existing companies and generate local tax revenues. Since 1965,
    EDA public works investments have assisted in the creation of more than
    1.5 million jobs.
        The Economic Development Council of Northern Vermont (EDCNV) an
    economic development district serving six counties where dairy farming
    is important, created a regional dairy industrial park with EDA
    funding. The focus of this industrial park is on using dairy by-
    products such as whey for pharmaceutical products and fertilizer. This
    kind of careful investment based on local planning continues to pay
    substantial returns to the economy and builds on and adds value to
    existing resources.
        EDA funding for infrastructure improvements to the Mallord Fox
    Creek Industrial Park in Decatur, Alabama through the North-central
    Alabama Regional Council of Governments has resulted in bringing more
    than 4,000 jobs to the area. This includes the recent announcement by
    the Boeing Company to employ between 2,000 and 3,000 people to build
    the common booster core for the new Delta IV rocket.
    2. Planning Is Essential for Long Term Sustainable Development
        EDA provides support for a network of 320 Economic Development
    Districts (EDDs) that serve local communities with professional and
    technical assistance. EDDs are multi-county public-private partnerships
    whose boards are composed of local elected officials, private-sector
    and minority representatives. EDDs are the core of EDA's delivery
    mechanism. Districts have evolved into the central planning and service
    coordination mechanism for many other Federal programs in rural areas
    including job training, housing, environmental protection, aging
    services, emergency management and small business assistance.
        As former Representative Bill Clinger (R-PA) stated during the
    debate on the Economic Development Reauthorization Act of 1994 (HR
    2442), ``EDA has established a network of regional development
    organizations throughout its service areas, and I cannot stress too
    much their importance. EDA is directed toward rural areas of distress,
    rural communities that are having trouble competing in a wide variety
    of ways. What this program does is provide an expertise that would not
    otherwise be available to these communities.'' NADO members heartily
    agree with this analysis.
        The districts are providers of professional capacity and technical
    assistance. In the current fiscal year, Congress appropriated $24
    million for EDA's Title III planning grants. Of this, EDA provides
    slightly more than $17 million for EDD planning grants. Districts
    receive an average of $53,000 from EDA. Like all EDA funds, these
    planning grants leverage additional funding from nonFederal sources,
    including State and local funds. EDA's planning grants support a staff
    person in each EDD who prepares an Overall Economic Development Program
    (OEDP) for the communities they serve. OEDPs are blueprints providing a
    comprehensive plan for community and economic development. They are
    developed with, and approved by, the local elected officials from all
    the participating communities.
        It is important to note that the real purchasing power of the
    planning grants has been greatly diminished over the past 30 years by
    inflation. The average planning grant to districts was approximately
    $54,000 at the start of the program in 1966. Today, the average
    planning grant remains only $54,000. Adjusted for inflation, the value
    of a 1998 planning grant is only $10,800, or 20 cents on the dollar,
    when compared to its original purchasing power in 1966. While districts
    have leveraged and stretched these small but significant dollars to
    help thousands of America's small metropolitan and rural communities
    forge ahead and create jobs, NADO members strongly encourage Congress
    to dramatically increase the authorization levels for the planning
    grant program.
        Larger cities and counties have professional staff including
    engineers and planners to assist elected officials in the
    decisionmaking process. However, in most of the country's small and
    rural communities, district employees are the only professional staff
    that are able to navigate the mountains of red tape, regulations and
    application forms necessary to apply for Federal assistance. It is
    through EDA grants to districts for planning assistance that many
    distressed communities gain access to professional capacity and
    technical expertise. Of the 39,000 general purpose local governments in
    the US, 33,000 have populations of less than 3,000 and 11,500 have no
    employees.
        EDDs are also the local institution that facilitates the flow of
    Federal assistance to rural and small metropolitan communities.
    Districts help smaller communities prepare applications for Federal and
    State assistance and often administer EDA infrastructure and economic
    adjustment grants. Districts are critically important in obtaining aid
    for rural counties and towns from other State and Federal agencies
    including: the US Department of Agriculture's rural development grants
    and loans, Department of Housing and Urban Development Community
    Development Block Grants, Department of Health and Human Service
    Welfare to Work and Older Americans programs, Department of Labor job
    training, Small Business Administration micro-loan and Certified
    Development Company programs.
        Economic Development Districts are entrepreneurial, extremely
    flexible and provide assistance far greater in scope than that provided
    by EDA or the Federal Government programs. Because they serve local
    communities and are governed by a majority of local elected officials,
    they respond to the needs of the communities and deliver a variety of
    services to meet locally identified needs.
        The Lower Savannah Council of Governments (LSCOG) headquartered in
    Aiken, South Carolina was officially established on June 20, 1967 with
    an EDA grant of $31,450 and local funds of $10,500. Today, LSCOG's base
    has broadened to include not only economic development but also law
    enforcement assistance programs, comprehensive local and regional
    planning, services to older Americans, health planning and historic
    preservation. During the past 31 years, the Lower Savannah Council of
    Governments has worked with EDA on a number of successful projects,
    including:
        Creation of the Aiken Technical Education Center and the Denmark
    Area Trade School which have helped increase both the number of jobs
    and the qualified persons to fill those positions.
        Testing the effectiveness of exporting goods produced by small
    businesses or farmers. The council identified current exporters and
    industries with the potential to export goods and assisted in
    developing the capacity of persons who had never participated in the
    export process.
        LSCOG planning staff provides mapping services which facilitate
    environmental, land use and economic planning, as well as the
    preparation of custom census and other data reports, using a Geographic
    Information System (GIS). GIS is an organized collection of computer
    hardware, software, geographic data and personnel designed to
    efficiently capture, store, update, manipulate, analyze and display all
    forms of geographically referenced information. A Global Positioning
    System (GPS) which allows locations to be mapped with satellite
    technology is also being used by LSCOG.
    3. Small Business Assistance Through Revolving Loan Funds Helps Fill
            Credit Gaps
        EDA's revolving loan fund (RLF) program is one of the most
    successful and powerful economic development tools for addressing the
    credit gaps that exist in many distressed communities, particularly in
    underserved rural areas. RLFs provide financing when standard lending
    institutions will not fund smaller, riskier or unconventional business
    ventures. These funds are lent to businesses that cannot obtain
    financing through traditional lending institutions. RLFs are managed by
    public or private nonprofit lending institutions as part of an overall
    economic development program by lending their initial capital and then
    relending funds as payments are made.
        The Mount Rogers Planning District Commission (PDC), an EDA
    Economic Development District, headquartered in Marion, Virginia offers
    an excellent example of the impact EDA's revolving loan fund program
    has in distressed communities. The commission has been a major
    beneficiary of EDA grants and special funding that have provided the
    critical infrastructure and site development for several industrial
    parks and facilities. Established in 1986, the commission's revolving
    loan fund has developed an outstanding track record with $1,368,000
    loaned for 12 loans that range from $25,000 to $150,000. Over 840 jobs
    have been created or saved via the commission's RLF program with a cost
    per job portfolio of $1,622 per job. Of the loans, approximately 28
    percent went to industry and business startups and 81 percent to
    manufacturers. The RLF also targeted 4 percent of the firms that were
    women or minority owned.
        One of the Mount Rogers RLF's most successful borrowers, Jack
    Galyean, President and Entrepreneur of Printed Circuit Solutions,
    recently received the Appalachian Regional Commission (ARC)
    Entrepreneur of Virginia Award. With the assistance of Mount Rogers
    PDC, Mr. Galyean established one of the region's most technically
    advanced/leading edge manufacturing facilities, specializing in the
    printed circuit board industry. Following a successful career in
    technology at Rockwell & Honeywell, he brought his expertise and
    business experience home to realize his dream of establishing a
    manufacturing operation in Galax, Virginia which would provide
    technically advanced, much needed jobs with above average wages.
    Printed Circuit Solutions Manufacturing, Inc. has grown to 30 employees
    with at least 50 percent of the work force having 2 years of college or
    more. The company provides wages 20 to 30 percent above the industry
    average in the Galax area.
        Based on the success of the RLF program, NADO members strongly
    encourage Congress to help strengthen the program. The agency should be
    strongly encouraged to continue to allocate resources to capitalize or
    recapitalize RLFs, to review their regulations to allow more
    flexibility and responsiveness to local priorities and make use of
    existing training programs such as the NADO Research Foundation's
    Economic Development Finance Service to ensure top level performance of
    new and existing RLFs.
    4. Assistance Is Needed for Communities Facing Long Term and Sudden
            Economic Decline
        EDA is extremely effective in helping communities cope with long-
    term economic disasters, such as resource-dependent economies facing
    the decline of coal or timber industries or sudden economic crises
    caused by plant closings and natural disasters. The agency is also a
    major player in the Federal Government's efforts to assist communities
    and industries struggling with defense conversion to shift their
    emphasis from military-based to private-sector economies.
        NADO members applaud EDA for its past success and encourage the
    agency to continue using economic development districts as part of its
    defense conversion strategy. In distressed communities, the districts
    are prepared to respond to and meet needs identified at the local
    level. The districts have the flexibility and expertise to respond to
    challenges, as well as the capacity to provide rural communities with
    the ability to react to new causes of economic distress, such as base
    or industry closure due to military downsizing. Through the overall
    economic development program, districts can help communities plan for
    defense conversion related problems and prepare a regional strategy to
    counter these obstacles.
        The South Western Oklahoma Development Authority (SWODA), an EDA
    Economic Development District, converted a former B-52 Strategic Air
    Command Base into the Clinton-Sherman Industrial Air Park owned by the
    city of Sherman. Employing 500 people, the industrial park is a small
    town in itself, with an airport, and commercial and industrial
    operations. Currently the State of Oklahoma has formed a team with
    SWODA to compete for a launch site for the next generation space
    shuttle.
    EDA Has Earned the Right to Be Reauthorized
        The Economic Development Administration has demonstrated its
    effectiveness and deserves the stability in programmatic structure and
    funding that reauthorization would provide. During the past 30 plus
    years, the agency has created or retained more than 2.8 million jobs
    resulting from 39,000 assistance projects throughout the country;
    generated $1.9 billion in private-sector capital through revolving loan
    funds that have supported more than 7,000 businesses; and leveraged
    more than $10 in private-sector investment for every Federal dollar
    invested.
        Under the leadership of Assistant Secretary Phillip Singerman, EDA
    has streamlined its operations and significantly reformed and
    reinvented itself. Now is the time to provide the agency with
    legislative tools and congressional guidance to bring EDA into the 21st
    century.
        EDA infrastructure grants are not only necessary, they are
    extremely successful and cost effective investment of Federal
    resources. The Federal Government receives a return on their investment
    far greater than the size of the Federal share of EDA infrastructure
    grants. As Assistant Secretary Singerman testified during House
    hearings last summer, a May 1997 performance evaluation of the EDA
    Public Works Program conducted by Rutgers University shows that EDA
    assistance helps distressed communities create jobs (at a cost of
    $3,058 per job), expands the local tax base (an increase of $10 for
    every $1 of EDA investment), and leverages private investment ($10 for
    every $1 of EDA investment). The results of this evaluation were
    gathered from a study of 203 public works projects that received their
    final payment from EDA in fiscal year 1990.
        In addition to EDA legislation, NADO members support
    reauthorization of the Appalachian Regional Commission (ARC) which
    provides assistance to distressed areas in this 13 State region. ARC,
    working with Local Development Districts, has focused its resources on
    their most distressed counties and should also be reauthorized.
        To restate briefly the main reasons why Congress should reauthorize
    the Economic Development Administration this year. EDA is the only
    Federal agency that has the array of program tools needed to meet the
    challenges facing America's distressed communities including: public
    works, revolving loan funds, planning and economic adjustment. The
    Economic Development Administration supports a network of 320 Economic
    Development Districts (EDDs) that serve small metropolitan and rural
    communities as vital providers of professional and technical
    assistance. EDA has demonstrated its effectiveness and has earned the
    stability in programmatic structure and funding that reauthorization
    would provide.

                                   __________
                 Educational Association of University Centers,
                        Cullowhee, North Carolina 28723, July 14, 1998.

        Senator John Warner Chairman,
        Subcommittee on Transportation and Infrastructure,
        Senate Office Building,
        Washington, DC 20510.

        Senator Max Baucus Ranking Minority Member,
        Committee on Environment and Public Works,
        Senate Office Building,
        Washington, DC 20510.

        Dear Chairman Warner and Ranking Minority Member Baucus: The
    Educational Association of University Centers, a member of the
    Coalition for Economic Development, is pleased to provide comments for
    the record in strong support of the reauthorization of the Economic
    Development Administration (EDA).
        As we all know, there are a myriad of different reasons why a
    particular geographical area may fall behind the economic development
    level of other regions of the country. Once this slide begins, however,
    standards of living further erode and poverty increases. EDA stands
    alone as our national resource to stem and hopefully reverse the
    economic decline in many distressed communities. By working through
    grants and local resource partners, EDA brings investment and critical
    technical expertise to create sustainable economic development in the
    most cost-effective manner possible.
        The University Center program, funded by EDA through its technical
    assistance account, provides the technical expertise component in the
    menu of EDA services. As you know, there are 69 university centers
    nationwide that uniquely link the knowledge, expertise, and resources
    of the nation's higher education system with the private sector and
    communities to solve economic development problems. By providing the
    feasibility studies, community economic development planning, data
    collection and dissemination, regional economic development studies,
    work force competitiveness training, non-profit development and local
    government official training, the university center program offers the
    technical expertise underpinning any successful economic development
    strategy.
        University centers are often the vital link between a community's
    economic development plan and the capital investment to make that plan
    reality. In fact, in 1995 alone the university center program, which is
    currently funded by EDA at $6.9 million, secured $200 million in
    capital investments. That means that this one small EDA program
    leverages $26 for every one Federal dollar EDA invests in the program.
    This extraordinary level of success is indicative of the value EDA
    brings to our nation's communities.
        But, the university center program is only one small part of EDA's
    economic development arsenal. The planning process, EDA's network of
    regional offices and State economic development representatives, the
    revolving loan fund, the trade adjustment assistance program are all
    available to insure eligible communities get the help they need, when
    they need it. In the end, EDA and all of its partners focus on creating
    the jobs that are so crucial to the long-term viability of a community.
    Job creation remains job one.
        Under the excellent leadership of Assistant Secretary Phillip
    Singerman, EDA has also instituted a number of measures to insure the
    highest possible quality from all of its programs. Several years ago,
    for instance, the university center program in conjunction with EDA
    developed a peer review process conducted by EDA staff and experienced
    University Center Directors to strengthen the overall program delivery.
    These onsite program assessments seek to correct instances of
    unsatisfactory performance and to proscribe new strategies for better
    serving our communities. The result has been a stronger, more efficient
    university center program.
        While this is only one example, EDA's commitment to quality, cost-
    efficient programs shines through in its strategies to prepare itself
    for the 21? Century. While EDA has planted and nurtured the seedlings
    of a long term and highly effective presence in America's economy, it
    will take reauthorization to ensure these strategies take root and
    develop the strength to resist the political winds of change. Economic
    development is critical to the overall prosperity of our nation.
    Perhaps it is a tired cliche, but it still holds true: we are only as
    strong as our weakest link. EDA works to strengthen us all.
        Reauthorization of EDA is vital to distressed communities
    nationwide. The Educational Association of University Centers urges you
    to act favorably and expeditiously to reauthorize EDA.
        Thank you for your time and consideration of this vital matter.
                Sincerely,
                                                Thomas McClure,
                         Educational Association of University Centers.
                                   __________

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