[House Hearing, 106 Congress]
[From the U.S. Government Publishing Office]





                THE FUTURE OF ROUND II EMPOWERMENT ZONES

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

                             FIELD HEARING

                               before the

                      COMMITTEE ON SMALL BUSINESS
                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED SIXTH CONGRESS

                             SECOND SESSION

                               __________

                               MECCA, CA

                               __________

                             APRIL 26, 2000

                               __________

                           Serial No. 106-56

                               __________

         Printed for the use of the Committee on Small Business

                    U.S. GOVERNMENT PRINTING OFFICE
67-351                      WASHINGTON : 2001




                      COMMITTEE ON SMALL BUSINESS

                  JAMES M. TALENT, Missouri, Chairman
LARRY COMBEST, Texas                 NYDIA M. VELAZQUEZ, New York
JOEL HEFLEY, Colorado                JUANITA MILLENDER-McDONALD, 
DONALD A. MANZULLO, Illinois             California
ROSCOE G. BARTLETT, Maryland         DANNY K. DAVIS, Illinois
FRANK A. LoBIONDO, New Jersey        CAROYLN McCARTHY, New York
SUE W. KELLY, New York               BILL PASCRELL, New Jersey
STEVEN J. CHABOT, Ohio               RUBEN HINOJOSA, Texas
PHIL ENGLISH, Pennsylvania           DONNA M. CHRISTIAN-CHRISTENSEN, 
DAVID M. McINTOSH, Indiana               Virgin Islands
RICK HILL, Montana                   ROBERT A. BRADY, Pennsylvania
JOSEPH R. PITTS, Pennsylvania        TOM UDALL, New Mexico
JOHN E. SWEENEY, New York            DENNIS MOORE, Kansas
PATRICK J. TOOMEY, Pennsylvania      STEPHANIE TUBBS JONES, Ohio
JIM DeMINT, South Carolina           CHARLES A. GONZALEZ, Texas
EDWARD PEASE, Indiana                DAVID D. PHELPS, Illinois
JOHN THUNE, South Dakota             GRACE F. NAPOLITANO, California
MARY BONO, California                BRIAN BAIRD, Washington
                                     MARK UDALL, Colorado
                                     SHELLEY BERKLEY, Nevada
                     Harry Katrichis, Chief Counsel
                  Michael Day, Minority Staff Director




                            C O N T E N T S

                               WITNESSES

                                                                   Page
Hearing held on April 26, 2000...................................     1
    Cantu, Celeste, State Director, USDA Rural Development for 
      California.................................................     4
    Wilson, Roy, Supervisor, Riverside County....................     8
    Benitez, Mark, Chairman, Executive Committee Desert Community 
      Rural Empowerment Zone.....................................    10
    Bracken, Michael, President, Coachella Valley Economic 
      Partnership................................................    20
    Knox, Harley, Developer, Harley Knox & Associates............    22
    Chank, Lawrence, CEO, JPH Enterprises, Inc...................    23
    Joseph, Harold, Executive Director, Coachell Valley 
      Enterprise Zone............................................    24

 
                THE FUTURE OF ROUND II EMPOWERMENT ZONES

                              ----------                              


                       WEDNESDAY, APRIL 26, 2000

                          House of Representatives,
                               Committee on Small Business,
                                                    Washington, DC.
    The Committee met, pursuant to call, at 10:15 a.m., at the 
Mecca Community Center, 91191 Sixth Street, Mecca, California, 
Hon. Mary Bono presiding.
    Chairwoman Bono. Good morning. Can you all hear me okay? We 
are ready to call the hearing to order. Those of you who want 
to grab your seats, we would appreciate it.
    Today the Small Business Committee is convening to discuss 
the development and progress that has been made in the Desert 
Communities Empowerment Zone. In addition to exhibiting the 
advancement being made in this area, this hearing is an 
important piece in the process to complete the Round II 
Empowerment Zones, which includes the Desert Communities 
Empowerment Zone.
    In 1997, 20 Empowerment Zones were authorized as part of 
the tax reconciliation package in the Balanced Budget Act. This 
second round of Empowerment Zones, 15 urban and 5 rural, were 
designated January of 1999. Unlike their predecessors in the 
first round, the Round II Empowerment Zones were not authorized 
to benefit from the employer wage tax credit, also referred to 
as the hiring tax credit, nor were there funds available to 
implement the strategic plans upon which the designations were 
made.
    Today's hearing is especially timely in addressing this 
matter. In the coming months, Congress is expected to begin 
consideration of the Watts/Talent American Community Renewal 
Act, which will establish areas of economic empowerment and 
renewal. Included in this legislation will most likely be 
aspects of the Administration's New Market Initiatives.
    I am concerned that Congress has an unfulfilled obligation 
to complete the process begun for the Round II Empowerment 
Zones. This obligation especially stands out as we consider 
proposals to create a new set of entities for economic 
development, the American Renewal Communities, and begin to 
consider implementation of the President's New Market 
Initiatives. I am committed to doing all that I can do to 
ensure that we pass legislation to provide full funding along 
with the hiring tax credit for the second round Empowerment 
Zones and complete the commitment that we have made to our 
distressed communities.
    The individuals we will hear from today work intimately 
with the Desert Communities Empowerment Zone, and they will be 
able to describe some of the exciting things that are happening 
at the eastern end of the Coachella Valley and throughout 
Riverside County. As well, they will be able to depict some of 
the economic development difficulties associated with 
indefinite funding and the lack of certain tax incentives. 
Given the potential impact of the Empowerment Zone in this 
area, it is critical that we in Congress devote the necessary 
time to understand the ramifications of not following through 
on our commitment to the Round II Empowerment Zones.
    Today's first panel will begin with Celeste Cantu, who is 
State Director for the USDA. Following Ms. Cantu will be my 
good friend Riverside County Supervisor Roy Wilson. Finally we 
will hear from the Chairman of the Desert Community Rural 
Empowerment Zone, Mark Benitez. The committee is interested in 
hearing the views of these individuals concerning the benefits 
of the rural Empowerment Zones, especially in eastern Riverside 
County.
    The second panel is made up of four individuals who deal 
with the economic development issues facing the rural 
Empowerment Zone: Harold Joseph, Executive Director of the 
Coachella Valley Enterprise Zone Authority, Harley Knox, 
developer, Larry Chank, developer, and Mike Bracken, Director 
of the Coachella Valley Economic Partnership.
    I would like to take this opportunity to offer my sincere 
appreciation to the panelists for their time and attention to 
making the Empowerment Zone successful and for being here to 
share with us today. As well, I would like to thank everyone 
that submitted written testimony for the record and those who 
came to show their interest in the future of the Desert 
Communities. Lastly, I would like to thank everyone involved 
with this event, making it happen, especially Leticia DeLara 
with Supervisor Wilson's office.
    I want to make a special recognition and welcome to Joe 
Ceja, who is principal of Mecca School, who has brought a 
handful of students here to participate and watch the 
Congressional process in action. And with it, I also want to 
thank deeply my colleague, Ms. Juanita Millender-McDonald, who 
I worked with yesterday in her district on a similar hearing 
like this. The topic was the digital divide. So today she has 
graciously come out here to Mecca to join in our hearing. And I 
want to thank you for getting up at the crack of dawn and 
coming this way. Hopefully you battled the traffic going the 
wrong way, against the grain. And so I want to welcome you. And 
on that note, I will turn to you for opening statement.
    Ms. Millender-McDonald. Thank you so much. Thank you, Madam 
Chairman, and thank you all for being here today. It is indeed 
a pleasure for the Subcommittee of the Empowerment of the Full 
Committee of Small Business to be here. I serve as the Ranking 
Member on the Small Business Empowerment Subcommittee, and I am 
very grateful to the Chairwoman here, who you very well know as 
your leader in the House of Congress. She has served you 
admirably and I am pleased to be here with her today.
    I am also pleased to be here in the absence of our Chair, 
Joe Pitts out of Pennsylvania, who cannot be here this morning, 
but he and I work very closely, along with your Congresswoman 
in trying to provide those types of opportunities for you, a 
small business, and even areas such as Mecca, who is trying now 
to get more self-sufficient and more opportunities coming this 
way. I am pleased to be part of this very important hearing.
    As your Chairwoman said just yesterday, she was with me in 
my district informing my constituents about the digital divide 
and its impact on education and the future of e-commerce, which 
affects how all of us handle day-to-day transactions.
    Today we are sharing the accomplishments and economic 
development benefits of Empowerment Zones with you, her 
constituents, and with all of our constituents because we are 
all from California. As we continue our journey through the 
21st century, we must make sure that none of our communities 
are economically disadvantaged. We can do this by making sure 
that all are equipped with the right set of tools, whether they 
are tax incentives, business opportunities, or other 
opportunities to stimulate economic development and economic 
growth.
    The Empowerment Zones and Enterprise Communities, EZ/EC, 
initiative is an element of President Clinton's job creation 
strategy for America. Its purpose is to create jobs and 
business opportunities in the most economically distressed 
areas of inner cities and rural heartlands. TheEZ/EC effort 
provides tax incentives and performance grants and loans to create jobs 
and expand businesses with all the opportunities that we can muster. It 
also focuses on activities to support people looking for work, job 
training, child care and transportation.
    On December 21, 1994, President Clinton and Vice President 
Gore designated 72 urban areas and 33 rural communities as 
Empowerment Zones or Enterprise Communities. What sets this 
initiative apart from previous urban revitalization efforts is 
that the community drives the decision-making. That is most 
important. You determine what you want, how you want it done, 
where you want it done and what time lines it will happen. 
Residents decide what happens in their neighborhoods, not the 
Federal officials in Washington--most of them call us 
bureaucrats, but we are really not--which EZ/EC community has 
written benchmarks or goals that determine how the money will 
be spent and what the results of the activity will be.
    Although the Empowerment Zones and Enterprise Communities 
initiative is a 10-year effort, visible change in zone 
neighborhoods has already taken place in the form of business 
startups and expansions, new jobs, commercial and housing 
development and improved services for community residents. The 
EZ/EC effort has taken the best of Republican and Democrat 
ideas by combining tax incentives for business development with 
a comprehensive approach to community revitalization through 
performance-oriented block grants.
    So I am pleased to be part of this hearing today, be a part 
of being in this district because we are here now to listen to 
you, and we will carry this back to Washington where we will 
engage in further interaction in providing the opportunities 
for you, our citizens of the State of California, and indeed 
this great district that I happen to be in this morning. I 
thank you and I am very happy to be here.
    Chairwoman Bono. Thank you. Before our witnesses begin, I 
would like to let you all know that on the back table there are 
written statements that are prepared by each of the witnesses. 
You might want to pick them up and follow along as they read 
their statements. If not, please pick one up on the way out so 
the staff won't have to lug them back to Washington. So please 
pick one up and help yourself.
    So with that, we are going to begin. Generally, in 
Washington we try to limit each witness to about a 5-minute 
time period. One of the beauties of being in the district here 
is they are a lot more flexible. But if you could try to be as 
concise as possible, as close to 5 or 10 minutes as you can, we 
would appreciate it. So with that, we will open the testimony 
up to Ms. Cantu.

    STATEMENT OF CELESTE CANTU, STATE DIRECTOR, USDA RURAL 
                   DEVELOPMENT FOR CALIFORNIA

    Ms. Cantu. Good morning, Madam Chair, members of the 
committee. My name is Celeste Cantu. I am State Director of 
USDA Rural Development for California, and I am sitting in for 
Maria Matthews, who is Deputy Administrator for Office of 
Community Development in Rural Development in Washington, D.C. 
It is her office that administers the rural EC/EZs. Her 
testimony is available in the back, and I have a somewhat 
abridged version of that. My version is probably going to be a 
little bit more finely-tuned to what is happening in this 
Empowerment Zone. I am happy to have the opportunity to talk 
about this, and I was also very happy to hear your good words 
and I think very accurate words about the power of the 
Empowerment Zones and Enterprise Communities.
    In a short period of time we have seen incredible 
transformations. It is almost mind-boggling when we started out 
with the strategic planning process and everybody had dreams 
that came out of the grass roots. All the voices were invited 
to the table so that no one would be left out. And ideas that 
at the time might have thought to have been marginalized 
because they were something nobody else had thought of before, 
perhaps they weren't mainstreamed, we have seen those flourish 
and come up.
    And now, even after a year in this Empowerment Zone, and 
almost five years in the Enterprise Community where I came from 
before I took this post, we see even those smallest ideas that 
we thought would be marginalized very successful. It's almost 
uncanny how that strategic planning process can engender and 
create a venue for these ideas to flourish.
    The Empowerment Zones and Enterprise Communities are taken 
from the very poorest members of the communities across our 
nation. They start with almost no resources. They start with a 
history of almost no successes. The people who come together 
have not personally found a lot of success and their 
communities are suffering tremendously from a lack of economic 
activity, a lack of a community development foundation from 
which to spring forth an economic strategy.
    In important ways, the rural EZ/EC is more of a community 
development program than an economic development program. In my 
work it seems that those two definitions often cross over and 
blur. It doesn't seem very functional to have two categories 
any longer. It's real clear that for economic development to 
happen, you have to have the foundation of a good, strong 
community development effort. It's very hard to inspire 
businesses to locate to your community when you don't have a 
good school system or a struggling, challenged school system, 
when you don't have recreations, you don't have a housing stock 
for employees to live in.
    All of those kinds of community development activities that 
we often take for granted in communities across this nation are 
really woefully lacking in the very communities that have been 
designated. They were designated because they lacked that kind 
of infrastructure. And it seems that a major first step is to 
get that activity going to serve as a springboard to support 
the economic development activity.
    The applications for EZ/EC designations were very 
competitive and had to be supported by comprehensive, long-term 
strategic plans for development. The planning process itself 
had to include broad public participation, and not merely the 
product of a planning office or consulting firm. In effect, the 
application procedure constituted a significant process of 
community development, and the communities that took this 
process seriously found themselves mobilized for action and in 
possession of an implementable plan.
    Recognizing the value of this planning process and the 
desirability of sustaining the progress made by the 227 Round I 
applicants, in fiscal year 2001 the president's budget has 
proposed $7 million for partnership technical assistance 
grants, which provide technical assistance to underserved 
communities to create strategic plans, better use and 
coordinate USDA Rural Development grant and loan programs, and 
achieve sustained economic viability, job creation and improved 
quality of life. These grants will be run through the World 
Business Opportunity Grant Program under USDA.
    When you look at the resources that these communities came 
together, and now as staff members we say ``You have to do the 
strategic planning process,'' initially they don't even know 
what that process is. They don't realize that they really 
continually are participating in such a process in their daily 
coffee shops. But to have it strategically set out with 
benchmarks, it sometimes seems overwhelming. It is particularly 
overwhelming when the finances don't seem to be there to 
support staff to give them technical assistance. But in spite 
of that, we have seen communities like the Riverside--the 
Desert Communities Empowerment Zone, who had just amodicum of 
resources, still prevail, and that's really an incredible testament, it 
seems to me.
    USDA designated most of the unsuccessful EZ/EC applicants 
as Champion Communities and provided them with special 
financial and technical assistance to implement parts of their 
strategic plans. USDA in particular used the Champion 
Communities as the basis for significant outreach to spur 
development in these hard-to-reach communities and through 
fiscal year 1999 has invested some $290 million in its business 
and infrastructure development program for these communities.
    In California what I have done is, I have reserved 100 
percent of my state director's discretionary points for the 
benefit of Champion Communities. We said, ``You weren't 
successful in the EZ/EC process, but you are still a Champion, 
you are not a loser. We are not going to give you any money at 
all,'' which is a horrible shock, ``but we will give you a lot 
of technical assistance.'' And where they have benefited is 
with this strategic plan that they had in place in order to 
compete for the designation, that's still a live document, we 
gave them technical assistance to help propel them forward. And 
with the reserve state director's points, we gave them 
preferential treatment for competing for grants. So in fact, 
they have been able to pull in a lot of grant money and loan 
money that otherwise would not have gone to their community.
    Those are not special designations or set-asides. These are 
regular funding stream. It's not funded under the EZ/EC 
initiative, but they were able to compete successfully for the 
first time to capture these monies, and that came out of the 
emotional commitment that comes after you finish a strategic 
planning process. People still have the energy to try to see 
that through, even though they receive no rewards at all from 
the government. So we are very thrilled to see those successes 
as well.
    I want to speak a little bit about the Desert Communities 
Empowerment Zone. It was about a year ago on January 13th that 
Vice President Al Gore and Secretary of Agriculture Dan 
Glickman announced the five rural Round II Empowerment Zone 
designations. The most important one for this area is the 
Desert Communities Empowerment Zone, which is the only 
Empowerment Zone in California. That designation was the 
culmination of unprecedented community-based, grassroot efforts 
by the stakeholders and the residents of eastern Riverside 
County to establish a process and a mechanism to effect long-
term positive change and improve the quality of life of their 
residents.
    They are able to do this with almost no direction. It is a 
basic understanding in the Empowerment Zone that all decisions 
are local decisions. There is no cookbook, there is no rule 
book. There is no process that says from the Federal government 
``This is the way it's going to be. You just make your 
community fit around it and see if you compete very well.'' 
It's very kind of organic, it comes from the inside out. And 
that can be troubling to a community that hasn't had a lot of 
successes in competing for Federal funds because if you don't 
know how to do something, it's very hard to start from scratch 
with not a lot of direction. Those communities that were able 
to do it are the ones that have been the most successful.
    In this year the Desert Communities EZ has organized and 
formed their board of directors and elected officers, developed 
and adopted their bylaws, established and incorporated a 
community- based nonprofit corporation, adopted the initial 
two-year $4 million budget, and I might add, without having 
received a penny to date, received the 501 (c)(3) tax-exempt 
status from the IRS, established the EZ's banking and financial 
services, developed Sponsor Agreements for the use of DCEZ 
funds, executed the Memorandum of Agreement with USDA, and 
executed the EZ Grant Agreement with USDA. Those are all 
important milestones that reflect the kind of sophistication 
that you don't always see in the varied communities that are 
designated as Empowerment Zones.
    But the real thing we like to boast about are the successes 
in the community. Keep in mind that this community has not 
enjoyed a lot of successes historically. It's an agricultural 
community and business has been pretty much as usual for all of 
my lifetime.
    Roy, you are going to have to expand that a little further 
back.
    Chairwoman Bono. Because he is older, you mean?
    Ms. Millender-McDonald. Watch it.
    Ms. Cantu. I drove pretty close to here. I can remember the 
Salton Sea when we could ski in it.
    Just some high points. The number of successes even in this 
first year are too numerous to be able read all of them, so we 
picked kind of our favorites. The Coachella Valley Housing 
Coalition received an $800,000 HUD grant for housing and 
community development that will benefit low-income farm 
workers. The Torres-Martinez Desert Cahuilla Indians is one of 
the EZ's four Native American subzones. It was awarded a 
$550,000 HUD grant under the Indian Community Development Block 
Grant. The Salton Sea Authority received a $2 million local 
assistance grant from the State of California to support 
efforts to maintain and improve the habitat in the Sonny Bono 
National Wildlife Refuge.
    The First Nation Recovery Incorporated opened a $6 million 
state-of-the-art tire recycling facility at the Cabazon Band of 
Mission Indians Tribe Resources Recovery Park near the 
community of Mecca. At full capacity, the facility will employ 
more than 30 people and recycle 35 million pounds of tires per 
year. This is a big deal.
    Conway Trucking broke ground for a new $4.5 million 
terminal that will be located adjacent to the Blythe Airport in 
the Mesa Verde Subzone. Conway will initially hire 30 to 35 
employees with starting hourly rates of 13 to $15 an hour for 
nonadministrative staff. The terminal should be fully 
operational by early December and is expected to handle 1.5 
million pounds per day. Conway plans to expand to 3 million 
pounds per day within a year.
    Of the four auto dealerships to be located at the I-10 Auto 
Mall in Indio, a developable site of the EZ, Honda Unicars 
opened in June 1999 and has hired 35 new employees, 31 of which 
were low-income. The second dealership, Fiesta Ford, is 
finalizing construction of its $3 million facility and has 
already hired 50 new employees and plans to hire another 20 to 
25 more staff when fully operational. Most job placements are 
being processed through the Riverside County JTPA-Workforce 
Development Program.
    They broke ground on a $66 million Phase III Highway 86 
Improvement Project. This project will provide the final link 
between the recently completed portions of the upper and middle 
Coachella Valley with the final portion extending to Imperial 
County.
    The Coachella Valley Water District located in the EZ 
received $4,250,700 from USDA in rural development colonia 
grant funds to provide a safe and sanitary water supply to the 
communities of Middleton road and 100 Palms Trailer Park. The 
Mission Spring Water District in the EZ received $900,000 from 
USDA to repair and upgrade the community's water delivery 
system. The City of Coachella Redevelopment Agency, $45,000 in 
USDA Rural Business Enterprise Grant funds to establish a 
revolving loan fund for micro- and standard-sized enterprises.
    Unfortunately, the Empowerment Zone designation did not 
include full funding as expected. Instead, future EZ funding is 
in doubt, requiring the DCEZ to slightly alter course. They are 
beginning to scale back their expectations and invest more time 
and effort into securing other non-EZ resources to further the 
implementation of their Strategic Plan.
    Despite these setbacks, belief in the Empowerment Zone 
philosophy and concept remains strong. Both USDA and DCEZ are 
committed to the implementation of the strategies identified in 
the Strategic Plan, and the pursuit of DCEZ's overall vision to 
improve the quality of life for all residents.
    Thank you for the opportunity to appear before this 
committee and share with you the accomplishments of the EZ/EC 
program, particularly those of the Desert Communities 
Empowerment Zone. As a former board member of the Enterprise 
Community in California, I can say from my own experience that 
this process works for the betterment of the community and all 
of its residents.
    Chairwoman Bono. Thank you, Ms. Cantu.
    Next we will hear from Supervisor Roy Wilson.

      STATEMENT OF ROY WILSON, RIVERSIDE COUNTY SUPERVISOR

    Mr. Wilson. Thank you very much, Congresswoman. We are 
happy to welcome you here to Mecca, California, a rural 
community that has been blessed, along with other small 
communities in eastern Riverside County, by the designation as 
a Rural Empowerment Zone. This has opened up a hope to the 
people of these communities for a future of better life and 
better qualities of life and better economic development.
    As Celeste indicated, it was on January 13, 1999 that the 
Vice President and Secretary Glickman designated this area or 
announced the designation of this area as a Round II 
Empowerment Zone. The efforts that these communities put in was 
rather unique. It brought together a wide range of individuals, 
from residents, local governments, Indian tribes, social 
service agencies, and other stakeholders throughout eastern 
Riverside County that traveled great distances to come together 
on a weekly basis to put together from grassroots vision a 
strategic plan that would improve the quality of life of their 
residents.
    The strategic planning process required the identification 
and development of a long-term vision, and that vision that 
they developed states as follows: Our vision of the Desert 
Communities Empowerment Zone is a region with vibrant and 
sustainable communities where all residents have the 
opportunity to achieve an enhanced quality of life and self-
sufficiency through innovative and collaborative community-
based public and private partnerships.
    The community members also established the following long-
term goals for the Empowerment Zone: To implement creative and 
innovative strategies that lead to sustainable community 
development, thereby advancing the creation of livable and 
vibrant communities; promote economic opportunities and 
entrepreneurship, including job creation within the communities 
throughout the region; expand and coordinate community-based 
partnerships, including increasing the participation of 
residents and all other stakeholders in the community; and 
pursue our Desert Communities' vision for change that 
incorporates human, community and physical development well 
into the 21st century.
    Since the designation, the DCEZ has moved forward with the 
implementation of the strategies identified in the Strategic 
Plan. The initial efforts have focused upon organizing and 
structuring the various individual entities. The Strategic Plan 
called for the formation of a new community-based, nonprofit 
corporation to be responsible for the administration of the 
DCEZ. This required the development of bylaws, the election of 
board members, the preparation and submittal of corporation and 
tax-exempt documents and the election of officers. This board 
has been meeting regularly since formation, back in April of 
1999, and the amount of community energy and involvement has 
just been outstanding.
    DACE is finalizing agreements with the 16 Year 1 activities 
and is ``drawing'' down funds from USDA. The DACE will soon 
enter into an agreement with USDA for Year 2 projects, and it 
is also developing plans for hiring full-time staff and 
acquiring permanent office space.
    Furthermore, the DACE is conducting ongoing ``town hall'' 
meetings and ``issue area'' meetings to continue the community, 
social, and economic development needs process to establish 
priorities for future Empowerment Zone funding.
    I might point out that one of the very first projects that 
they were able to do in the Empowerment Zone was to help 
restore a swimming pool on the Torres-Martinez Tribal Nation 
grounds that had been sitting in disrepair for years. And they 
got in and with the help of the Torres-Martinez Indians, they 
repaired that pool in time for the youngsters and the community 
members of that tribe to enjoy it last summer.
    The entire Federal Empowerment Zone program was predicated 
upon the Federal government's commitment to act as a partner 
with residents and local stakeholders in the revitalization of 
distressed rural communities. This commitment, and primary 
incentive for local participation, was the investment of $40 
million in Empowerment Zone funds to assist and facilitate the 
implementation of each EZ's strategic plan. To date, this long-
term commitment has not been fulfilled. The DCEZ and the 
communities must endure year-to-year funding struggles. 
Consequently, successful implementation of Round II EZ/EC 
strategic plans has not been realized.
    It is imperative that the Round II Empowerment Zones 
receive their full funding. Without such funding, long-term 
success and performance of the Empowerment Zones is uncertain.
    Whereas the direct Empowerment Zone funding is a critical 
and essential component of DCEZ Strategic Plan, other Federal 
incentives and preferences for Empowerment Zones are important 
as well. These incentives and programs include direct set-
asides of Federal program funding,
    USDA, HUD, EPA, various funding sources, for projects or 
activities within our Empowerment Zones; preference points, for 
Federal grant applications, for programs or projects located 
within or serving Empowerment Zones; authorization for 
Empowerment Zone Employment Credits for Round II EZ/ECs; the 
continuation of Work Opportunity Tax Credits for Empowerment 
Zones and Enterprise Communities; and continuation of the 
Section 179 deductions.
    It is also very important that sufficient funding be 
provided to USDA to continue their administration of the Rural 
Empowerment Zone program. USDA, through their state and local 
offices, has been an invaluable advocate, partner, and 
supporter of our Empowerment Zone. It is imperative that USDA 
have the resources to continue these efforts. And we would urge 
you to please take the message back that these zones have many, 
many needs. We have a plan; we just need your help and support. 
And we trust that you will carry that message. Thank you.
    Chairwoman Bono. Thank you, Roy.
    Mark Benitez, it is now your turn.

   STATEMENT OF MARK BENITEZ, CHAIRMAN, EXECUTIVE COMMITTEE, 
            DESERT COMMUNITY RURAL EMPOWERMENT ZONE

    Mr. Benitez. Good morning, Madam Chair and distinguished 
panel. I am Mark Benitez, and I'm the President of the 
Executive Committee for the Desert Alliance for Community 
Empowerment. Roy and Celeste did a tremendous job of laying out 
the foundation of what actually made the Empowerment Zone of 
this area a key formation. There is not much I can addto that.
    But I can add, a perspective of emotions shared by the rest 
of the board members that represent Mecca and the other cities 
that are involved in the Empowerment Zone is that it took a 
year to finally get all of the correct documentation in place 
to specify what the Empowerment Zone was, how the funding would 
be allocated and how the funding would be acquired. We are 
hopeful that this week we will have some good news on that 
process and that everything that needed to be done is finalized 
and we will finally get past that hurdle, and a lot of the 
projects that have been spoken about will actually be funded in 
order to do them.
    I know today that we need to talk a lot about the economic 
development of the Empowerment Zone, and at this particular 
time we have a few projects that have actually come forward 
that, once again, is based upon funding, whether or not they 
will get matching funds and startup fees and things like that 
to get them going. Probably one of the most hopeful projects is 
ADC Company, Allied Digital Communications. They make CD-ROM 
discs. They're going to actually relocate to this area and open 
a facility for manufacturing CD-ROMs. Now, that's going to 
create I believe around 130 jobs. That's what they are 
specifying right now. That would be great if we could actually 
get that started, too. Once again, that's another coalition-
type arrangement where the----
    Unidentified Speaker. Mark, could you speak up a little?
    Mr. Benitez. The Economic Development Agency will actually 
be a key player, too. It's a partnership.
    Chairwoman Bono. They really want to hear what you are 
saying. That's the good news, Mr. Benitez.
    Mr. Benitez. All right. Anyway, that would be a tremendous 
project that would actually be brought into the Thermal area. 
Another project would be the--a proposed project would be a 
relocation of industry that--one of the particular board 
meetings we had, a presentation was brought forth by a group 
of, let's say, relocation experts for five industries that 
would actually relocate in the Thermal area. That would be 
another tremendous project, but once again, that's one of those 
matching fund projects that really needs to have that catalyst 
created to get those projects off the ground.
    But we are really a rural area. A lot of the projects have 
really been leaned towards a lot of the infrastructure 
development. Like Mesa Verde and Ripley need a water system. 
USDA has been working very closely with them to use the 
Empowerment Zone-type emphasis and leverage to help facilitate 
a water treatment or water supply system upgrade for them.
    At the same time, once again, the Torres-Martinez people 
have been mentioned a few times already, and I'll add one more. 
It's the historical center. They have an old schoolhouse there. 
It's been--gosh, I think my dad even went to school there at 
one time. And they are going to restore that and turn it into 
an historical cultural center, interpretive center, to be able 
to educate visitors to the reservation on the Desert Cahuilla 
and the travails of their existence, et cetera. All tremendous 
projects.
    At the same time there is also the Limon's Market that is 
in Thermal that is untapped. They believe that they will be 
able to achieve the funding they need to be able to restore 
that market that has been here forever. All the families in 
this area especially know Limon's Market. It had burned down in 
a fire. It was totally destroyed. So they came to us seeking 
help because they didn't have the funding necessary to rebuild 
this store, so we are hoping that that will be able to be 
worked out with them and they will carry out with their 
project. That will be another source of employment for the 
area.
    And at the same time there is another project that we were 
quite proud of, which is the youth association that builds 
homes in the area. It's job training, job skills type of 
application that allows them to build homes that people 
actually buy. It's a tremendous project.
    Once again, a lot of community outreach, a lot of rural 
development and a very small segment of economic development at 
this time, but we are hopeful that will continue to grow as the 
Empowerment Zone continues to exist and reachieves the funding 
it needs every year. We are hoping that we can continue to get 
full funding instead of 50 percent funding also. It would be 
tremendous. Thank you.
    Chairwoman Bono. Thank you. I guess when it comes to Mark, 
what is that saying, he walks softly and carries a big stick. 
He talks softly. But you certainly do a lot of good work, and I 
appreciate that and I appreciate your being here.
    At this time I'm going to defer to my colleague and let her 
open it up to questions.
    Ms. Millender-McDonald. Thank you, Madam Chair.
    Let me first compliment you on your willingness to take the 
bull by the horn, if you will, and proceed with developing that 
which has been given to you in a very microcosmic way. You 
know, you get this idea from Washington, you get the 
Empowerment Zone, the EZ/EC, and yet it is up to you to design 
and develop all those things that will make that work, and I 
commend you on that.
    I was very impressed, Ms. Cantu, when you spoke of the 
myriad of grants that you have received to continue to make 
this happen. It is very true, we cannot have a one size fit all 
anymore. We have to let individual communities plan and do 
their own thing, if you will, in order for these things to 
succeed. We in Washington cannot just come down with a heavy 
hand and just expect you to do what we are suggesting you do, 
when most of us don't even know Mecca exists.
    So while we appreciate what you have done, we want you to 
know how very much we were grateful also in taking this bull by 
the horn. You are very right. You have to have the 
infrastructure, the community infrastructure in order to move 
with Empowerment Zones.
    You did mention the 100 points for cities that did not get 
grants. Is that something you can expound on more for the sake 
of just the audience and for this member to know more about 
what you meant by that?
    Ms. Cantu. I don't know if we are unique in California for 
doing this or not, I have no idea, but in all of our funding 
competitions at USDA Rural Development, we have 100 points--
almost 100 points, sometimes it's 120, sometimes it's 80--and 
of that the state director has usually about 20 points that are 
discretionary points that he or she can then use to promote the 
principles that he or she is particularly concerned about. I 
chose in California to secure all of those points and reserve 
them to be used for the Champion Communities.
    The Champion Communities were communities that applied for 
the designation but were unsuccessful. They got no money, no 
special preferential treatment, other than this, and no 
designation, although they worked incredibly hard. By giving 
them those 20 points exclusively, it allows them to be 
competitive for the first time for a whole array of funding 
opportunities. You know, they are disadvantaged communities. 
They may not have the best grant writer in the state, they may 
not have all the matching funds that are necessary to make them 
competitive. In fact, they have almost no resources outside of 
their will.
    But by doing this, we are able to bring them up and it's 
their most meritorious projects that are the ones that will 
compete for the top, and then they can get funding. It is 
impossible to ask any community to go through this strategic 
planning process without any hope of a golden ring at theend or 
preferential treatment or something. It's impossible----
    Ms. Millender-McDonald. But it happens all the time.
    Ms. Cantu. Right. But it's impossible to----
    Ms. Millender-McDonald. Regretfully, to say, but it does 
happen, yes.
    Ms. Cantu. So this is kind of a consolation prize. It has 
been very effective.
    Ms. Millender-McDonald. How do you select the cities that 
buy into this 20 percent of the--the 20 points, if you will, 
discretionary fund? How do you determine those cities?
    Ms. Cantu. There is a formal designation process. We went 
to all the applicants who were unsuccessful and said, ``We've 
got a plan for you. If you want to carry through with your 
strategic planning, if you are committed to it, if you want to 
act like you were designated and continue to hold meetings with 
the hope that you will be more competitive and will be 
successful in capturing funds, will you carry out this process? 
Will you play along as if you were designated, although you get 
no money? There is no golden ring except for these 
discretionary points.'' And in California we had----
    Ms. Millender-McDonald. But it does give them an edge up 
from those who are not able to get the discretionary funding.
    Ms. Cantu. Exactly. Although I think it just levels the 
playing field.
    Ms. Millender-McDonald. That is correct.
    Ms. Cantu. They really get no more than a level chance. And 
most of the communities in California who were applicants 
initially said, ``Yeah, we'll go for it. We think it's worth 
it. We are energized by our strategic planning process.''
    Ms. Millender-McDonald. Is this both rural and urban that 
can buy into this discretionary funding, or is it just for 
rural?
    Ms. Cantu. We only look after the rural areas in 
California. I have not heard of this happening in the urban 
areas.
    Ms. Millender-McDonald. I see. Did you mention, did I note 
this right, that you have already raised $2 million in this 
whole effort of the Empowerment Zone? You said something about 
four-year $2 million budget?
    Ms. Cantu. The original plan was a $40 million ten-year 
budget. The appropriations have been yearly to date. We don't 
have a ten-year plan for which our communities can count on. 
And of the yearly appropriations, instead of the $4 million 
yearly, it has been $2 million.
    Ms. Millender-McDonald. That's where I got the 2 million. 
Okay. Fine. How many jobs can you speculate, if you can, that 
have derived from all of the efforts, the grants and all other 
things that have come to date?
    Ms. Cantu. Jobs for all the rural Empowerment Zones and 
Enterprise Communities saved or created are 10,892 nationwide.
    Ms. Millender-McDonald. Say that again.
    Ms. Cantu. 10,892 jobs created or saved. And I believe this 
is to date. January.
    Ms. Millender-McDonald. And that's across the country?
    Ms. Cantu. Across the country.
    Ms. Millender-McDonald. Excellent.
    Mr. Supervisor, it is so good to hear anyone who is in 
leadership talk about hope and vision, and you started out 
saying that and I commend you on that because if the people 
have nothing else, they must have hope and they must have 
vision, and they must see that vision from a leader such as 
yourself. So I commend you for starting out with that.
    It is also good to know that when you speak about rural--
God knows I'm not going to propose to know anything about it 
because I did not grow up there nor does my district encompass 
any of this--but it was very interesting for you to say that 
you have gotten all of the groups, including your Indian 
tribes, to come together to make this work. And indeed, those 
are the ones who have been the forgotten group that has not 
played into this whole process of building or developing a 
strategic plan.
    So I applaud you and all who have come together to try to 
make this work and to include--we cannot--the one thing 
Washington wants to know is that you have included everyone, 
you include everybody, and they come to the table to sit as you 
develop a strategic plan. Job creation, CBO partnerships, 
stakeholders, those are the things you need, and I suppose I 
have just been so impressed with your presentations, my 
questions aren't as much as to just commend you on that which 
you have said.
    I do want to discuss with you the formation of this 
nonprofit corporation. Again, that is to administrate and to 
advance the project and to look into economic development. 
Expound on that a little bit for me.
    Mr. Wilson. Yes. The--we call it the Desert Alliance for 
Community Empowerment is a nonprofit group. Each community and 
each tribe, they elect one representative up to a certain 
population. The larger communities elect two representatives. 
They sit on this nonprofit board and administer the funds and 
apply for the grants, seek out the economic development 
opportunities, et cetera. The idea was to separate it--even 
though I am a board member of--one of 17 board members, I'm the 
only government representative and I'm only one vote and one 
voice. And the idea was to separate it from the government, to 
make it the people speaking, the people governing, and it's 
working.
    Ms. Millender-McDonald. And I think the more you let 
Washington know the people are speaking through whatever 
efforts you are doing, the better off you are, your chances are 
in getting that full funding. Again, they perhaps know it 
because we have to see these proposals in order to vote for 
them, but it is impressive and important that Washington knows 
that you have, first, included everyone, everyone sits at the 
table, and secondarily, that you are bringing those who are in 
need to build an economic stream. That is the most critical. 
Those are the things we look for when we are deciding who gets 
and who doesn't and how much and how few fundings they get. You 
spoke about the Section 179 and its deductions. Can you expound 
on that a little more for me?
    Mr. Wilson. No, I can't.
    Ms. Millender-McDonald. That's all right. My chief deputy 
has already written it and she will certainly expound on it 
when I get back, and I will be able to further review that.
    Mr. Wilson. One of the things that Round II has not gotten, 
in addition to the full $40 million funding, is the tax 
incentives, the different business incentives that have been--
we have gotten some of them, but not all of them, and we would 
like to see that revisited.
    Ms. Millender-McDonald. Well, you know, that's one of the 
big issues that we have right now in the House. Tax incentives, 
who gets what and those types of things, doesn't always 
necessarily mean that is part of the totality of the tax cuts 
or the tax incentive package. But any time you say tax 
incentives, it does become a gridlock issue, to some degree. We 
will, though, work through the process.
    Empowerment Zones/Enterprise Communities should not have to 
wait for those incentives to come down the pike, especially 
when we are asking you to develop your plans, try to implement 
those, build your infrastructure whereby all of this will take 
place, and certainly I will work with your congresswoman to 
ensure that those tax incentives be put in the pipeline as 
quickly as wecan.
    Mr. Benitez, you are fortunate to have a manufacturing 
anything coming into your district.
    Manufacturing jobs just aren't as plentiful in California 
as they were when I was in the California State Legislature. So 
it is, indeed, great to hear that.
    The relocation project that you speak about and the 
matching funds, where are you trying to get those matching 
funds from other than the Federal government?
    Mr. Benitez. Well, evidently, from the best of my 
knowledge, the Empowerment Zone designation allows you, or I 
should say, gives you an opportunity to pull up other type of 
funding that could be channeled through the Empowerment Zone 
designation. It's not actually coming from the Empowerment Zone 
itself. It's a rerouting of Federal funds.
    Ms. Millender-McDonald. It does not preclude you, though, 
from seeking matching funds from state?
    Mr. Benitez. As far as I know, no.
    Ms. Millender-McDonald. No. I don't think so. The 
interpretation--this Torres-Martinez project that's going to be 
a cultural monument or whatever, I think that's great.
    Mr. Benitez. Cultural interpretation center, yes.
    Ms. Millender-McDonald. You said your father went to school 
on that site?
    Mr. Benitez. Uh-huh.
    Ms. Millender-McDonald. It's going to become a traditional 
generational type of, I guess, point of interest and really 
something for the community to embrace.
    Mr. Benitez. It's a tremendous cultural resource.
    Ms. Millender-McDonald. And that's the way I seem to have 
taken it. But you are going to do interpretations on the 
reservation as part of a learning process for those who are on 
the reservation?
    Mr. Benitez. Correct. That would be one of the different 
venues, and at the same time they are establishing an 
interpretation center for the environment of the Salton Sea 
itself.
    Ms. Millender-McDonald. What about job training, though, is 
there a critical need for job training in this area as well?
    Mr. Benitez. Well, the job training aspect of it is 
somewhat limited because of the fact it's a resort-type area. A 
lot of the employers are hotel and resort, golf course type of 
work. That is probably the largest employer. But actually that 
would be a tremendous avenue for a lot of people to seek 
employment and be trained so they can go into that job much 
easier.
    Ms. Millender-McDonald. I would tend to think, as I listen 
to you and as I look at the ambience, that there is a critical 
need for some job training funds to come in here because 
certainly folks have to be skilled in order to get these 
incredible jobs that are going to come from the various 
partnerships and businesses that are going to be developed from 
your Empowerment Zone.
    Mr. Benitez. The county does have a Workforce Development 
Board that is working closely with that.
    Ms. Millender-McDonald. I thank you, Madam Chair.
    Chairwoman Bono. Thank you. I was going to say, if the 
supervisor wanted to answer that, feel free to jump in. Our 
questions really are--if anybody has a comment, feel free to 
answer at any point.
    But I wanted to say most of all, it's encouraging to me 
that my colleague is here. Those of us on opposite sides of the 
aisle have different basic philosophies of how government 
should work and how the Federal government should work and why 
it even exists. But I know that Juanita is here, and when she 
came out here she was even surprised to know that my district 
was as rural as it is and that agriculture was my number one 
industry and not golf, which is actually part of number two, 
which is tourism. But the 44th District of California is very 
diverse, and I know she is now seeing on a firsthand basis what 
we are doing here.
    And I think, as Roy and Celeste said so well, what it takes 
to do this is that all the people come together, and this 
community does that. And I can say with almost every issue that 
we have, whether it's workforce development, whether it's any 
economic development of any sort, and we have representatives 
from the western side of Riverside County here as well, and 
this--I don't know about your district, but in my district I am 
so proud of my representatives of the people, whether it's an 
elected position or a spokesman for a tribe, but the people 
here work together and they do come to the table and they 
usually iron out their differences before they come see us in 
Washington.
    Ms. Millender-McDonald. Would the gentlewoman yield?
    Chairwoman Bono. Yes.
    Ms. Millender-McDonald. What I just want to simply say is 
that this has been an education for me today. She's absolutely 
right. When you think of Mary Bono, you think of Palm Springs, 
Palm Desert, golf course, golf courses, but you really don't 
think of the heart and guts and meats of any of our districts 
until you come there. She was with me on yesterday, I'm with 
her today. She has learned from my district and I am learning 
from hers.
    Thank you, Madam Chair.
    Chairwoman Bono. Thank you. So on that note, I want to 
begin my questions with Celeste, if I might. These questions I 
came up with earlier, they are a little bit more geared for 
Maria. So if you are unable to answer, if I could just submit 
them to you to get to her, for the record, and they could be 
submitted in writing, I would be fine with that.
    Ms. Cantu. She sent the support staff people who could 
probably answer the questions better than anybody.
    Chairwoman Bono. Okay. So they are on the spot. My first 
question is, are there any plans underway to hold a third round 
of EZ/EC programs?
    Ms. Cantu. We hope so. Discussion is taking place now to do 
a third round. This is a tremendous amount of energy, 
particularly amongst those Champion Communities who want to 
compete for the designation. As I understand it, the proposal 
includes at this point, and it is developmental, two Rural 
Empowerment Zones for the nation. And I have to say from a 
personal note, when I look at all the tremendous 
accomplishments the Enterprise Communities have done, to limit 
that to two for the whole nation is kind of crushing to me.
    Personally, those two, the funding that would be tied to 
those two Empowerment Zones could result in 30 Enterprise 
Communities. The Enterprise Communities do all the same work 
but don't get as much money to work with, but they have been 
incredibly fruitful with their work. And I think from the point 
of view of California, we would stand a better chance of 
capturing the designation of an Enterprise Community to help 
our rural communities if there were more slots to compete for. 
With one rural Empowerment Zone now, the chances of us getting 
another, if there are only two to be allocated, are, I think, 
very slim.
    Ms. Millender-McDonald. Are you saying two in the country 
or two in California?
    Ms. Cantu. In the country. I think that's the proposal as 
it stands right now. You can jump in.
    Mr. Wetherill. That's correct. It's in the FY 2000 budget 
for ten Round III Empowerment Zones, eight urban, two rural.
    Chairwoman Bono. Okay. Do you have other questions?
    Ms. Millender-McDonald. No. I'm just trying to gather my 
information here. Well, I suppose I do, Madam Chair. If you 
give us an opportunity to get to this mike, we're going to take 
you up on it. So the third round is for eight urban and two 
rural?
    Mr. Wetherill. That's the proposal we are seeing in the 
budget.
    Ms. Millender-McDonald. Is there a possibility of 
California getting a second rural?
    Mr. Wetherill. The way the competitions have run in the 
past, Congresswoman, is that it's a nationwide competition and 
the cream rises to the top.
    Ms. Millender-McDonald. We are the cream.
    Chairwoman Bono. Just to remind everybody, we do have a 
second panel to go, and I don't want it to be too long of a 
day, but sir, can I ask you to please state your name and spell 
it for the court reporter over here.
    Mr. Wetherill. Sure. My name is Richard Wetherill, W-e-t-h-
e-r-i-l-l. I am Director of the Empowerment Programs Division 
in the Office of Community Development, USDA, Washington, DC.
    Chairwoman Bono. Thank you.
    Again, Ms. Cantu, why didn't the Desert Communities 
Empowerment Zone and other Round II EZs receive the same tax 
credits as the Round I EZs received?
    Ms. Cantu. The tax credits were not allocated in Round II. 
It's something that we would really hope to see in Round III. I 
don't have any empirical evidence exactly what the value of tax 
credits are in terms of attracting businesses, but it seems to 
me they are just another tool in the toolbox that disadvantaged 
communities need to compete for businesses to locate. It can 
only help.
    Chairwoman Bono. I'm hearing from my people that this would 
help a great deal, and Supervisor, would you care to comment on 
that?
    Mr. Wilson. It is very much needed in the Round II areas, 
and I think you will hear from the next panel, from some folks 
that are working on economic development, if they had these tax 
credits and incentives, that it would make their job a lot 
easier. It's hard to get an industry to relocate from an urban 
area to an area like this. But here we have, some of these 
communities, 35 percent unemployment, and they need jobs. Those 
that are employed, many of them are seasonally employed in 
agricultural work, and many times of the year they are not 
employed. So we need a better economic base for these people, 
and tax incentives and credits would be very helpful.
    Chairwoman Bono. Thank you. Again, Ms. Cantu, in the last 
census, tracts were so large that many communities had problems 
qualifying within the thousand-square-mile size limitation.
    Are there any plans to address this either with the 
existing communities or in the future round?
    Ms. Cantu. We understand that the discussion is now taking 
place to make all of the previously pretty rigid criteria much 
more flexible, to be more responsive. In my almost 30 years of 
competing for Federal funds in my own position, time and time 
again we saw the prescriptive formulas were really 
Northeastern-driven or Eastern-driven, and they simply put 
California at a disadvantage. And that's very true. We had so 
many census tracts that it just didn't work out.
    But we understand that discussion is taking place. We have 
learned from Round I and Round II. We want to open the door to 
make this program available to those communities that are also 
poverty-ridden, but don't exactly fit the relatively rigid 
prescription that we saw in Round I and Round II.
    Chairwoman Bono. Thank you.
    Supervisor, if you could talk about housing. A couple of 
the ideas that were put forth include self-help programs and 
migrant housing. Can you speak to what is being done in these 
two areas?
    Mr. Wilson. Yes. That is really in addition to economic 
development. The housing needs in this Empowerment Zone are 
uppermost in this program. We just opened up a new area of 
migrant housing. I hope you have a chance to drive by it on 
your way out on Lincoln. It is the first time that you will 
see--if you were holding this hearing four weeks later, you 
would see people sleeping in the streets, cardboard in and 
around the parks in this type of community because of the grape 
harvest, and thousands of people come into this community. We 
don't have adequate housing for them.
    We also have a lot of substandard housing. We have mobile 
homes that have been condemned in urban areas, hauled out here 
on trucks, and they are providing housing for--unsafe housing 
for large families. Many of the grants, and we are working with 
USDA and HUD right now on building--housing applications to 
build on the Torres-Martinez reservation a 300-space mobile 
home park that will meet safety standards. Coachella Valley 
Housing and the county are building a 106-unit mobile home park 
that will allow people to relocate from unsafe parks to this 
park.
    What we have are people living, hooked up to extension 
cords running through raw sewage, very deplorable conditions. 
And that is what we are hoping the Empowerment Zone will help 
us, and it is helping us, get the recognition from Federal 
agencies, HUD and USDA, to get grants to help us provide better 
housing.
    Chairwoman Bono. Thank you. And on that, I know Secretary 
Cuomo is very interested and has been out at least once to tour 
the area, and I will continue to get him out here if we can.
    But Mr. Benitez, as well as being with the Empowerment 
Zone, you also work with the Cabazon Indian Tribe. Can you 
describe some of the impacts the Empowerment Zone has had on 
the tribes in the area?
    Mr. Benitez. I would say probably the Torres-Martinez 
people have had the most opportunity to--potential to benefit 
because of the location that they reside in, the core of the 
Empowerment Zone in this area, because it is an extensive 
Empowerment Zone. It stretches all the way out to the Colorado 
River, 744 square miles. It's pretty big.
    But the Torres people have so much that needs to be done 
for them. They have a great need for water cleanup. They need a 
good palatable water system that could bring new drinking water 
to the tribal reservation. They have a great need for 
infrastructure building as far as power, telephone. Many people 
talk about the Internet, or as you say, the digital divide, 
bringing the Internet to the reservations. This is another area 
that could be addressed on that reservation. It really has a 
great need for infrastructure building, things that could--
would actually be a catalyst to bring more development to that 
location because it is lacking so direly for that type of 
infrastructure building.
    Chairwoman Bono. I think the spin-off question I have on 
that is not directly related to the Empowerment Zone 
designation, but as you know, we are working very hard on the 
settlement for the Torres-Martinez Tribe, and I know you have 
had your finger in this and I guess your comments here remind 
me of how I know you will work hard to make sure this 
settlement comes again, and that the Torres-Martinez can at 
some point in time see some sort of economic benefit, 
hopefully, from that as well. But I would be remiss if I didn't 
ask you what your thoughts are on gaming and the passage of 1A 
and where we are going here and how it might touch upon 
theEmpowerment Zone and what you think about this.
    Mr. Benitez. Well, as it presently stands right now, with 
1A basically limiting the amount of expansion of gaming to 
Torres traditionally-held land, the Torres-Martinez people 
would actually be the only tribe with the ability to locate a 
facility inside an Empowerment Zone. So that would be of 
benefit to create an incentive for employment numbers, 
increasing employment rolls. Spin-off could be other 
development based upon that facility. There would be even more 
job creation, bringing more prosperity to that region.
    Our reservation actually is split into three different 
locations. The most southernly reach is the Mecca area, on the 
outskirts of town here, and that's where we have a resource 
recovery park and that's what we are currently working on, and 
that resides actually inside the Empowerment Zone. The other 
two locations are on the outside.
    Twentynine Palms themselves are at the very furthest reach 
of it. They have been included, but they are very much land-
poor. They don't have a lot they could offer other than through 
their own casino, actually, job rosters filling as they 
continue to expand their existing facility. They expect to 
increase their job enrollment probably at least 50 percent when 
they increase the size of their resort. They are actually 
turning their existing facility into a resort, but it would be 
a different type of application. It wouldn't actually be in the 
Empowerment Zone.
    So I keep hearing that there is tax incentives for 
employment, but at the same time I am also hearing it's not 
available. So I believe that would be the only thing, other 
than the fact that people that are employed by those facilities 
actually live in the Empowerment Zone. So that would be a side 
benefit for them.
    Chairwoman Bono. Thank you. Unless there is another burning 
question or comment that any of you want to make, I think it's 
time to move on to the second panel. Thank you all for being 
here. I personally want to invite you to stay and listen to the 
second panel if you can and have time, and I appreciate your 
travelling such a long way to be here. Actually, everybody 
traveled a long way. Thank you all. I think we are ready for a 
five-minute break.
    [Recess.]
    Chairwoman Bono. We are going to begin with Mr. Mike 
Bracken, the Coachella Valley Economic Partnership.

   STATEMENT OF MICHAEL BRACKEN, PRESIDENT, COACHELLA VALLEY 
                      ECONOMIC PARTNERSHIP

    Mr. Bracken. Good morning. My name is Mike Bracken. I'm the 
president and CEO of Coachella Valley Economic Partnership, 
which is a private sector economic development corporation. The 
company I represent has about 120 investors, 12 of which happen 
to be public entities. The other hundred-plus are actually 
private sector corporations that put their real money on the 
table to assist in regional economic development efforts. Our 
efforts clearly are geared toward expanding the economy of this 
region, of retaining what we have and diversifying the economy.
    As what was alluded to in the first panel, our economy out 
here is basically twofold--agriculture and tourism. That type 
of an economy leaves us very susceptible to recessions and that 
kind of turmoil. And so our corporation really is geared toward 
trying to diversify and expand the economy.
    With respect to this region here, this subregion within the 
entire Coachella Valley, the Desert Communities Empowerment 
Zone, there are a couple things I want to bring to your 
attention. In the last 18 months, I took over the corporation 
about 18 months ago, we have had interest an average of once 
every two weeks by a Fortune 500 company to put a facility 
within this area.
    Now, what do they want it for? Very simple. Every one of 
them is the same thing. Distribution centers. You are probably 
familiar with the Ontario area, Mira Loma, which has really 
become the distribution capital of North America. They are out 
of land. But there is a very specific reason why those 
distribution centers went to Mira Loma and Ontario to begin 
with, and it has to do with freeway access, it has to do with 
access to foreign markets, and it also has to do, right, wrong 
or indifferently, with NAFTA.
    Well, the reality is this region has an incredible 
opportunity right now, and that opportunity is to be able to 
take advantage of this unprecedented economic status that we 
have as a nation, to take advantage of corporate America 
looking to expand, finding ways of creating more revenue 
through additional retail location, e-commerce and other 
things.
    Obviously, as you know, the only way to get that product to 
those people and to those retail facilities is via some type of 
bulk-rate distribution. What's in the way? Let me tell you 
what's in the way. I am speaking very, very bluntly about where 
I am at. The corporation I run, just to give you a couple 
statistics, in 18 months we generated a total of approximately 
120, 130 qualified leads. We know the name of the company, we 
know exactly what they are looking for, and we are trying to 
find it for them and work out deals.
    Why haven't any distribution centers landed here? Well, 
there are a couple that are pretty close, but in talking with 
them, one, nobody wants to be a pioneer. They really don't. You 
probably came in Highway 86. All of that land on both sides, 
most of that is zoned or available for distribution. Wonderful 
freeway access and an amazing workforce for distribution.
    What does a distribution company setting up a distribution 
center look for? They are looking for a low to semiskilled 
workforce. They will pay an average wage of between 10 and $12 
an hour, which is significantly higher than the 6 to $8 an hour 
that they are making now. And they are extremely loyal, our 
workforce here is loyal. The folks that live in this portion of 
the valley are third and fourth generation. So it would be a 
huge impact for them.
    With respect to this concept of them shying away from being 
a pioneer, we've spent a lot of time. So what do we need to do? 
It really comes down to two things, in my mind, and these are 
two things that you have control over. I wear another hat, as 
Congresswoman Bono knows, and that's as a city councilman 
outside of this region. And I learned something long ago 
through experience, and that is, you want people coming before 
you to be brief, tell you exactly what they want, and if you 
can do it, you will.
    Two things: Restore this Empowerment Zone to the $4 million 
a year, ten-year level. Make it retroactive. Go back and do 
exactly what they did in Round I Empowerment Zones when they 
gave them the $4 million dollars a year for the ten years. Give 
these folks out here the resources they need for the 
infrastructure financing and to take care of the economic 
projects that are on the table.
    Two, give us a hiring tax credit. The hiring tax credit, 
very briefly, which was stripped out of Round II, potentially 
would help a company to a favor of three-quarters of a million 
to a million dollars a year for distribution centers. Are they 
small businesses? No. These are Fortune 500 companies. But you 
and I both know that as Fortune 500 companies come into a 
region, for every Fortune 500 company that lands out there, for 
every job that's created out there by them, two or three small 
business jobs are also created because of the supporting 
industries, for the uniforms that have to be cleaned, for the 
machinery that has to be serviced, for the trucks that have to 
be serviced, for everything else that goes on within an economy 
within a cluster.
    If Congress were to take action right now, during this 
economy, to fund this Empowerment Zone to the level that Round 
Is were funded and to restore the hiring tax credit, I am here 
to say, based on what I have seen and the clients that I work 
with are saying, this region can be a model for what an 
Empowerment Zone should be, which is a way, a tool to help 
communities help themselves and make themselves economically 
viable. Thank you.
    Chairwoman Bono. Good job. You are succinct and quick and 
definitely an elected official.
    Our next panelist is Harley Knox, a developer in Coachella 
Valley.

 STATEMENT OF HARLEY KNOX, DEVELOPER, HARLEY KNOX & ASSOCIATES

    Mr. Knox. Thank you, Madam Chair. It's indeed a pleasure to 
be here. And the speakers before me have addressed the history 
or the origin and the successes to date. Mr. Bracken expressed 
very succinctly some of the points that I am going to make, but 
I must say that if this Empowerment Zone is to have substance, 
if the Enterprise Zone is to have substance, if there is going 
to be a reality to all of this, it's got to be funded. It's 
nice for politicians to talk about it, but to have real impact 
on the lives of the people in this area, it has to be funded.
    And I want to focus on a certain element of the Empowerment 
Zone that I believe to be crucial. With your permission, I will 
walk through a very brief prepared statement, and then I would 
like to expand on a few items.
    Harley Knox and Associates, in partnership with Germania 
Construction, and Mr. Wolf, the owner of Germania is with me 
today, have an industrial development company, and we are 
working with many small but rapidly growing manufacturing 
companies. Now, these companies are sound and viable 
manufacturers and they offer good-paying, year-round jobs with 
health insurance and other employee benefits. And I would 
suggest to this panel that that speaks to the core of economic 
development. It's year-round jobs, benefits, health insurance 
that provides security and income to the workers, and it is 
these jobs that are the foundation for any economic progress.
    These companies require low cost, long-term financing for 
manufacturing facilities and for equipment to use in 
manufacturing. Now, the tax-exempt Industrial Development 
Bonds, as provided for in the Empowerment Zone and issued by 
the County of Riverside, would meet the capital requirements of 
these manufacturers.
    Other tax incentives, such as offered in the Enterprise 
Zone, are extremely important, vitally important, and these 
incentives should be put back in place. They should be in place 
for Round II and they should be funded and perfected in every 
way possible. However, the tax-exempt Industrial Development 
Bonds meet the most immediate and often overwhelming capital 
requirement for expansion and relocation of manufacturing 
facilities.
    Now, the companies with which we interact, some of which 
are California companies, some of which are international 
companies, all of them are small, find that they cannot access 
the benefits provided by an Enterprise Zone unless they first 
have the capital to locate within that Enterprise Zone, and 
that's the importance of the tax-exempt Industrial Development 
Bond, financing for these manufacturers. And I would add that 
without this kind of incentive to make that initial investment 
in this area, certainly the half dozen manufacturers that we 
are currently working with to locate in this area will not be 
able to come here.
    So it's imperative that Round II funding of this 
Empowerment Zone be expanded and enriched in every possible 
way. This Empowerment Zone must be reliable. We must be able to 
look to it with confidence if we would entice employers to 
locate their businesses here. Be sure that funding will be 
available when their plans are completed to move to this area. 
We ask these manufacturers to put their fortune and their 
future on the line and take a leap of faith with us to come to 
the Coachella Valley with their businesses, and unless we are 
secure in the knowledge that the funding is going to be there 
and it will be adequate, that won't happen.
    And it has to be in abundance. You can't just fund one or 
two. That doesn't make an economic base, and it doesn't justify 
the pioneering effort that is required to establish an 
industrial park and to finance the backbone infrastructure that 
is required. So it has to be enough to assure you have some 
momentum, some ongoing activity.
    I want to reinforce what Mr. Bracken had said about the 
need for the tax credits. I do hope that you will carry back 
with you the message from us that we are very close with a 
number of viable employers for this area. We are anxious to put 
that over, over the line and make it a reality. We thank you 
very much. I commend Congress for the foresight in establishing 
an Empowerment Zone in this area. I think that it will be 
crucial to the economic development of this area. Thank you 
very much.
    Chairwoman Bono. Thank you.
    Larry Chank is a developer. He said it's a golf term and I 
don't play golf.
    Mr. Chank. It's a very bad golf shot.
    Chairwoman Bono. He's also a developer with a good deal of 
land in the Empowerment Zone. And you have the floor.

    STATEMENT OF LAWRENCE CHANK, CEO, JPH ENTERPRISES, INC.

    Mr. Chank. Members of the House Committee on Small 
Business, For the record, first of all, JPH is a private sector 
corporation which has received no Federal funding. I'm a 
developer of agricultural, commercial, and industrial 
properties in the Coachella Valley. For the past 20 years I 
have been active in developing over 500 acres of date 
properties, 300 acres of row crop land, 150,000 square feet of 
commercial buildings and 250,000 square feet of multi-tenant 
industrial space in 17 locations. I have also developed three 
industrial business parks in the Palm Desert and Indio area.
    Over the last 20 years my partners and I have owned 
properties in Palm Desert, Indio, Coachella and Thermal. The 
developments in Palm Desert and Indio have proceeded on 
schedule with great demand from the private sector. The 
Coachella and Thermal developments continue to struggle.
    Recently I have had the opportunity to negotiate with six 
to eight manufacturing and distribution center prospects for 
the Coachella and Thermal area. After lengthy negotiations and 
multiple site visits, the bottom line in their decision was 
``We have decided not to locate with you, but to locate 
elsewhere because we do not wish to be the first company to 
locate in the Coachella-Thermal area,'' and ``The lack of 
quality education, housing, and infrastructure makes it 
difficult to invest the dollars in your location.''
    In addition to the three business park locations that I 
have in Coachella and Thermal, there continues to be a 
significant amount of land available in the Highway 111 and 
Highway 86 corridor to accommodate distribution center and 
manufacturing developments. With surrounding areas, such as 
Ontario, approaching capacity and the added truck traffic 
moving more and more border crossings to Calexico, the 
Coachella, Thermal, Mecca and Salton Sea areas are well poised 
to attract new business.
    However, the Federal government's assistance is a necessity 
in helping to provide the necessarytools and incentives to 
entice the first few players in.
    I have the land and the partners who have offered the land 
at below true value and have offered to build-to-suit to 
prospective tenants at below market lease rates. The state, the 
city, the county have all provided incentive packages tailored 
to attract the target businesses that we want. Additionally, 
the county has invested heavily in the expansion of the Desert 
Resorts Airport. This has not been enough to bring the first 
businesses to the table.
    It will take the partnership of the local communities, the 
landowners, the developers and the Federal government to 
develop a long-term plan to build a successful business 
environment. Corporate America looks for stability, an educated 
workforce and quality of life in making expansion and 
relocation decisions.
    With the proper incentive programs we can develop a 
successful business destination which will start the cycle 
going toward an improvement in education, infrastructure, job 
opportunities, and quality of life. This cycle increases the 
number of jobs and the number of people who can afford entry-
level housing, which again repeats the business cycle as 
families begin to gain a stronger economic base and additional 
businesses locate here.
    The successes of the central communities in the desert must 
be leveraged to ensure the opportunities enjoyed by the Rancho 
Mirage, Palm Desert and Indian Wells residents are afforded to 
the poorer communities in the east. Thank you for this 
opportunity to appear before you.
    Chairwoman Bono. Thank you. That was quick enough. You 
should run for office. Harold Joseph is the executive director 
of the Coachella Valley Enterprise Zone Authority.

   STATEMENT OF HAROLD JOSEPH, EXECUTIVE DIRECTOR, COACHELLA 
                VALLEY ENTERPRISE ZONE AUTHORITY

    Mr. Joseph. We are going to talk about a success story this 
morning. The Coachella Valley Enterprise Zone is a joint powers 
agreement between the cities of Coachella, Indio, and Riverside 
County. And the impact of the Coachella Valley Enterprise Zone 
in new business relocation, expansion and new job creation is 
what we will talk about today, and I would like to refer to my 
notes in my presentation to you.
    The Coachella Valley Enterprise Zone has been successful in 
achieving its primary goals of helping to attract new business 
relocation and expansion into its boundaries and creating new 
jobs with existing businesses. The reason the Enterprise Zone 
has had such a positive impact on economic development is the 
powerful financial incentives mandated by the State of 
California.
    The Enterprise Zone offers to businesses within their 
boundaries five incentives which provide credits against state 
income tax, including, one, the employer hiring credits, up to 
50 percent of qualified employee wages; two, sales and use tax 
credits, tax credits for new machinery and parts; three, 
business expense deductions; four, net operating loss 
carryover; and five, nontaxable investments, net interest on 
loans to Enterprise Zone businesses can be taken as tax credit 
by lender.
    The effect of all these incentives is to give businesses 
within the Zone, including new businesses relocating or 
expanding into the Zone, substantial savings on their state 
income tax. Since these are primarily tax credits, not 
deductions, the result is a direct cash savings to the 
business, money they would otherwise not have for reinvestment 
in the success of their company. The total savings can be 
tremendous--as much as tens or even hundreds of thousands of 
dollars each and every year for businesses for the life of the 
Enterprise Zone's existence. This has proven to be a powerful 
inducement for attracting new business for areas that have the 
necessary infrastructure but lack the momentum of economic 
development.
    The Coachella Valley Enterprise Zone was established in 
1991 and in the last four years has realized the potential of 
its mandate for local growth of new business, business 
expansion and new jobs. Adverse economic conditions, meaning 
the real estate recession we had in the early '90s, kept this 
from happening earlier. Today's economy is ideal for the 
promise of Enterprise Zone assistance to business development. 
There are many success stories that, taken together, 
demonstrate the value of all the Zone's incentives.
    Three companies stand out as prime examples of Enterprise 
Zone success. The first is Guy Evans, Inc., the largest 
regional manufacturer and installer of doors to commercial, 
tract and custom builders. In 1998 Guy Evans began using the 
hiring credits. The lack of red tape and ease of qualifying 
employees due to the Target Employment Area make this incentive 
especially useful to companies. In his first year of using 
hiring credits, Guy saved $57,000. This money was reinvested 
back into his business, purchasing new equipment and creating 
new jobs. In 1999, because of the growth of his business, he 
saved $134,000. This was reinvested again into his expansion 
plans.
    The Enterprise Zone incentives were so important to him 
that when he decided to build a new 50,000-square-foot 
building, he made sure it was located in the Enterprise Zone. 
In addition, he was expanding to a satellite location and he 
instructed his real estate broker to look only for property 
located within an Enterprise Zone. He actually includes the use 
of Enterprise Zone incentives as part of his business plan.
    The second example involves Mathis Brothers Furniture. They 
are the second largest furniture retailer in the world, with 
home offices in Oklahoma City. In 1999 they decided to expand 
into the west, specifically Southern California. They 
commissioned detailed demographic studies and concluded that 
the location that made the most business sense was Indio, 
California, inside the Coachella Valley Enterprise Zone.
    The Enterprise Zone tax incentives were part of their 
decision. They proceeded to renovate a 50,000-square-foot 
building, which had been vacant for several years, adding 
another 50,000-square-foot facility as a distribution center. 
Mathis Brothers opened in Indio in early 2000 and is performing 
well over their initial projections.
    The third example is Peter Rabbit Farms. They are a major 
grower, processor and packer of vegetables including carrots 
and peppers. The company uses several of the Enterprise Zone 
incentives to help support its growth and continued success, 
including hiring credits, sales and use tax credits and 
nontaxable investments. They used the last one, the nontaxable 
investments, to negotiate a reduced interest rate from their 
bank on a loan. This can be a powerful tool for a business 
relocating or expanding into the Enterprise Zone.
    The tax incentives offered by the Enterprise Zone are 
powerful inducements to attracting economic development, but 
are not the only things the Zone offers to incoming businesses. 
The Zone acts as a clearing house for inquiries, a liaison to 
city and county governments, and offers assistance and advice 
on all the myriad details of establishing a new business 
location. They develop, quote, unquote, ``Red Teams'' that 
fast-track permits and deal with regulatory issues. The Zone 
even sponsors seminars and workshops on business development.
    The Coachella Valley Enterprise Zone has a direct impact on 
bringing in new business through its marketing effort. A 
substantial portion of its operating budget is dedicated to 
advertising, marketing and promoting the Zone to companies 
throughout the country, if not internationally, that are 
considering relocation or expansion. This effort would not have 
the impact that it doeswithout the powerful financial benefit 
of the tax incentives that the zone can offer.
    In conclusion, the facts demonstrate that the Coachella 
Valley Enterprise Zone is successfully working to attract new 
business relocation and expansion and to create new jobs, 
revitalizing the economic development of the cities and 
communities within its borders. Thank you very much.
    Chairwoman Bono. Thank you.
    So with your testimony, Mr. Joseph, you are saying that the 
Enterprise Zone has had significant success in business 
development due to the hiring tax credit and other tax 
incentives from the state. Is this based upon similar 
conditions as we are hearing in the Empowerment Zone? 
Basically, you are proving the success you have had, you will 
have it again with the Federal designation?
    Mr. Joseph. I would say this: I cannot speak specifically 
to the Empowerment Zone because I, unlike the other speakers 
that you have had before you, am not specifically committed to 
working with the Empowerment Zone. I can tell you, however, 
that based on my experience, if you provide tax incentives to 
people who are looking to locate or relocate or expand where 
they are, these tax incentives can prove an extraordinarily 
powerful incentive for that purpose.
    Chairwoman Bono. I see. Thank you. Can you talk a little 
bit about how your agency works with the Federal side of this 
thing, how the two work together?
    Mr. Joseph. Very little. Ours is primarily a state-mandated 
operation. The Empowerment Zones of California were created 
through enabling legislation in Sacramento in 1985. There are 
currently 39 Enterprise Zones throughout the state of 
California. Ours, as noted, was established in 1991. Because of 
the real estate problems we had, not only in California, but 
elsewhere, it didn't really get off the ground until 1995, '96. 
So I consider our Enterprise Zone to be, maybe, 4 or 5 years 
old, maximum, not the 9 or 10 years old which the calendar 
would dictate.
    Within this last 4 or 5 years, we have had an enormous 
surge of interest and activity, and as you can see by my 
testimony, there are businesses who specifically look out for 
locations within an Enterprise Zone because of the California 
tax incentives they can provide. If we could combine California 
tax incentives and Federal tax incentives, we would have a 
skyrocket of development within the area down here.
    Chairwoman Bono. Thank you. I guess my next question is 
mostly to Mike Bracken, but any of you can certainly weigh in 
on this issue. You know the predicted growth of Riverside 
County is tremendous. We are going to see a huge boom over the 
next decade. Why do we have to do this if the growth is going 
to come our way anyway?
    Mr. Bracken. Because unfortunately, the way the growth 
patterns are projected, the people in this region, and I mean 
in this specific Empowerment Zone, would truly be left behind. 
The problems just aren't on the job creation side, which, of 
course, is what this panel is addressing, but it goes to the 
heart of why these companies aren't here to begin with, why 
this community needs help.
    It has been so relying on agricultural for so long, which 
is historically low-paying and historically employs low-skilled 
folks. We have huge problems in our education system out here. 
I mean, you know that firsthand and you have taken steps 
yourself to try and correct that. And I know the state is as 
well.
    This area here very clearly is going to get left behind 
unless we can do something to provide some type of incentive. 
And this goes back to really the heart of what I said to begin 
with, which is, if we are successful in providing some short-
term incentives to give the infusion into this region at the 
same time the growth of the economy nationwide is so good, 
chances are you will be able to bring the private sector 
investment that you really want to see, so that 12 years from 
now, 15 years from now, nobody back in Washington would ever 
even know that this Empowerment Zone existed. Or better yet, 
wouldn't it be great if 10 years from now you people back in 
Washington and across the country were saying, ``Huh? They 
didn't need the Empowerment Zone.'' No kidding, because it was 
successful.
    Chairwoman Bono. Does anybody else care to comment on that?
    Mr. Chank. Again, because of the strong agricultural base 
here, you will always have agriculture as a primary employment 
at this end of the valley. As development occurs in the center 
of the valley, and I am in the middle of the developers that 
take farmland out of operation, and when somebody takes 
farmland out of operation in the central valley, we look down 
in this area of the valley to re-create that demand because 
there is still the demand for the date crop or for the row 
crop.
    So this area, without Federal assistance, will have a 
strong agricultural base, but again, those jobs tend to be very 
low-paying and very seasonal. The infusion of the Federal 
incentives along with the state incentives that are available 
will again give this area the ability to compete with an 
economically healthy area that's going after the same business.
    When a business comes in, they will send a site selector 
out, and that site selector will look at up to six locations on 
his trip out. So now you are competing against six locations. 
You may get narrowed down to three, and then it becomes the 
issues of infrastructure, quality of life, find stability that 
really are the final ranking. It can be offset with incentive 
programs that will provide the long-term stability and lead to 
the long-term strong, community-based infrastructure that 
everyone looks for.
    Mr. Knox. If I may, some of the companies with which we are 
interacting are located in Southern California and coastal 
areas. And the conversation begins very difficultly when you 
are talking to a business owner who lives at the beach, lives 
in the middle of this market, is surrounded by vendors and 
suppliers, and he's asking, ``You want me to do what?'' And so 
you have to have some economic motivation for him to take a 
hard look at this area.
    And with the creation of the Empowerment Zone, we have been 
successful in doing that, where we now have a number of 
companies who are focused on this area and on our proposals, 
and not because it's a superior place to live than Newport 
Beach, but because there are economic reasons to come here, and 
those reasons are provided by the Empowerment Zone.
    Mr. Joseph. Very quickly, to respond to your question from 
my perspective, the reason you have 39 Enterprise Zones in 
California is that they were designated to go into areas of 
poverty, and they had to compete, they had to even--somebody in 
the previous panel talked about evening the playing field, so 
to speak. Rather than go to Newport Beach, why would they come 
to Coachella? And there is really no other reason except to 
say, ``What's in it for me?'' How are we going to be able to 
create an economic environment that's going to make it 
attractive for me to come down here and contribute to the 
economy and maybe even balance out the money that the taxpayers 
are spending to get me down here? I'm going to contribute more 
to that.
    We are going to create an economic environment that's going 
to be a plus as opposed to a negative in this area. And I think 
that that is the real reason. We are facing terrific 
competition throughout California, throughout the country for 
jobs, for industry, and you have to create something that 
attracts their attention. And once you get them down here--and 
the executives can play on the 105 golf courses that are 
available and eat in the fancy restaurants--if you have the 
workforce, if you've got the well-priced property, industrial-
priced land, if you've got the infrastructure, you've got the 
power, you've got the water, the storm drains, the sewers and 
everything you need, what else will grab their attention? The 
quality of life we talked about.
    Once you grab their attention, it's ``What's in it for me 
as a business, to my stockholders, to my corporate partners?'' 
The key is ``Can I get an economic advantage? Is there a 
leverage here, is there an edge that would serve my purposes?'' 
And that's what incentives give you. It gives you an economic 
push that says, ``I think I'm going to take a real hard look at 
that area because it affords me something that other areas 
don't have.''
    Chairwoman Bono. Thank you. I'm going to wrap up my 
questions, but I want to say that I have been in Congress now 
for two years and I have learned that what we do on the panel 
usually is not ask questions because we want to learn 
something. We are asking questions because we want you to say 
what we want you to say. And you all just said perfectly what I 
was hoping to hear, and that was you made such a strong case 
for the Empowerment Zone and why we need it.
    And I was going to say to you, you know, the question here 
is, who is going to be the one to start it? How is this going 
to begin? And I think we have made the case clearly that it is 
up to the Federal government to be the first one. And they 
started by making the commitment and they need to follow 
through with the funding. And I want to say to you all, thank 
you for making such a great case and so eloquently and 
succinctly. And I will turn to my colleague now for her 
questions.
    Ms. Millender-McDonald. Thank you, Madam Chair. I was 
looking at the clock because I have to get on the road, too. I 
thank you all for being here. In my past life I served as a 
mayor of a city 90,000 strong. I am very familiar with the CRA. 
And my concern is, Mr. Bracken, are you by any means helping 
through a CRA program to provide the incentives for this 
Empowerment Zone?
    Mr. Bracken. If you will indulge me for a second, let me 
walk you through a very specific case of a Fortune 500 company 
where we are at.
    Ms. Millender-McDonald. But the question I raised to you is 
whether you have a CRA and if you are working in concert with 
the Empowerment Zone to provide those types of--in other words, 
you have project areas through CRAs. Do you have project areas 
within this Empowerment Zone?
    Mr. Bracken. Absolutely. Both the County of Riverside and 
City of Coachella have active redevelopment agencies and have 
multiple project areas within the Empowerment Zone.
    Ms. Millender-McDonald. So that, too, is a type of 
incentive, a type of program that you have that helps in the 
tax incentive totality of this whole success of the Empowerment 
Zone?
    Mr. Bracken. Yes. In fact, many times the incentive 
packages we put together for companies, for distribution 
companies, exceed $20 million in incentives over a five- to 
seven-year period. They typically include localized incentives, 
county incentives, state incentives and Federal incentives, the 
JTPA.
    Ms. Millender-McDonald. To have distribution centers, you 
tend to look at the infrastructure, you tend to look at 
equidistance to freeways and how are you going to move products 
in and out. The freeways you have here are very good, I have 
traveled on them this morning. But are they the ones that's 
going to drive the goods from--what is it, 87 I came out on or 
whatever, 86--on through a drop-off period and then on across 
the nation? Walk with me as to how your distribution centers 
will carry those goods across the nation.
    Mr. Bracken. When a company makes a decision----
    Ms. Millender-McDonald. Do you have a port system anywhere 
around?
    Mr. Bracken. We are not part of the inland port system at 
this time. There is some proposals within the Alameda corridor 
east. Of course, that's about an eight-hour----
    Ms. Millender-McDonald. You've got to wait until my Alameda 
corridor.
    Mr. Bracken. When a company decides they need to put a 
larger distribution center or a distribution center somewhere 
in the West Coast, that center typically supports seven western 
states. That's just for geographic locations. They do a 
transportation analysis, also know as a centroid analysis. 
Where is the very cheapest point to ship from?
    And all it has to do with is where is the product coming 
from, where is it going to? Because the cost of moving goods is 
the most expensive cost for a distribution center in that 
process. And they do this centroid analysis, and what comes up 
is a centroid, a dot. I have seen dots come up on the screen 
for Death Valley, California. It has nothing to do with Death 
Valley. It has to do with where would be the very cheapest to 
move things here, there and everywhere.
    Ontario comes up a lot, Barstow comes up a lot, and Indio 
and Coachella are beginning to hit on that screen. So the 
bottom line is, companies are realizing, from a financial 
sense, its a number-crunching exercise, the I-10 corridor, 
access to the 15 corridor, access to the 86 corridor. We are 
essentially----
    Ms. Millender-McDonald. Would you go over that again? I 
know the I-10.
    Mr. Bracken. The I-10, the 15 corridor, which essentially 
extends from San Diego up into Utah, the 5 corridor, and of 
course the 86 corridor. This road that you came in on 
terminates at a new customs station that you funded in 
Mexicali, in Imperial County, and we are seeing a significant 
amount of product being shipped from there. I think they are up 
to about 7- or 800 trucks a day.
    Ms. Millender-McDonald. In serving on the Transportation 
Committee as well as the Small Business Committee, and I am the 
senior member on the Aviation Subcommittee of Transportation 
Full Committee, I have gone to all of the airports in the 
Southern California region in trying to see how we can move 
goods, services and expand in terms of economic growth, given 
the downsizing of the military contracts, especially in my 
district, that have kind of evaporated. So I am very much clear 
and pretty much cognizant of infrastructure, where we are 
going, where we should go, where we need to go, and what areas 
will provide that type of swift cargo transporting at the most 
efficient and effective way.
    So that's why I was wondering in distribution centers out 
here, where are we moving this? What infrastructure can you 
demonstrate to me that we can really provide the type of swift 
movements--rail, as we now see, would be really the most 
efficient way of moving things, and the Alameda corridor east 
would perhaps provide some of that, if not a lot of that in 
terms of moving goods.
    Your hiring tax credits--I was and do go down as the 
historic chairwoman who chaired the Revenue and Taxation in the 
California State Legislature. I do want to be very clear and 
want you to understand me very clearly, that the state provides 
the tax incentives. They are the ones who really give you what 
you need in terms of job creations through businesses 
relocating or start of businesses. So the state has given you a 
great deal of tax incentives.
    Federal governments do not give those types of tax 
incentives. What you are asking for would be a secondary layer 
or even a third layer because the CRA provides something, your 
states provide something and the county provides something. And 
so the Federal government will look a little more tenacious at 
trying to provide the hiring tax credits, the development--you 
said the financial--what is it--let me put on my glasses. I 
certainly cannot read without them. You were asking for--I had 
noted that it was Mr. Joseph who spoke on it, and I just wanted 
to reiterate that. The bonds. You had spoke about the bonds, 
too, Mr. Bracken; am I correct?
    Mr. Bracken. Yes.
    Ms. Millender-McDonald. Let's be very clear. The Federal 
government does look into what is being done in areas in terms 
of tax incentives before they come in with any others outside 
of the ones that they are going to typically give anyway to the 
Empowerment Zones. And so I am hearing about the hiring tax and 
other tax credits, but as the former chair of Revenue and 
Taxation, I think you have an absolutely, incredibly good tax 
incentive package from the State of California.
    Chairwoman Bono. If I could just ask Mike Bracken. I see 
you are chomping at the bit, and I know you want to say 
something on the last point, and I'd like to see if you can 
interject.
    Mr. Bracken. All we are essentially asking for with respect 
to the employment credits, the hiring credits, is to give us 
the same tool you gave Round I, which is already within 
Publication 954. It's already there, it is already given to 
Round I. Give us the same thing you gave Round I. That's all 
I'm asking for.
    Ms. Millender-McDonald. What would be your rationale as to 
why you won't get it?
    Mr. Bracken. Why we won't or why----
    Ms. Millender-McDonald. Why you wouldn't get it.
    Mr. Bracken. Right now we are not.
    Ms. Millender-McDonald. You are not getting it, I 
understand that. But what would be the rationale for you not 
getting it? In an area such as this that really needs to be 
developed, what would be our rationale for not giving it to 
you?
    Chairwoman Bono. You are asking him to explain Congress' 
rationale?
    Mr. Bracken. I have trouble explaining city council 
rationale for the one I sit on, sometimes.
    Ms. Millender-McDonald. But what I am saying, if you have a 
good point, and that indeed you have, it seems that you have 
either unskilled, low-skilled possibility of a workforce here, 
and I am only going by some of the things that have been said, 
what would be the difficulty of your giving us that argument, 
for the second round folks not to get your Hiring Tax Credit or 
incentives?
    Mr. Bracken. Let me answer it, I think in the same way. The 
hiring tax credits given in Round I are very short-term 
credits. In fact, they start ramping down in another year and a 
half. We have an incredible economy now. We need a pioneer. We 
need one or two pioneers. Give us the tax credit now. It's very 
short-term. It allows us to get these pioneers in place. The 
credit sunsets very quickly. It starts ramping down in the year 
2002. We've got the short-term infusion of tax credits, we need 
to get these pioneers over the hurdle.
    Ms. Millender-McDonald. All I'm saying, it is very 
difficult for the Federal to--when the state has come in, we do 
look to the state to give those enormous tax credits, if they 
are going to do that, and the ones that we give will not be 
nearly as much as your states and counties and cities. And so 
for them to get--and if that is on the books, that's fine--but 
I am just saying that you have to have a strong argument, and 
your argument should be, in my opinion, that there is a 
tremendous workforce here, but it has to be cultivated, in my 
opinion, just from what I have heard.
    And that should be some rationale for your coming back to 
the well again and having your Congresswoman go back to the 
Hill and have a strong argument. Outside of your talking to me 
today, I would not have known this. But now that I have seen 
this, perhaps that would be your rationale for it.
    Mr. Bracken. The economic development corporation that I 
run--and a couple of the investors happen to be sitting here as 
well, both Larry and Hal, their corporations are investors--we 
plan on asking and have asked our congresswoman to carry 
special legislation for all Round II Empowerment Zones, to give 
them the same benefits as Round I.
    Ms. Millender-McDonald. And like you say, things are 
cutting off and hopefully you can get that. I'm not suggesting 
that you shouldn't or that you won't, but I am saying you have 
to have a strong--because you are competing with everyone 
across this nation, so it has to be strong.
    The last thing that I--Mr. Joseph. The others I just 
clearly followed what you were asking for, but Mr. Joseph, you 
said something that was very telling and quite concerning to 
me. If Mr. Bracken is saying they want to hire folks at 10 to 
$12 an hour, and you are saying there is a lack of education 
here that precludes you from relocating in this area, what kind 
of rationale--on the one hand you are saying that we don't have 
an educated workforce; on the other hand he is saying that we 
do have one commensurate enough to get 10 to $12 an hour. So I 
am a little perplexed with those kinds of dynamics going on 
here.
    Mr. Joseph. Well, the jobs that are created here in--I'm 
not exactly sure of your question, so let me give you--unless 
you want----
    Ms. Millender-McDonald. The lack of education will be the 
persons that you are hiring in the Enterprise Zones through 
those businesses; am I correct?
    Mr. Joseph. Yes.
    Ms. Millender-McDonald. The persons that Mr. Bracken is 
envisioning to be that workforce, he's already saying hiring 
tax credits will provide them an opportunity to pay $10- to 
$12-an-hour. That's not a bad hourly rate. But you've got to 
make sure that you have someone who is educated or job-training 
skilled enough to get that. So you are saying it's a lack of 
education, so I'm just trying to----
    Mr. Joseph. Before I pass this back, because I think Mr. 
Bracken can speak more adequately to that issue than I, the 
hiring tax credits that we can provide in the Enterprise Zone 
represent a number that does not exceed more than 50 percent of 
the minimum wage. In other words, if you are getting like--if 
the minimum wage right now is $7 or $8, 50 percent of that is 
the cap that we can give hiring tax credits to.
    But I want to make one thing sure, clear here. The 
Enterprise Zone is a prescribed geographic area and it has 
35,000 acres. It comprises the Thousand Palms area, Indio and 
Coachella and runs down to Mecca. The Empowerment Zone is much 
broader than that, and therefore the tax incentives you can get 
from California in an Empowerment Zone--the geographic area in 
the Empowerment Zone far exceeds the geographic area of the 
Enterprise Zone.
    Ms. Millender-McDonald. I understand that, because with 
Enterprise Zones, I took care of that as well in the state 
legislature, they are the state type of empowerment or 
incentive, where Empowerment is the Federal, so that you would 
expand on that, of course. So you are talking about Enterprise 
Zone lack of education or the Empowerment Zone lack of 
education?
    Mr. Joseph. I think it was the Empowerment Zone that was 
talked about. My only comment was--I want to make sure of the 
two points, and you certainly are aware, you wrote the 
legislation--the size and location of the Enterprise Zone vis-
a-vis the Empowerment Zone; and secondly, the fact that even 
the hiring credits have a cap from which the employer can draw. 
But I did not speak to the other issue, and maybe someone else 
wants to.
    Mr. Chank. I do, because I bring small businesses into the 
desert very often. One of the things I do in bringing a company 
into the desert is to link them up with the training programs 
that are available through the county, through the local 
community college, through the high schools. We have a very 
employable workforce, a very underutilized workforce. The 
peoplethat are working in the agricultural area are trainable. 
They haven't been trained.
    Ms. Millender-McDonald. Of course not.
    Mr. Chank. It's a matter of creating the jobs and creating 
the training programs to move them in. I have been very 
successful in having companies come in and having them find 
qualified employees that they train into the job. They 
understand that to come into the area and have a workforce that 
is employable is important. We have a high--in this area in 
particular, a high unemployment rate. The people that are 
unemployed are not unemployed because they do not want to work 
or because they are not able and capable of working. It's just 
that the jobs at this end of the valley are not there for them.
    Ms. Millender-McDonald. Meaning?
    Mr. Chank. Meaning for them to travel to Palm Springs to 
work in a hotel is just not physically possible, for various 
reasons. Again, the creation of the jobs, if we were to--when a 
hotel comes into the desert and creates several thousand jobs 
in a resort hotel environment, they find an employable 
workforce and they go through the job-training programs. 
Employers coming in, we have a very large employable workforce 
and people that are trainable.
    Ms. Millender-McDonald. Let me ask you lastly about the 
joint powers authority that you talked about, Mr. Joseph. That 
authority is between what city, county, state?
    Mr. Joseph. It's the two cities of Indio, Coachella, and 
Riverside County. Each of them contribute a certain sum of 
money every year. This is used for the overhead, for staff and 
other equipment, as well as a marketing program to do two 
things: A, those businesses that are now within the Enterprise 
Zone, many of them do not know what advantages are available to 
them for being in the Enterprise Zone. So we have to go out and 
reach these people and share with them the information of how 
they could use these incentive programs of the state that just 
happen to be there. They don't even know how to use it, so we 
are reaching those people. That's about two-thirds of our 
effort. One-third of our effort is to encourage through our 
marketing programs people from outside the area to say, ``Hey, 
we have something you want to look at.''
    Ms. Millender-McDonald. Thank you, Madam Chairman.
    Chairwoman Bono. Thank you. It's time to wrap up. I want to 
thank my colleague again for being here, and the panelists, for 
your presentations here. I would also like to take the 
opportunity to thank staff who have traveled here from 
Washington, DC, Dwayne Andrews and Harry Katrichis. And I would 
like to especially thank Imani Brown, who was also out here 
with the Palm Springs radar problem, and you definitely are on 
top of things and I appreciate you being here again.
    Most of all to my colleague for traveling so far, and for 
your insight and guidance and wisdom.
    And I would like to thank the Mecca Community Center staff 
for hosting this event. You've done a great job and it's a 
pleasure to be here. I'm just so glad your air-conditioning 
works. That was my biggest fear.
    So thank you all very much for being here. I hope we--I 
know that we can take what we have learned and heard today back 
with us to Washington, DC. Thanks to the good efforts here, we 
will take it to Washington and go from there.
    [Whereupon, at 12:33 p.m., the committee was adjourned.]

                                
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