[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.
                               __________

                               

                               

                               

                               

                               

                               

                               

                               

                               

                               

                               

                               

                               

                               

                               

                               

                               

                               

                               

                               

                               

                               

                               

                               

                               

                               

                               

                               

                               

                               

                               

                               

                               

                               

                               

                               

                               

                               

                               

                               

                               

                               

                               

                               

                               

                               

                               

                               

                               
                                   - 
