[Senate Hearing 108-505]
[From the U.S. Government Publishing Office]



                                                        S. Hrg. 108-505
 
                         REAUTHORIZATION OF THE
                  ECONOMIC DEVELOPMENT ADMINISTRATION

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

                                HEARING

                               before the

               COMMITTEE ON ENVIRONMENT AND PUBLIC WORKS
                          UNITED STATES SENATE

                      ONE HUNDRED EIGHTH CONGRESS

                             SECOND SESSION

                               __________

                             APRIL 28, 2004

                               __________

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



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               COMMITTEE ON ENVIRONMENT AND PUBLIC WORKS

                      ONE HUNDRED EIGHTH CONGRESS
                             SECOND SESSION

                  JAMES M. INHOFE, Oklahoma, Chairman
JOHN W. WARNER, Virginia             JAMES M. JEFFORDS, Vermont
CHRISTOPHER S. BOND, Missouri        MAX BAUCUS, Montana
GEORGE V. VOINOVICH, Ohio            HARRY REID, Nevada
MICHAEL D. CRAPO, Idaho              BOB GRAHAM, Florida
LINCOLN CHAFEE, Rhode Island         JOSEPH I. LIEBERMAN, Connecticut
JOHN CORNYN, Texas                   BARBARA BOXER, California
LISA MURKOWSKI, Alaska               RON WYDEN, Oregon
CRAIG THOMAS, Wyoming                THOMAS R. CARPER, Delaware
WAYNE ALLARD, Colorado               HILLARY RODHAM CLINTON, New York
                Andrew Wheeler, Majority Staff Director
                 Ken Connolly, Minority Staff Director


                            C O N T E N T S

                              ----------                              
                                                                   Page

                             APRIL 28, 2004
                           OPENING STATEMENTS

Allard, Hon. Wayne, U.S. Senator from the State of Colorado......    19
Baucus, Hon. Max, U.S. Senator from the State of Montana, 
  prepared statement.............................................    37
Bond, Hon. Christopher S., U.S. Senator from the State of 
  Missouri.......................................................     5
Clinton, Hon. Hillary Rodham, U.S. Senator from the State of New 
  York...........................................................    21
Crapo, Hon. Michael D., U.S. Senator from the State of Idaho.....     5
Inhofe, Hon. James M., U.S. Senator from the State of Oklahoma...     1
Jeffords, Hon. James M., U.S. Senator from the State of Vermont..     2
Murkowski, Hon. Lisa, U.S. Senator from the State of Alaska......    15
Thomas, Hon. Craig, U.S. Senator from the State of Wyoming, 
  prepared statement.............................................    37
Wyden, Hon. Ron, U.S. Senator from the State of Oregon...........     7

                               WITNESSES

Gatson, Charles R., vice president and Chief Operating Officer, 
  Swope Community Builders.......................................    28
    Prepared statement...........................................    75
Gorshing, Gary, president, National Association of Development 
  Organizations..................................................    25
    Prepared statement...........................................    65
Sampson, David A., Assistant Secretary of Commerce for Economic 
  Development, Economic Development Administration...............     8
    Prepared statement...........................................    39
    Responses to additional questions from:
    Senator Baucus...............................................    61
    Senator Jeffords.............................................    46
    Senator Murkowski............................................    62
    Senator Thomas...............................................    60
Saudade, James J., deputy commissioner, Department of Housing and 
  Community Affairs, State of Vermont............................    27
    Prepared statement...........................................    72
Singerman, Phillip A., executive director, Maryland Technology 
  Development Corporation, on behalf of the International 
  Economic Development Council...................................    30
    Prepared statement...........................................    77
    Responses to additional questions from Senator Jeffords......    80

                          ADDITIONAL MATERIAL

Charts:
    EDA Investments and Advance Faith-Based Social 
      Entrepreneurship and Redevelopment Strategies, FY 2002 to 
      Date and Over $1M in EDA Funding, May 12, 2004.............    59
    EDA Investments FY 1998 to Date In the State of Vermont, May 
      12, 2004................................................... 52-53
    EDA Investments to the Philadelphia Region Office FY 1998-
      2004 to Date for Public Works, EA Construction and RLF 
      Only, Average Estimated Private Investment Leveraged per 
      EDA$, May 12, 2004.........................................    54
    EDA Public Works, EA Construction and RLF Investment FY 1998 
      to Date In the State of Vermont, May 12, 2004..............    51
    EDA Revolving Loan Fund Investments, FY 1998 to date, Sorted 
      by FY and State, May 12, 2004.............................. 55-58
Letter, Union County Board of Commissioners to Oregon 
  Congressional Delegation.......................................    88
Policy Recommendations, International Economic Development 
  Council (IEDC)................................................. 80-84
Statement, National Association of Regional Councils and National 
  Association of Counties........................................    86


       REAUTHORIZATION OF THE ECONOMIC DEVELOPMENT ADMINISTRATION

                              ----------                              


                       WEDNESDAY, APRIL 28, 2004

                               U.S. Senate,
         Committee on Environment and Public Works,
                                                    Washington, DC.
    The committee met, pursuant to notice, at 9:30 a.m. in room 
SD-406, Senate Dirksen Building, Hon. James M. Inhofe (chairman 
of the committee) presiding.
    Present: Senators Inhofe, Bond, Crapo, Murkowski, Allard, 
Jeffords, Wyden, and Clinton.

 OPENING STATEMENT OF HON. JAMES M. INHOFE, U.S. SENATOR FROM 
                     THE STATE OF OKLAHOMA

    Senator Inhofe. The meeting will come to order.
    First of all, good morning, and we thank all the witnesses 
for appearing before us today. A special welcome to Gary 
Gorshing, who is here from Oklahoma, from southwest Oklahoma. 
We are glad to have you here, Gary, and look forward to your 
testimony. That is one thing nice about being Chairman of the 
committee, you can always have a witness from Oklahoma.
    Senator Jeffords. I remember my days.
    Senator Inhofe. Well, you have one from Vermont; so do not 
cry.
    Senator Jeffords. All right.
    Senator Inhofe. This hearing today is to discuss the 
reauthorization of the Economic Development Administration. It 
was created in 1965 to provide assistance to economically 
distressed areas, primarily those experiencing substantial and 
persistent unemployment and poverty. We have a lot of those 
problems in Oklahoma that, of course, Vermont does not have. So 
I am more concerned about this probably. These areas count on 
EDA to help create favorable environments for long-term 
economic growth. Studies have shown that EDA uses Federal 
dollars efficiently and effectively, creating and retaining 
long-term jobs at an average cost that is among the lowest in 
the Government.
    We have had some great successes working with EDA in our 
home State of Oklahoma; overall, in the last decade, EDA 
investments of about $47 million, leveraged by $42 million in 
State and local dollars, and more than $1 billion in private 
sector dollars. Now, that is what this is all about, that is 
what we are supposed to be doing. Altogether, these investments 
created or saved more than 13,000 jobs just in my State.
    More specifically, just about a year ago, I joined Dr. 
Sampson as he presented an award to the city of Durant and the 
Choctaw Nation of Oklahoma for a public works project. The 
project is construction of an industrial park and 
infrastructure to support the expansion of a Big Lots, Inc. 
distribution facility. It will include significant local, 
State, tribal, and private investment and will support more 
than 300 jobs. I know we will have many more of these success 
stories as time goes by. I am sure, Mr. Sampson, you were 
impressed with the very large turnout that was there with you 
and me on that date.
    The EDA contributes to important projects like this all 
across the country. Reauthorization gives us an opportunity to 
talk about the efficiencies and about areas where we might have 
room for improvement. One thing I would like to pursue, and 
perhaps you could address this in your opening statement, and 
maybe your predecessor on the next panel could also do it, is 
we have been disturbed a little bit recently about some of the 
language I have seen on EDA's work on brownfields that would 
change the role from redeveloping to remediation of these 
sites. As you and I talked in my office, Mr. Sampson, that is 
the role of the EPA, EDA is supposed to be creating jobs. So 
maybe we can talk about that as we move on. Thank you very much 
for appearing.
    [The prepared statement of Senator Inhofe follows:]

      Statement of Senator James M. Inhofe, U.S. Senator from the 
                           State of Oklahoma

    Good morning. Thank you to all of our witnesses for appearing 
before us today and a special welcome to Mr. Gary Gorshing from 
southwestern Oklahoma. We're glad to have you here, Gary, and I look 
forward to your testimony.
    Today's hearing is to discuss reauthorization of the Economic 
Development Administration. EDA was created in 1965 to provide 
assistance to economically distressed areas, primarily those 
experiencing substantial and persistent unemployment and poverty. These 
areas count on EDA to help create favorable environments for long-term 
economic growth. Studies have shown that EDA uses Federal dollars 
efficiently and effectively creating and retaining long-term jobs at an 
average cost that is among the lowest in government.
    We've had some great successes working with EDA in my home State of 
Oklahoma. Overall, in the last decade, EDA investments of about $47 
million, leveraged $42 million in State and local dollars and more than 
$1 billion in private sector dollars. All together, these investments 
created or saved more than 13,000 jobs. More specifically, just about a 
year ago, I joined Dr. Sampson as he presented an award to the city of 
Durant and the Choctaw Nation of Oklahoma for a public works project. 
The project is construction of industrial park infrastructure to 
support expansion of a Big Lots, Inc. distribution facility. It will 
include significant local, State, tribal and private investment and 
will support more than 300 new jobs. I know we will have many more of 
these success stories in the future as well. In fact, just yesterday we 
announced $2.1 million in EDA project and planning grants for the State 
of Oklahoma. I look forward to seeing the benefits of these good 
investments in the coming months and years.
    EDA contributes to important projects like this all across the 
country. Reauthorization gives us an opportunity to ensure the 
continuation of this good work and to provide the tools necessary to 
improve performance even further. I look forward to hearing from 
today's witnesses and to working with my committee colleagues, the 
Administration and interested stakeholders to move a reauthorization 
bill as quickly as we can.

    Senator Inhofe. Senator Jeffords.

OPENING STATEMENT OF HON. JAMES M. JEFFORDS, U.S. SENATOR FROM 
                      THE STATE OF VERMONT

    Senator Jeffords. Good morning, Mr. Chairman. Thank you for 
holding this hearing today on the Economic Development 
Administration (EDA). I am delighted to be here to discuss the 
reauthorization of this very important Agency.
    EDA and its programs provide vital financial and technical 
assistance to our Nation and to my home State of Vermont. I am 
so pleased to welcome a witness from Vermont, James Saudade, 
the deputy commissioner of the Vermont Department of Housing 
and Community Affairs. He most recently completed 7 years as 
executive director of the Green Mountain Economic Development 
Corporation and has valuable insight into EDA's performance in 
Vermont. Welcome, Mr. Saudade.
    During the past 10 years, Vermont has seen an EDA 
investment totaling over $13 million. This investment has 
created over 750 jobs and leveraged over $89 million of private 
sector investment in our small rural State. Vermont's State and 
local match dollars total $22 million. These are significant 
economic investments for a small State. Through regional 
planning grants and infrastructure project money, the Economic 
Development Administration has been a vital and willing partner 
in Vermont's economic growth. In fact, the last time Dr. 
Sampson and I were together we were in the bucolic setting of 
rural Randolph, VT, announcing a new business incubator 
initiative. This initiative represents a wonderful 
collaboration between the Federal Government, higher technical 
education, and local Vermont business community.
    In addition to commending EDA for its important role, I am 
here to explore how the Agency can do its job more efficiently 
and effectively despite being hamstrung by budgets being 
authorized levels and far below the economic development needs 
of this country. I am also interested in exploring how EDA's 
programs meet the needs of rural States, like Vermont, which 
suffer not only from high poverty levels and unemployment but 
underemployment as well.
    We all know the critical importance of innovation and 
value-added industries. However, where would we be without the 
preliminary planning process that informs any successful 
economic initiative. EDA has a very important role to play in 
supporting planning at the local level. Nationwide, EDA has 
spearheaded the development of the business incubators, 
creating a platform for a variety of entrepreneurs to grow 
small businesses. It is a great idea. Small business is the 
backbone of our country. The economy and statistics tell us 
that it is. A supported startup in a business incubator has far 
better possibilities of success.
    I appreciate hearing many more people talk about the 
fundamental importance of linking research universities to 
businesses. Ideas need a hospitable environment in which to 
incubate in order to create new enterprises. Support for the 
university centers and technology transfer they may foster from 
the laboratory to the marketplace is very important in our 
economy. These opportunities result in high paying, skilled 
jobs and prosperity for our citizens. EDA must continue to make 
work force development a high priority so that the United 
States can meet the skill needs of the global marketplace.
    Brownfield redevelopment is another area of great interest 
to me. The State of Vermont has over 2,000 brownfield sites. 
Only a handful of these have been declared cleaned up. It is my 
hope that EDA can play a larger role in the economic 
redevelopment of these brownfield sites in order to diminish 
the amount of industrial property sitting idle.
    Mr. Chairman, thank you for scheduling this hearing at the 
full committee level. I look forward to hearing testimony from 
this morning's witnesses.
    [The prepared statement of Senator Jeffords follows:]

     Statement of Senator James M. Jeffords, U.S. Senator from the 
                            State of Vermont

    Good morning. Mr. Chairman, thank you for holding this hearing 
today on the Economic Development Administration (EDA). I am delighted 
to be here to discuss the reauthorization of this very important 
Agency. EDA and its programs provide vital financial and technical 
assistance to our Nation and to my home State of Vermont.
    I am also pleased to welcome a witness from Brownsville, Vermont--
James Saudade, the Deputy Commissioner of the Vermont Department of 
Housing and Community Affairs. He most recently completed 7 years as 
the Executive Director of the Green Mountain Economic Development 
Corporation and has valuable insight into EDA's performance in Vermont. 
Welcome Mr. Saudade.
    During the past 10 years Vermont has seen an EDA investment 
totaling over $13 million. This investment has created over 750 jobs 
and leveraged over $89 million of private sector investment in our 
small rural State. Vermont's State and local match dollars total $22 
million. These are significant economic investments for a small State.
    Through regional planning grants and infrastructure project money, 
the Economic Development Administration has been a vital and willing 
partner in Vermont's economic growth. In fact, the last time Dr. 
Sampson and I were together, we were in the bucolic setting of rural 
Randolph, Vermont announcing a new business incubator initiative. This 
initiative represents a wonderful collaboration between the Federal 
Government, higher technical education, and the local Vermont business 
community.
    In addition to commending EDA for its important role, I am here to 
explore how the Agency can do its job more efficiently and effectively 
despite being hamstrung by budgets below authorized levels and far 
below the economic development needs of this country.
    I am also interested in exploring how EDA's programs meet the needs 
of a rural State like Vermont, which suffers not only from high poverty 
levels and unemployment, but under-employment as well.
    We all know the critical importance of innovation and value-added 
industries. However, where would we be without the preliminary planning 
process that informs any successful economic initiative?
    EDA has an important role to play in supporting planning at the 
local level. Nationwide, EDA has spearheaded the development of 
business incubators. Creating a platform for a variety of entrepreneurs 
to grow small businesses is a great idea. Small business is the 
backbone of our economy. The statistics tell us that a supported 
startup in a business incubator has a far better possibility of 
success.
    I appreciate hearing many more people talk about the fundamental 
importance of linking research universities to businesses. Ideas need a 
hospitable environment in which to incubate in order to create new 
enterprise. Support for University Centers and the technology transfer 
they foster from the laboratory to the marketplace is very important to 
our economy. These opportunities result in high paying skilled jobs and 
prosperity for our citizens. EDA must continue to make work force 
development a high priority so that the United States can meet the 
skill demands of the global marketplace.
    Brownfield redevelopment is another area of great interest to me. 
The State of Vermont has over 2,000 brownfield sites. Only a handful of 
these have been declared cleaned up. It is my hope that EDA can play a 
larger role in the economic redevelopment of these brownfield sites in 
order to diminish the amount of industrial property sitting idle.
    Mr. Chairman, thank you for scheduling this hearing at the full 
committee level. I look forward to hearing testimony from this 
morning's witnesses.

    Senator Inhofe. Thank you, Senator Jeffords.
    Senator Crapo.

 OPENING STATEMENT OF HON. MICHAEL D. CRAPO, U.S. SENATOR FROM 
                       THE STATE OF IDAHO

    Senator Crapo. Thank you very much, Mr. Chairman. I, too, 
appreciate your holding this hearing and your strong work in 
this area. I also want to welcome and acknowledge Dr. Sampson. 
I would like to say at the outset that I believe the EDA is one 
of those Federal Agencies that is really working well. It is 
doing its job. As you can tell from the comments that have 
already been made by other Senators, the results are visible on 
the ground out in the States. I simply want to commend you for 
the job that the Agency is doing.
    That is not to say we do not have our issues once in a 
while. But the fact is that you personally and your staff have 
worked very closely with me when I have raised concerns or when 
we have needs and issues. All over Idaho we can see the 
evidence of the good work that EDA is doing in helping our 
communities. I simply want to note that.
    I want to specifically join in the Chairman's comments on 
brownfields. We need to clean up the brownfields in this Nation 
and we must give that the attention that it needs. There is a 
role that the EDA can play in terms of the economic development 
and jobs related to these kinds of issues. But I am very 
concerned that we do not want to see funds diverted away from 
jobs into a separate program that should be operated by the EPA 
rather than by the EDA. I am very concerned to make sure that 
we do not see a weakening in the focus of the Agency's efforts 
so that we turn this Agency into a cleanup Agency rather than 
into an economic development and a jobs oriented Agency. So I 
share in the Chairman's comments in that context.
    Last, I would simply say that, as you know, Dr. Sampson, I 
have some concerns about the formula that has been recently 
changed with regard to the trade assistance adjustment centers. 
We will work together on that between ourselves and I will not 
necessarily bring it up or make it a big issue here. But I am 
very concerned about the recent adjustments in this formula 
that have, in my opinion, made it more difficult for us to get 
the kinds of resources and support into the rural areas that we 
need. So I will be working with you personally on that more in 
the future.
    Thank you again very much for your great work and this 
Agency's work.
    Senator Inhofe. Thank you, Senator Crapo. I have talked to 
Secretary Sampson about this. I know he shares our views on the 
proper role of EDA.
    Senator Bond.

  OPENING STATEMENT OF HON. CHRISTOPHER S. BOND, U.S. SENATOR 
                   FROM THE STATE OF MISSOURI

    Senator Bond. Thank you very much, Mr. Chairman. Welcome, 
Dr. Sampson. I would join in with concerns that apparently you 
have expressed and Senator Crapo have expressed.
    I am very pleased that, under the leadership of Dr. 
Sampson, the Economic Development Administration has been 
transforming itself into a results oriented Agency, maximizing 
the economic impact of each and every dollars while at the same 
time maintaining its core focus on empowering distressed 
communities to develop and implement their own economic 
development strategies. I think EDA has remained true to its 
guidelines.
    EDA assistance in Missouri has been a great boon to local 
investment. Over the last decade, some 300 projects have 
resulted in investments of more than $150 million in Missouri, 
leading to the creation of 5,000 jobs and leveraging an 
additional $1.4 billion, roughly, in private and State and 
local funding. EDA has recently invested in several good 
activities. Last August, EDA awarded a $2 million grant as seed 
capital for the North H. Shell wetlab space, which is 
tremendously important in moving forward in biotechnology.
    I think it is important EDA continue transforming itself 
from a culture of compliance to a culture of performance. In 
the past, too often, economic development districts would be 
rewarded for simply being a member of an economic development 
district and filling out the paperwork. I think changing the 
structure to reward districts for their achievements while 
motivating others to improve makes a lot of sense.
    The EDA should achieve its maximum impact with every 
dollar. I also think the Administration has to remember its 
legislative mandate to aid distressed communities. I am 
concerned about the new standards of EDA regarding the minimum 
amount of money leveraged and jobs created per EDA dollar. It 
is my understanding that under the new Balance Scorecard 
measurement, a region must meet an average of no less than $22 
non-EDA dollars for each EDA dollar, and no more than $5,000 of 
EDA funds per job created. This could wind up funding only 
projects that are in a strong position to leverage a maximum 
amount of jobs and investment already. A recent example, a 
southwest area career center in Monett, MO, was turned down 
because it did not have the new direct job creation 
requirements. I think in Mexico, MO, EDA has looked at putting 
some resources into job training in an area where resource-
heavy industries such as refractories industries have been shut 
down and we are looking for skilled work forces to replace 
them.
    But I look forward to hearing your testimony and the 
testimony of other witnesses as we work toward a 
reauthorization, a multi-year authorization that will support 
the good, new path on which you and this Administration have 
chosen to put EDA. Thank you.
    [The prepared statement of Senator Bond follows:]

    Statement of Senator Christopher S. Bond, U.S. Senator from the 
                           State of Missouri

    Thank you Mr. Chairman. I am pleased to be here today to discuss 
the reauthorization of the Economic Development Administration. Under 
the leadership of Dr. Sampson the Economic Development Administration 
has begun the transformation into a results oriented Agency that 
maximizes the economic impact of each and every dollar while at the 
same time, maintaining its core focus on empowering distressed 
communities to develop and implement their own economic development and 
revitalization strategies.
    EDA has been successful over the years because it has remained true 
to the guideline that ``distressed communities must be empowered to 
develop and implement their own economic revitalization strategies.''
    EDA assistance in Missouri has truly been a boon to local 
investment and economic growth. For instance, over the last decade EDA 
has implemented over 300 projects and invested more than $115 million 
in Missouri. Since 1998, EDA funds have led to the creation of over 
5,000 jobs in my State and leveraged an additional $684.7 million in 
private sector funds and $83.1 million in State and local funding.
    Recently, EDA has invested in several economic development 
initiatives in Missouri that have continued to diversify the job base 
with a focus on high-tech, high-growth industry. For example, last 
August EDA awarded a $2 million grant as seed capital for the ``North 
8'' shell wet lab space.
    It is important that EDA continue its transformation from a 
``culture of compliance to a culture of performance.'' I support 
implementing further incentives that reward deserving projects and 
their communities based on their performance.
    Economic development districts are rewarded for simply being a 
member of an economic development district. A change in this structure 
will reward districts for their achievements while motivating others to 
improve further.
    While it is important for EDA to achieve the maximum impact with 
every dollar, the Administration must also remember its legislative 
mandate to aid distressed communities.
    Specifically, I am referring to EDA's new standards regarding the 
minimum amount of money leveraged and jobs created per EDA dollar. It 
is my understanding, that under the new ``balanced score card'' 
measurement rules, the region must meet an average of no less than 22 
non-EDA dollars per each EDA dollar and more no more than $5,000 EDA 
funds per job created. It is my concern that EDA may become overly 
focused on funding only projects that can leverage a maximum amount of 
jobs and investment.
    These new criterion will be devastating to distressed rural and 
urban communities throughout Missouri.
    One recent example of a project that has been rejected based on the 
new standards is the Southwest Area Career Center in Monett, Missouri. 
It is my understanding that this project was turned down expressly for 
not meeting the new direct job creation requirements.
    A better example of EDA's role in our Nation's evolving economy can 
be found in my hometown of Mexico. As the economy continues to grow and 
diversify away from natural resource heavy industries such as 
firebrick, businesses in the surrounding area will need a highly 
skilled work force.
    My testimony has highlighted just a few examples of the 
opportunities and needs for economic development across my State.
    I look forward to hearing the testimony from our witnesses today 
and look forward to working with you all in the future toward a multi-
year reauthorization of EDA.

    Senator Inhofe. Thank you, Senator Bond.
    Senator Wyden.

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

    Senator Wyden. Thank you very much, Mr. Chairman. I really 
appreciate your holding this hearing. As Mr. Sampson knows, he 
and I have been going back and forth with a series of letters. 
Anyway you slice it, Mr. Chairman and colleagues, the message 
is out in the rural part of the country and in the rural west 
that you have to come up with more dollars in the private 
sector in order to get some additional help. I am just looking 
at a letter that I got from the Union County Board of 
Commissioners. Mr. Chairman, I would just ask unanimous consent 
to have this made a part of the record.
    Senator Inhofe. Without objection.
    Senator Wyden. The first paragraph says it all. It says,

    ``We are writing to express deep concern regarding the new 
2004 rule from the Economic Development Department regarding a 
$22-to-$1 match for economic projects. Union County enjoys a 
wonderful working relationship with our Federal partners 
regarding our economic efforts.''

    It goes on to say, as I have heard consistently throughout 
my State, that the relationship with your Agency, Mr. Sampson, 
is exceptional. It is very positive. Ann Berblinger, in 
particular, has been an incredibly useful and constructive kind 
of partner. I think this letter sums it up. It says, ``We see 
this new rule to be a considerable barrier to our 
partnership.''
    I am going to have some detailed questions to ask when it 
is appropriate, Mr. Chairman, and you have always been very 
gracious about that. But having looked at these exchanges that 
Mr. Sampson and I have had, and I appreciate the fact that you 
have been willing to do them very quickly, Mr. Sampson, I think 
it is clear that the message is out in the rural west in these 
hard hit towns, many of which have unemployment way over 10 
percent, is they have to figure out how to come up with 
additional dollars in the private sector. I think that is 
regrettable and I hope we can change it. I look forward to the 
time when we can ask some questions. Thank you.
    Senator Inhofe. Thank you, Senator Wyden. That time will be 
shortly.
    Secretary Sampson, and for the other witnesses on the 
second panel, we will confine your opening remarks to 5 
minutes. Your entire statement will be made a part of the 
record. We will give a little more latitude to Secretary 
Sampson since he is the only person on this panel. With that, 
we will recognize you and thank you at the same time for the 
fine job you are doing.

  STATEMENT OF HON. DAVID A. SAMPSON, ASSISTANT SECRETARY OF 
    COMMERCE FOR ECONOMIC DEVELOPMENT, ECONOMIC DEVELOPMENT 
                         ADMINISTRATION

    Mr. Sampson. Thank you, Mr. Chairman, members of the 
committee, it is a pleasure to be with you this morning. Thank 
you for this opportunity. I have had the opportunity of touring 
your States with many of you and look forward to the 
opportunity of being in other Members' States with you.
    Economic development is very near and dear to my heart. I 
have dedicated much of my professional career to economic 
development. Over the years, I have learned a lot. I have seen 
what works and what does not work. I have had economic 
development responsibilities at the local level in the Dallas/
Fort Worth area. I have had economic development 
responsibilities for the entire State of Texas. I have also had 
work force development responsibilities at the local and State 
level. While I do not claim to have all the answers with 
respect to economic development, the perspective I offer today 
in my role as the Assistant Secretary for Economic Development 
is one that has been informed by years of economic development 
professional experience, careful review of the research, and 
now almost 3 years as the head of EDA.
    It is clear to me that the only constant in economic 
development today is change. American companies face changing 
competition, both domestically and from worldwide markets, and 
government budgets are tied at the State and local as well as 
at the Federal level. Just like our counterparts in the private 
sector, Government Agencies must adapt and get the most from 
our resources. As officials entrusted with public 
responsibility, we ignore this new reality at our peril.
    The reauthorization language builds upon the good work of 
my predecessor in the previous Administration, Dr. Phillip 
Singerman. His efforts and your support secured the 
reauthorization of EDA 5 years ago, after a 16-year gap, and 
set the stage for the improvements that we seek today.
    Today, EDA's mission is to help lead the Federal economic 
development agenda by promoting innovation and competitiveness, 
preparing American communities for growth and success in the 
worldwide economy. In order for EDA to achieve this mission and 
for the Federal Government to be successful in its overall 
economic development efforts, we need a new economic 
development strategy for the 21st century. I believe this new 
strategy has at least five elements.
    No. 1, focusing on regional development. Economies are not 
hermetically sealed along artificial political boundaries. The 
evidence clearly shows that those regions that collaborate are 
better able to attract the private capital that spurs job 
creation.
    No. 2, promoting America's innovative capacity. EDA 
strongly supports innovation as a key driver of economic 
development. At EDA, we believe the goal of economic 
development is to increase prosperity, to increase the per-
capita income of the residents in your State. Productivity and 
increased rates of productivity growth is the primary driver of 
prosperity, and innovation is what drives productivity. That is 
why we have made university-led and technology-led economic 
development a funding priority for EDA.
    No. 3, maintaining flexibility and local control. EDA's 
development partners laud our program flexibility. However, 
they have told us that we can do a better job, and this bill 
increases our flexibility while maintaining accountability.
    No. 4, enhancing coordination with other Federal programs. 
The Federal Government spends a total of $20 billion a year in 
economic development programs, spread across nine different 
Federal Agencies. We believe that all of our communities, 
especially the economically distressed communities, will be 
better off if we can coordinate our efforts better. This 
legislation supports a first step in that direction.
    No. 5, focusing on results and rewarding performance. At 
the end of the day, results are what matter most. This 
legislation mirrors EDA's focus on results with language that 
rewards our partners who exceed job creation and private 
investment expectations.
    Those are the broad thematic underpinnings of EDA's 
reauthorization legislation. There are a couple of specific 
provisions that warrant your attention. The first involves 
Revolving Loan Funds.
    Twenty-seven years ago EDA created the first economic 
development Revolving Loan Fund. Today, we have a portfolio of 
over 600 RLFs around the country, capitalized at over $1 
billion. Reforms are needed to ensure the continued 
effectiveness and accountability of these funds. Since 2001, 
DOC's Inspector General has conducted 46 audits of EDA RLFs and 
all but a handful of these audits revealed serious instances of 
non-compliance or failure to safeguard RLF assets, such as 
loans to ineligible borrowers, failure to properly document 
loan decisions, poor accounting and financial management 
practices, and failure to meet basic reporting requirements, 
among other issues. We need additional tools that only Congress 
can authorize to help us manage this portfolio better.
    The second area, Mr. Chairman, is one that you mentioned, 
and that is brownfields. I know the committee is keenly 
interested in the brownfields provisions added by the House. 
EDA is a very strong supporter of brownfield redevelopment. We 
have made 269 investments in brownfield projects since 1999. We 
average $50 million a year in grants to brownfield 
redevelopment.
    I believe the language inserted by the House will actually 
reduce EDA's effectiveness in returning brownfields into 
productive economic assets. Specifically, the provisions that 
tie EDA to the CERCLA language causes us particular concern. 
These provisions will graft limitations of CERCLA onto EDA's 
brownfields activities that are not consistent with our 
brownfield work. CERCLA is targeted to clean up programs, and 
EDA's focus, on the other hand, is on the phase after the 
cleanup takes place, the development of the site for job 
creation and private investment. As written, the CERCLA alter 
and I believe would ultimately wither our brownfields efforts. 
Please know that I am confident after visiting with both 
majority and minority staff that we can identify language that 
will address your concerns and enable us to move forward with 
our core mission, which is economic development and turning 
brownfields back into productive assets.
    In the interest of time, I have submitted more detailed 
written testimony that I appreciate your including in the 
record. I thank the committee for holding this hearing and I 
look forward to answering your questions.
    Senator Inhofe. So I would assume then that you are in 
agreement with Senator Bond and myself and Senator Crapo when 
we brought up this concern that we had with CERCLA?
    Mr. Sampson. I certainly do. I think the CERCLA provisions 
will be a very significant barrier. One of the greatest 
implications of this is that it would preclude our ability to 
work on the next round of BRAC closures, military base 
closures, because military bases owned by the Federal 
Government do not meet the definition for brownfields in the 
CERCLA legislation, and EDA is a major player in getting 
military bases back into productive assets. That is just one 
example of how the CERCLA language would fundamentally change 
our program.
    Senator Inhofe. As you well know, being very familiar with 
your neighbor to the north, Oklahoma, we are a rural State and 
I expressed to you a concern that I had on the $22-to-$1 
policy. So I would ask you on the record here if this is a 
rule, how much flexibility there is in this, or is this a goal?
    Mr. Sampson. That is a very good question, Mr. Chairman. 
First of all let me say, it is not a rule. It is a goal. It is 
one measure in our Balance Scorecard among many measures that 
we look at in evaluating both our regional office performance 
as well as evaluating individual projects.
    The decision to look at private sector leverage is not one 
that is arbitrary or capricious on our part. Global Insight, 
which is one of the world's leading econ-metric and economic 
development strategy firms, has said, ``Private capital 
investment is a pre-requisite for job growth.'' EDA began 
tracking private sector investment in its grants as a result of 
the GPRA provisions back in 1997. We have been tracking and 
looking at the private sector leverage since the 1997 
timeframe. The actual data that we have was standardized and 
begun to be collected in 1998.
    So the degree to which the private sector is willing to 
invest in a project we believe is a very clear indicator of the 
successful outcome of that project. Professor Michael Porter at 
Harvard was in town earlier this week and was talking to a 
group of international economic development professionals and 
made I think a very compelling point. That is, economic 
development cannot be focused on the work of government at any 
level--national, State, or local--that it has to be market-
driven and private sector led. That is why we have placed a 
significant focus on private sector leverage.
    That being said, the $22-to-$1 ratio is a goal. We have a 
very broad diversity in our portfolio. What we are looking at 
is a broad portfolio management at the regional level and at 
the national level.
    Senator Inhofe. Thank you. I agree with your 
interpretation. Could you elaborate a little bit on the 
Revolving Loan Fund audits, what they consist of now and what 
you would like to have them be.
    Mr. Sampson. Yes. The goal of the Administration under this 
section of the legislation is, No. 1, to ensure better 
financial integrity. No. 2, to allow RLFs to consolidate or 
expand their lending area, at their request, not ours. Many 
economic development organizations around the country manage 
multiple RLFs. They may have a general purpose RLF, they may 
have an RLF that was created as a result of a military base 
closure, they may have an RLF that was created as a result of 
natural disasters. As a result of that, they have multiple 
reporting periods for each of those RLFs. What we are proposing 
to do in the Administration's legislation is to allow them to 
consolidate those RLFs into a single general purpose RLF which 
will take them, in the case where they have three RLFs, from 
six reports submitted a year to one report submitted a year.
    No. 3, our proposal would allow third party service of an 
RLF portfolio. In those cases where we have had RLFs that 
simply were not performing, we have had an inability to close 
those RLFs down because we did not have the ability to have 
those RLFs managed by a third party.
    No. 4, the RLF provisions in this bill would allow for 
possible future securitization of RLF loans. There are other 
Federal RLF funds that can be securitized. What we have done is 
include placeholder language that if a significant market 
develops for securitization, it would allow our RLFs to pursue 
that course.
    Now, with respect to the audits. When an RLF brings in an 
auditor, the auditor can only look at what the OMB circular 
says that they can look at, which is basic program functions. 
What we are asking for authorization for in this bill would be 
for us to define more broadly what the auditor can look for--
basic business practices as opposed to just looking at the 
broad program practices. In essence, we have an RLF system 
around this country that is unregulated. It is a separate 
banking system. Banks and S&Ls all have very rigorous national 
oversight. Our RLF program as it has evolved over the years 
does not have that kind of rigorous oversight. The provisions 
that we are asking for and that are included in the House bill 
would enable us to look a little more deeply into the basic 
business management practices of those RLFs.
    Senator Inhofe. Secretary Sampson, thank you very much.
    Senator Jeffords.
    Senator Jeffords. Our country has been losing manufacturing 
jobs at a staggering rate. Since the start of the recession, 
Vermont has lost over 10 percent of the State's manufacturing 
jobs. Could you tell me what EDA is doing to help communities 
suffering from loss of manufacturing jobs and what authorities 
the Administration is using?
    Mr. Sampson. Senator Jeffords, the loss of any job is 
regrettable. We believe that we have to stay focused on those 
kinds of policies that are going to create jobs in this 
country. That is certainly what our focus is at EDA and it is 
the focus of the President's economic growth and jobs agenda. 
We think we are beginning to see the job market come back and 
we are starting to see hiring again.
    EDA's particular focus is at the direction of the Secretary 
of Commerce. He has directed us to give priority to those 
communities that are experiencing the loss of manufacturing 
jobs. We have tried to intervene early in those communities as 
opposed to just waiting until the factory has closed down and 
all of the lay-offs have taken place. We have tried to move EDA 
in much more of a proactive measure, that as soon as the plant 
closure is announced or as soon as significant lay-offs are 
announced, we come in with a cross-disciplinary team, bringing 
our colleagues from the Department of Labor in with the 
Employment and Training Administration to early on develop a 
retraining program, enhanced job training programs for those 
workers who have been dislocated to help them get easy access 
into continuing health care benefits. While we at EDA are 
working with the community on developing a comprehensive 
adjustment strategy, a strategy that is focused on retaining 
their existing manufacturers, No. 1, but, No. 2, diversifying 
their economic base, and then No. 3, helping that community 
plan for and then implement the kind of economic infrastructure 
that is going to enable them to tap into and compete in a 
worldwide economy.
    We have had some great success stories in that effort. I 
think of an event that I did with Senator Bond I guess about a 
year and a half ago now in St. Louis, where Ford announced a 
closure of a major truck manufacturing plant in St. Louis. We 
came in very early on, as soon as that closure was announced, 
working with the St. Louis economic development authority and 
the surrounding governments, providing them with funds to do an 
economic adjustment strategy to look at some of the fundamental 
business environment issues. The good news is, as a result of 
that study and the teamwork that was involved both at the 
Federal delegation level, State and local, they made a very 
compelling case to Ford that made a decision to keep that plant 
open. I think that is the kind of scenario we would like to 
replicate around the country.
    Senator Jeffords. Is EDA considering a regional 
reorganization plan? If so, will this allow regional staff to 
visit States more often?
    Mr. Sampson. Senator Jeffords, we are operating under a 
very tight budgetary environment. We have been flat funded now 
in terms of our S&E account for 3 years running. That places 
some very significant operating constraints on us. We were 
concerned about that when we arrived 3 years ago as we looked 
at the S&E funding level. As you know, we went through a 
headquarters reorganization. We worked in very close 
cooperation with committee staff and members on this committee 
as we went through that process. The reason we did that was to 
try to free up more resources to place out in the regional 
office level where that direct interaction with the clients and 
the communities take place. I am very pleased to be able to 
tell you that we accomplished that headquarters reorganization 
without a single involuntary separation. That is a commitment I 
made to you personally, that is a commitment I made to this 
committee's staff, and we were able to keep that commitment.
    What we are looking at now is if we continue to be flat 
funded at S&E moving forward, what are the implications for our 
cost structure in the regional office level. I have asked our 
six regional office directors to look at their business 
processes to see where we can standardize and streamline those 
across our six regional offices. They have made a report to me. 
We are very carefully considering that. My commitment to you, 
Senator, is that we will work very closely with you and this 
committee staff, in the same way that we pursued our 
headquarters reorganization, to make sure that we maintain the 
capacity to deliver speedy and accurate service to the 
communities and clients that we have around the country.
    Senator Jeffords. Thank you. I see my time has expired. I 
will submit my other questions.
    Senator Inhofe. Thank you, Senator Jeffords.
    Senator Bond.
    Senator Bond. Thank you, Mr. Chairman. Dr. Sampson, Senator 
Jeffords touched on the very important issue of job loss and 
manufacturing job loss. As I understand it, the Department has 
been dealing with this job loss problem in manufacturing for 
quite a few years, it did not just come with the recession that 
began in 2000, and there is a lot of talk about outsourcing. 
Now I understand that the Department figures indicate that I 
think it was $78 billion of job outsourcing was going on but 
$134 billion worth of job insourcing was coming in. I would 
like to know what your experience has been through your 
administration with this job loss, and are you able to 
facilitate more of the job insourcings so more foreign 
companies are investing in the United States and hiring people. 
How is that working? I think you are in a good position to give 
us some how idea how that is working.
    Mr. Sampson. Mr. Chairman, that is a great question. The 
reality is that participation in the worldwide economy has 
tremendous upside potential at the macro level and at the macro 
level there is no country in the world that is better 
positioned to take advantage of the worldwide markets than the 
United States. You are right, the United States imports more 
jobs from foreign companies than what we outsource. Last year, 
we had a $77.3 billion surplus in jobs that are insourced into 
the United States.
    That having been said, clearly there are industry sectors 
and there are sections of the country that are harder hit by 
those changing trade patterns than other industry sectors. The 
manufacturing sector has been particularly hard hit. 
Manufacturing has been losing jobs as a percentage of the 
private sector work force for the last 40 years. It has been 
losing about \3/10\ of a percent of its percentage of total 
employment over a period of about 30 years now. We believe that 
we have a special and unique responsibility to work with those 
communities and those regions that are going through this 
structural economic change and dislocation and we have placed a 
great deal of emphasis on that at Secretary Evans' direction. 
We have been very active in the textile impacted regions of 
this country, we have been very active in steel-based regions 
of this country, and manufacturing-based regions of this 
country, even as in previous years and previous administrations 
EDA has focused on those economies that have been particularly 
hard hit as they moved away from natural resource-based 
economies.
    There are communities that are making that adjustment 
faster than others. We believe that one of the real key 
elements of success in making this transition is tapping into 
the power of universities in States around the country really 
pursuing technology-led economic development strategies, 
wedding work force development efforts with economic 
development efforts. The Federal Government spends $23 billion 
a year in work force development. We need to make sure the work 
force development and economic development system are closely 
wedded together.
    Senator Bond. Well, coming from a part of my State which 
has been hit hard by natural resource outsourcing, refractories 
was dependent upon the steel industry and then they were 
decimated by asbestos litigation. The jobs in northeast 
Missouri have been outsourced thanks to asbestos litigation.
    What specifically can EDA do in those areas to bring in, 
you have mentioned the insourcing, what is it that EDA can do 
to facilitate insourcing? We do not care where the jobs come 
from, we just need jobs in northeast Missouri.
    Mr. Sampson. We can help your communities buy down the cost 
of basic infrastructure to attract new jobs into your State. 
Some 6.4 million Americans work for companies that are owned 
abroad. Just last week I was in the poorest county in Alabama, 
Loundes County, Alabama, where we awarded a $2 million grant to 
open the first county-wide industrial business park in that 
county's history. They already have a tier I supplier to 
Hyundai which is opening a major manufacturing plant outside of 
Montgomery. This tier I supplier in the poorest county in 
Alabama has already committed to invest $25 million in a plant 
there and employ 200 people. I think that is a very dramatic 
example of the role that our infrastructure grants can play in 
helping communities be able to attract those jobs in the 
future.
    Senator Bond. Thank you very much, Dr. Sampson. You can 
help also as well by developing technical training facilities, 
for which we are most grateful. Thank you, Mr. Chairman.
    Senator Inhofe. Thank you, Senator Bond.
    It might be helpful for the record, I was very much 
impressed with the statistic you used of the $77 billion 
surplus of insourcing versus outsourcing, and it would be kind 
of interesting to see this over about a 20-year period to see 
where the trends are. Maybe you could get someone to do that 
for us for the record.
    Mr. Sampson. I would be happy to do that, contact my 
colleagues at the Economic Statistics Administration that 
actually run those numbers.
    Senator Inhofe. OK. That is great.
    Senator Murkowski, as you know, the rules of the committee 
are that once opening statements are concluded and we are into 
questions we do not revert back to that. But certainly your 
statement will be made a part of the record. We will recognize 
you for questions at this time.

OPENING STATEMENT OF HON. LISA MURKOWSKI, U.S. SENATOR FROM THE 
                        STATE OF ALASKA

    Senator Murkowski. Thank you. I appreciate the opportunity 
to submit my opening statement for the record. I just want to 
state my very sincere and genuine appreciation to you, Mr. 
Sampson, and all the efforts that EDA has made in Alaska. I 
think we recognize in Alaska we really are seeing true 
investment coming out of EDA. We have had a chance to talk 
about some of the projects. We have a dry dock in Ketchikan, we 
have an all tides dock in Dillingham, and both are huge 
investments in very small communities. As you know, in these 
depressed communities where oftentimes there is only one real 
economy, this is an effort to really expand on the economy and 
we are seeing those efforts.
    The conversation up at the table here has been focused on 
how you are making an impact in those industrial or 
manufacturing jobs. I would like to hear your comments about 
how you balance that with the needs in the rural areas, 
creating these jobs and these opportunities in the rural parts 
of the country. I would like to know that there is balance as 
you weigh these projects and your investments.
    Mr. Sampson. Senator Murkowski, that is a very important 
dimension of our overall management of our portfolio of 
economic development grants. Over the last 3 years of my 
stewardship of the Economic Development Administration, 56 
percent of our grants have gone to rural areas, 38.7 percent 
have gone to urban areas. I know that does not add up to 100 
percent. The other 6 percent roughly have been either statewide 
grants or they have been national technical assistance grants. 
That is an average or a split of our portfolio that has been 
consistent historically. As of April 24 of this year, we have 
awarded 34 rural public works investments totally $40.2 
million, and 20 urban investments for $34 million. So we take 
that management very seriously.
    Our goal is not to penalize the rural and remote regions, 
but it is rather to help rural and remote regions plug into a 
growing national economy and to develop strategies that they 
can link into the growing State economies. Some of the research 
that we have funded over the last 3 years, and I believe just 
this week we posted a ground-breaking new national research 
grant on rural economic development strategies that was 
completed for us by Professor Michael Porter, one of the 
leading thinkers and practitioners in competitiveness and 
cluster development anywhere in the world, on how rural areas 
can better develop their economies by linking into broader 
regional economies. That is something that we are very focused 
on and that we are committed to. We are committed to working 
with our partners at the Department Agriculture and Rural 
Development, where there are billions of dollars in grants 
available, to really ensure that there is an integrated focus 
on rural economic development strategies.
    Senator Murkowski. So as you are evaluating where you go 
and how you go within the regions, are you taking specific 
steps to encourage programs in these rural areas in non-
traditional projects as opposed to the bricks and mortar type 
of an approach that you would see in the urban areas?
    Mr. Sampson. That is certainly our desire. I have made it a 
point during my leadership of EDA to spend a significant amount 
of time rural America. As a matter of fact, I have been called 
the ``Captain Kirk'' of the Commerce Department because I have 
boldly gone where no Assistant Secretary of Commerce has gone 
before. I can assure you the places I go to in rural America 
you do not fly into, you spend a lot of time in cars. But we 
believe that is important.
    We are holding 20 economic development forums around the 
country this year specifically focused on rural economic 
development strategies and we have held those forums in rural 
America. We have not gone necessarily to the major metropolitan 
area in those States. We have gone into the more remote places, 
like Millinocket, ME, in the middle of January, and places like 
that to deal directly with the economic development 
practitioners who are on the ground there.
    Senator Murkowski. I appreciate your efforts in our rural 
areas. You will not be able to drive to them, but we will fly 
you out and keep you there for a while. Thank you.
    [The prepared statement of Senator Murkowski follows:]

      Statement of Senator Lisa Murkowski, U.S. Senator from the 
                            State of Alaska

    Mr. Chairman, thank you for moving forward with this hearing, and I 
would like also to offer my thanks to Dr. Sampson and the other 
witnesses for appearing today.
    I am pleased to have an opportunity to make sure that my strong 
support for the reauthorization of the Economic Development 
Administration (EDA) goes on the record. I sincerely hope that this 
important reauthorization measure does not become hostage to other 
issues and will progress briskly from here to the floor.
    Along with many of my fiscally conservative colleagues, I am 
concerned about the appropriate role for the Federal Government in 
encouraging private industry. I believe industry is healthiest when it 
does as much as possible for itself.
    However, after carefully watching the activities of the EDA in my 
State of Alaska, I have been very positively impressed. Mr. Chairman, 
the dollars disbursed by the EDA are not going to waste. They are 
building economic capacity so that the private sector can step in to 
provide real, long-lasting economic activity and employment. That is 
absolutely vital in a State like mine, which continues to lag far 
behind most others in the kinds of infrastructure that make a vibrant 
economy possible.
    Quite frankly, Mr. Chairman, many times Federal funds are committed 
for projects that are quick shots in the arm but product no lasting 
impact. EDA projects are linked to private sector job growth. As such 
they are both different and deserving of our support.
    In Ketchikan, for example, we have a shipyard capable of doing 
almost any job on vessels up to and including our own marine ferries, 
Coast Guard cutters and NOAA research ships. This yard has an exemplary 
reputation for high quality workmanship, it has won high praise from 
almost all its clients, and it is capable of providing upwards of 200 
highly skilled, well-paid, year-round private sector jobs in a local 
economy that was shattered by the loss of the timber industry and where 
seasonal fishing and tourism just can't carry the whole load. 
Unfortunately, it has one problem--although it can DO the work, it 
cannot ACCEPT all the work it is offered, because when its drydock is 
in use by one vessel, it cannot move any other vessel into an area 
where work can be done. EDA is helping solve that problem by supporting 
the construction of facilities that will allow it to accept additional 
work--and provide additional jobs.
    Another example occurs in Dillingham, a relative remote community 
in Alaska's Bristol Bay region. For years, all goods delivered to 
Dillingham and through Dillingham to nearby villages have had to arrive 
in shallow-draft barges, from which the goods are transferred to other, 
smaller vessels before coming ashore. The reason is that Dillingham has 
lacked a dock structure that will support larger vessels at all tide 
conditions. What it means is that every item that comes into the region 
arrives at a higher price because of increased shipping costs, and 
every item shipped out of the region is sold at a lower profit margin 
for the same reason. EDA is changing that by helping the region build a 
dock suitable for use anytime.
    These two simple projects, for very modest amounts of money, are 
making new economic development in those communities not just possible, 
but probable--and that is no small thing.
    In short, Mr. Chairman, I consider the programs of the EDA to be an 
``investment'' in the very best sense of the word.
    In the interests of time, I won't go into detail on other aspects 
of the reauthorization except to note that the EDA's involvement in 
economic adjustment grants and trade assistance programs are also very 
important both to many communities.
    I do, however, want to mention one other requested change that has 
my strong support. The Administration has suggested the inclusion of a 
provision regarding ``Special Impact Areas,'' which would allow the 
Secretary to waive certain requirements for assistance in the event 
there is a finding that a grant or technical assistance will fulfill a 
pressing need and be useful in easing excessive unemployment.
    Mr. Chairman, I don't anticipate this provision would be abused, 
and I think it would be very important for the most economically 
depressed areas where the regular process may be difficult to 
accommodate. I, for one, would like to see it included in the bill we 
send forward.
    Finally, Mr. Chairman, I want to note my support for authorizing 
full funding for the EDA at the requested level. We on this committee 
will not actually be providing appropriations, but it is nonetheless 
important that we provide this support, so as to ensure maximum 
flexibility for those who will.
    Thank you Mr. Chairman. I look forward to hearing from our 
witnesses.

    Senator Inhofe. Thank you, Senator Murkowski.
    Senator Wyden.
    Senator Wyden. Thank you very much, Mr. Chairman. Mr. 
Sampson, let me review where we are with respect to economic 
development. I think, first, everybody understands that it is 
important for towns to generate private sector involvement. It 
is just crystal clear that that is important. During the 
Clinton administration, they began an effort to sort of monitor 
that effort, as you announced in your testimony, and that was a 
constructive step by the Clinton administration as well. You 
all then come in in 2003 and come up with this so-called goal 
of the little towns having $20 of private sector money to get 
$1 of help from EDA. Then we go to the new so-called goal of 
$22-to-$1. As I have told you, my small towns are just up in 
arms about it. What is especially troubling to them is that 
they say they were not consulted. We have heard from the small 
towns in Oregon who work with your Agency and love working with 
your Agency that nobody consulted with them before this new so-
called goal of $22 private sector dollars before you got $1 
from EDA. What would be your response to them on the question 
of whether you consulted with them before you put in place this 
new, as I call it, so-called goal?
    Mr. Sampson. Senator Wyden, I believe that we have had the 
greatest degree of collaboration with our partners around the 
country in many years at EDA. We have met with each of our 
regional offices around the country, I have discussed our 
funding priorities from day one when I arrived, I have 
discussed the investment policy guidelines that we have 
developed over the course of the last 3 years. In virtually 
every speech that I have given out there I make myself 
available for questions, for dialog as I meet with economic 
development practitioners, economic development districts 
around the country. We have held economic development forums in 
Oregon where I laid out all of these policies and goals. So I 
think we have provided ample opportunity for dialog and 
discussion of the direction that we go. But ultimately, I 
believe that my responsibility as the leader for EDA, in 
consultation with Secretary Evans, is to set the policy 
guidance and direction that ensures the best stewardship of 
these taxpayer dollars.
    Senator Wyden. Well, tell me then how you came up with the 
figure of $22 private sector to $1 from EDA? Let me make it 
clear, the people that are on the ground in Oregon feel that 
you did not consult with them. Maybe you had some conferences, 
maybe you gave some speeches. I am just telling you that is how 
they see it. These are people who like your Agency. These are 
not people who are opposed to your Agency. So that is No. 1. 
But, No. 2, tell me how this figure was arrived at. Why not $9, 
or $31, or--how did you get the figure that you had to generate 
$22 private sector dollars?
    Mr. Sampson. First of all, as I mentioned earlier, the GPRA 
measures that we started to collect in 1998 tracking private 
sector investment and private sector leverage has been a part 
of the evaluation of grant proposals ever since that period of 
time. It may have been before but the numbers were not tracked 
then. The GPRA measures in 1998 were $9-to-$1. So that was the 
baseline from which we started.
    As we faced decreasing budgets appropriated by Congress, we 
believe that it is our responsibility to try to achieve the 
maximum economic impact for those decreasing Federal dollars 
and so we began to look at increasing competition for EDA 
dollars. There are more grant applications coming into us than 
what we have dollars to fund. So we began looking at regional 
economic impact, looking for drivers of regional economic 
growth, not focused so much on small one-of-type projects like 
landscaping main street, but looking for those kinds of 
projects that are going to drive regional economic growth.
    Before I arrived up here, I met with a number of equity 
fund managers that manage equity funds or VC funds that 
specifically do business in urban areas, inner-city areas, or 
economically distressed areas where they are really focused on 
a triple bottom line as opposed to just a single bottom line of 
return on investment. I asked them what kind of return on 
investment are you looking at. The numbers that I got were far 
higher than $20-to-$1. So in consultation with our regional 
directors of our six regional offices, we settled on a $20-to-
$1 ratio as our goal.
    The reality on the ground is that last year we actually 
achieved a $28-to-$1 ratio, which was far in excess of our 
goal. So as we set goals for this year, we did what we think 
any good manager does, we increased that ratio by a modest 10 
percent. As I mentioned earlier, when you look at the split 
between rural and urban, even though we set that $20-to-$1 
goal, we still achieved that historic rural-urban balance.
    Senator Inhofe. The time has expired.
    Senator Allard, do you have questions?

 OPENING STATEMENT OF HON. WAYNE ALLARD, U.S. SENATOR FROM THE 
                       STATE OF COLORADO

    Senator Allard. Yes, Mr. Chairman, and I also have a 
statement I would like to make part of the record.
    Senator Inhofe. We have a policy, and I explained that to 
Senator Murkowski, that once our opening statements are made 
and we go to questions, we do not revert back to opening 
statements, unless you want to make it using your question 
time.
    Senator Allard. I would just like to have mine put in the 
record.
    Senator Inhofe. Without objection.
    [The prepared statement of Senator Allard follows:]

       Statement of Senator Wayne Allard, U.S. Senator from the 
                           State of Colorado

    Mr. Chairman, thank you for holding this hearing. As someone who is 
a Member of both the Banking and the Armed Services Committees in 
addition to this committee, I have a great interest in the work that 
the Economic Development Administration does. The Economic Development 
Administration does important work in many economic sectors throughout 
the county in communities large and small.
    As we are aware, the House has already passed a bill reauthorizing 
the Economic Development Administration. There are some positive 
changes in that bill, but there are also portions that deserve a second 
look. That is at least part of what we are doing here today.
    The Economic Development Administration is in charge of a budget of 
around $300 million. While that is a lot of money to pretty much every 
individual person in this room, it is quite a small amount in the 
scheme of the entire Federal budget. However, even with such a modest 
investment, the EDA is able to leverage many times over that amount in 
private funds with every dollar that they spend. I think that deserves 
praise.
    As a Member of the Banking Committee, and the Chairman of the 
Subcommittee on Housing and Mass Transit, I get to see a lot of 
projects that aim to bring about redevelopment in communities around 
the country. The projects that are most successful are those that bring 
Federal and private funds together. There will never be enough Federal 
dollars to fund every project that someone deems worthy, by bringing in 
private funds which, in turn, guarantee private sector involvement, the 
EDA is setting communities and organizations with partners that help 
them to succeed on their own. The need for perpetual Federal funding is 
just not there with this kind of arrangement.
    Mr. Chairman, again I thank you for bringing the EDA, and the 
projects that they help fund, to the forefront of the committee's 
attention. After reviewing the witness testimony I look forward to a 
productive discussion on the issue of why and how the Economic 
Development Administration's reauthorization will move forward.

    Senator Allard. Thank you. Your budget is one of the few 
budgets that does not get earmarked during the congressional 
appropriation process. Would you talk a little bit about how 
this affects your ability on spending the money that Congress 
sends to you.
    Mr. Sampson. Well, we believe that we are very fortunate in 
that we have not had earmarks historically. We believe that 
what that enables us to do is to be responsive to the economic 
development organizations and the communities around the 
country and respond to their needs on a competitive basis and 
ensure that the grants that are awarded are truly grants that 
score well on a competitive process. We certainly hope that 
moving forward our appropriations will not be earmarked.
    Senator Allard. You have public-private partnerships that 
you work with. Has this been working out satisfactorily with 
you?
    Mr. Sampson. I guess that depends somewhat on who you 
listen to around this table this morning. But, yes, I believe 
that our private-public partnerships are working well. We think 
we have demonstrated an ability to significantly crowd in or 
attract significant private sector money for every dollar of 
Federal appropriation that goes out--a $28-to-$1 ratio last 
fiscal year.
    Senator Allard. We have a nuclear site in Colorado that is 
in a cleanup stage right now and getting close to termination. 
But with the private contractor and cleanup there has been 
incentives built into the contract where there was a reward for 
getting the project done ahead of schedule and doing various 
desirable things like keeping the injury rate down low and that 
kind of thing. Do you have performance-driven contracts that 
you work with in trying to get that accomplished, because this 
has worked so well in Colorado. We are one of the few States 
that has actually had some cleanup occur as far our nuclear 
sites are concerned, with the sites ahead of schedule and under 
budget. Do you try and utilize this process in your projects?
    Mr. Sampson. We certainly do. In the Administration's bill, 
we have proposed a transferable performance credit that would 
reward the grant recipient if they met or exceeded a number of 
performance measures, including coming in on time, under budget 
with their economic development expectations met or exceeded. 
In negotiations with the House, what emerged were three 
performance awards. One, an award for under-cost underruns, 
where the grant recipient could keep the underrun and use it to 
enhance the project. The second is a performance award where if 
they meet or exceed the private sector leverage or job creation 
projections, they are eligible for up to a 10 percent award on 
the project cost. And then the third element of the award was 
for a planning performance reward, moving away from a passive 
process-oriented award to a reward for planning districts who 
actually have projects that are not just planned but are 
actually implemented and then meet or exceed their 
expectations. So we have three performance awards in the House-
passed version.
    Senator Allard. One of the issues happening in Armed 
Services Committee is BRAC. Could you discuss some of the 
successes and perhaps some of the difficulties that EDA has 
encountered during these projects? We have a BRAC situation in 
Colorado and it has had some problems and other parts of it 
have done very well. So I would like to have you talk just a 
little bit about that.
    Mr. Sampson. I think that we have learned a great deal in 
terms of how to take former military bases and return them to 
productive use. There have been a number of very successful 
bases around the country that have been converted; Pease Air 
Force Base in New Hampshire and Kelly Air Force Base in San 
Antonio. Perhaps one of the greatest success stories anywhere 
is the former Fitzsimmons Army Medical Center right in Aurora, 
CO, where they have now successfully attracted already $1.3 
billion of new private sector investment onto that base. It is 
a magnificent redevelopment. It is not primarily a land 
development, it is a cluster development, a biotechnology 
cluster that has been developed there. As a matter of fact, 
Senator, I was so impressed with that project that I hired away 
the executive director of the Fitzsimmons Reuse Authority who 
is now our regional director for our Denver Regional Office and 
he will be an extremely valuable resource for EDA as we move 
forward into the next round of base realignment and closure.
    Senator Allard. I see my time is running out. Just briefly, 
Mr. Chairman, one last comment on GPRA, the Government Results 
and Performance Act. I think this is really important and if 
you are not in conformance with the GPRA law and everything 
that we have passed, I hope that you would look at making sure 
that is implemented. I think about 60 percent of the Agencies 
in the Government are now considered in compliance with GPRA or 
close to it. I hope that you can set these parameters, measure 
results, because I think it is very beneficial to committee 
members as well as people in the Administration like yourself. 
So I would encourage that you use that.
    Mr. Sampson. Senator, not only do we take it seriously and 
are in compliance, but we view GPRA as a floor and not the 
ceiling for our performance measures. It is the basic 
performance measure requirements. But our goal is to develop 
performance measures that are even more rigorous than GPRA.
    Senator Inhofe. Senator Clinton.

OPENING STATEMENT OF HON. HILLARY RODHAM CLINTON, U.S. SENATOR 
                   FROM THE STATE OF NEW YORK

    Senator Clinton. Thank you, Mr. Chairman. I, too, would 
like to submit my opening statement for the record.
    Senator Inhofe. Without objection.
    [The prepared statement of Senator Clinton follows:]

  Statement of Senator Hillary Rodham Clinton, U.S. Senator from the 
                           State of New York

    Thank you, Mr. Chairman for holding this important hearing. I 
strongly support reauthorization of the Economic Development 
Administration. I think we can all agree that economic development and 
the job creation that goes with it has to be one of our top priorities.
    It is certainly a high priority for me, particularly with respect 
to upstate New York. We are losing manufacturing jobs in upstate New 
York, as I know is happening in many other parts of the country. And 
while job creation has to occur in the private sector, the Federal 
Government can and should play a role in spurring job creation.
    In the case of the EDA, its mission since being established in 1965 
has been to help economically distressed areas address conditions of 
substantial and persistent unemployment. While many economic conditions 
have changed in the intervening 40 years, that core mission remains 
relevant today.
    I think that EDA is doing a good job with the resources that we 
provide them. In the last 10 years alone, EDA has funded 280 projects 
in New York State. I want to mention just a few examples.
    In fiscal year 2003, EDA provided $2.8 million to support the 72-
acre Cornell Agriculture & Food Technology Park in Geneva, New York. 
Cornell broke ground on that project just a couple of weeks ago. This 
will help companies to carry out cutting edge research in food, 
agriculture and bio-based technologies, and will existing research and 
extension programs of the New York State Agricultural Experiment 
Station and Cornell University.
    In Rome, New York, EDA has put four rounds of funding to assist in 
the conversion to civilian uses the former Griffiss Air Force Base 
property. These grants have helped attract private funding for the 
Griffiss Business and Technology Park, which has helped retain and 
develop more than 3,000 jobs.
    And in 2002, EDA provided $3 million in funding to the Essex County 
Industrial Development Agency for infrastructure work related to the 
development of the Chesterfield Commerce Park. EDA's investment will 
leverage private investment, and will help lead to the creation of 200 
new jobs.
    So I know that EDA can be helpful.
    I note that in his testimony, Dr. Sampson states that EDA's mission 
today is to lead the Federal economic development agenda by promoting 
innovation and competitiveness, preparing American regions for growth 
and success in the worldwide economy.
    This is certainly no small task. And while EDA can only be a 
catalyst for public sector development, I strongly believe that current 
funding levels are totally inadequate.
    In fiscal year 2004, we appropriated $318 million for EDA, and the 
Administration has requested a similar amount for fiscal year 2005. 
This is simply not enough, and I hope that we can work together in this 
committee to increase the funding for EDA.
    I also look forward to working with Chairman Inhofe, Senator 
Jeffords and other members of the committee as we move toward markup on 
several proposals that I have been working on, such as new ways to 
promote business incubators, training, and entrepreneurship.

    Senator Clinton. I strongly support reauthorizing the EDA. 
I appreciate the work that you have done in New York over so 
many years because, as with many of my colleagues, part of my 
State has been very hard hit by the loss of manufacturing jobs, 
mostly up-state. There is a proposal currently pending at EDA, 
submitted by the Rochester Institute of Technology, applying 
for a $300,000 grant for the Roadmap Project, which is a 
project focused on analyzing 10 manufacturing clusters in New 
York to develop a roadmap to enhance competitiveness for 
manufacturing and attraction of private sector investment. This 
is a very important project. RIT is a first-class institutions 
with the intellectual brain power to really make a significant 
difference in the State. Can you inform me about the status of 
this particular grant application, Mr. Sampson?
    Mr. Sampson. Senator Clinton, I am very pleased to be able 
to tell you that that grant has been processed. It will be on 
my desk by the end of the week for me to sign and prepared to 
be announced. It is a model example of what we are looking for 
in economic development projects. No. 1, it is regional in 
nature and scope; No. 2, it focuses on developing industry 
clusters; and No. 3, it is a university-led economic 
development strategy. So it is a model example of what we are 
trying to give priority to around the country.
    I will tell you in the way of how it has worked through the 
process, I believe, as you are familiar with, that money was 
actually appropriated to the Office of Economic Adjustment at 
the Pentagon, then transferred to us. As a result of the delay 
in getting an appropriation for Commerce this year and being in 
the Omnibus--and then we faced three recisions after the 
Omnibus was passed--we got our allotment in three different 
crunches of funds that were released, we were not able to 
process all of the grants as early in the fiscal year as we 
would normally like to do. But that grant has completed its 
processing and I will be signing that grant this week.
    Senator Clinton. I am very, very glad to hear that. I agree 
with you, I think it is a model project that I hope has 
implications not only for other parts of my State but other 
States as well.
    I also wanted to inquire about the status of work that 
Congressman Walsh and I have been doing with respect to the 
workers laid off at Carrier. As you know, Carrier Air 
Conditioning laid off 1,200 workers in the Syracuse area and 
moved them to the far East, even though it was a profitable 
plant, which caused a lot of angst because they kept doing 
everything they could to enhance profitability and nevertheless 
those jobs were lost. Congressman Walsh and I have worked hard 
to try to figure out how to fill the hole left by this 
announcement. I know that the Congressman convened a meeting to 
get EDA's assistance to develop a comprehensive, coordinated 
plan to reuse the potentially available space at the Carrier 
campus. It is my understanding that local officials are working 
on the final details to submit that proposal to EDA and that 
Congressman Walsh has received commitments that the proposal 
would receive a very high priority. So I just want to publicly 
reinforce the importance that Congressman Walsh and I place on 
this and ask if I can get the assurance that it will receive 
the high priority attention that we think it merits.
    Mr. Sampson. Senator, I have been to Syracuse and met with 
State and local officials, I have met with the labor leaders 
that were there. We had a very extensive discussion about the 
challenges that community faces. I brought with me my regional 
director that serves New York who operates out of Philadelphia, 
had our economic development representative for New York who 
was there at that meeting as well. I made very clear to my 
staff that this was a very high priority issue. Further, 
Secretary Evans has directed EDA to give high priority to all 
of our grant applications to those communities that have been 
impacted by manufacturing job loss. So I can give you my 
personal assurance that that will receive high priority 
consideration.
    Senator Clinton. I appreciate that very much. Finally, Mr. 
Sampson, the whole question about outsourcing, off-shoring, 
whatever we want to call it, I think many of our companies are 
missing the opportunities in low-cost rural areas throughout 
our country. I know Senator Murkowski asked about rural areas. 
When you take into account the full cost of off-shoring, there 
is an article in I think it is The New York Times this morning 
talking about there are lots of hidden problems and costs that 
businesses are only now recognizing--customer relations 
problems, monitoring problems, depth of knowledge and 
experience challenges. Many rural areas could be great 
competitors to keep these businesses in America but right now 
they do not have the infrastructure. They do not have the fiber 
optic communications, the office parks, the trained work force 
clustered sufficiently to be a viable competitor.
    I think it would be very helpful for EDA to make a special 
effort to look at call centers and back office processing. I 
predict that many of our companies that have made these moves 
in this particular sector are going to be having second 
thoughts. Therefore, we need our rural areas, whether it is 
Colorado, Missouri, Oklahoma, Vermont, New York, to be better 
positioned so that we basically can compete for in-shoring, so 
we can tell people in New York or Chicago or Los Angeles you do 
not need to go off-shore to another country, you can come to 
the rural areas of this country, we have the assets that you 
need.
    So I would ask that perhaps I could work with you and your 
colleagues and my colleagues to try to figure out if there is 
some special way that we could get positioned for this in the 
next several years so that we stop the flow of jobs overseas 
and we actually are competitive enough so that when the tide 
turns, which I think it will for security reasons and so much 
else, we have the assets ready to take those jobs and be 
competitive here at home.
    Mr. Sampson. Senator, I can tell you that we believe that 
making telecommunications, broadband infrastructure available 
in rural areas is certainly a high priority for us. Last week I 
was in New Mexico where we announced a major point of presence 
grant there that will serve the entire State of New Mexico. We 
have a grant that is in processing right now that will serve 
very rural areas of Virginia, Kentucky, and North Carolina in a 
partnership. We believe that is a high priority for us. 
Further, I would just say that in the Agriculture bill that was 
passed I guess the last session there was a significant amount 
of money that was included in that for deployment of broadband 
technology in rural areas. I think this is another example 
where we need to work very closely with Agriculture and 
Economic Development close together.
    Senator Inhofe. Thank you, Dr. Sampson. We are not going to 
have a second round. However, if any of the members have a very 
high anxiety level for one more minute, we would cooperate with 
that.
    Senator Bond. One high anxiety minute. I commend you on 
having the $22-to-$1 ratio that you have been able to achieve. 
I think that is great for banks and private investors. But I 
would look forward to discussing with you and your staff 
whether that means that some of the really poor or distressed 
areas might be shut out. This has been raised by Senator Wyden 
and others. It may be the social investment may be great even 
though you cannot meet that $22-to-$1 private investment. I 
hope that does not become an albatross and drive you from the 
poorer to the wealthier but still needy areas.
    Senator Clinton. Mr. Chairman, could I just add on to 
Senator Bond's point?
    Senator Inhofe. Surely.
    Senator Clinton. It might be very useful if EDA could give 
us some breakdown of exactly how that ratio is reached. I think 
that the Senator from Missouri is right on target, that in some 
areas that is a ratio that probably not only can be met but 
exceeded, which then raises the average, when we know that when 
we are talking about poor or distressed communities, at least a 
lot of the places I represent in up-state New York, they could 
never meet that kind of requirement. But we do projects all 
over the State that have merit and that raises the average. So 
I think it would be useful to get a breakdown of this 
information as to how the $22 and $28 figures actually were 
arrived at.
    Senator Inhofe. Thank you, Senator. We did discuss that 
earlier on in this meeting. Of course, we reemphasize that is a 
goal, not a rule.
    With that, I would just say to you, Secretary Sampson, that 
you have done a great job. In the OMB performance assessment, I 
think you are among the highest, if not the highest, of all 
these bureaucracies that we have around here. They even 
recommended a higher budget, which is most unusual. So let me 
just congratulate you on the fine job you are doing.
    Mr. Sampson. Thank you, Mr. Chairman.
    Senator Jeffords. I would like to join in your accolades. 
You are doing a fantastic job.
    Mr. Sampson. Thank you, Senator Jeffords.
    Senator Inhofe. We will now move to the second panel.
    The next panel consists of Mr. Gary Gorshing from southwest 
Oklahoma, Mr. Jim Saudade from Vermont, Mr. Charles Gatson, and 
Phillip Singerman. Dr. Singerman, we would be very interested 
in any comments you may make on any of these things. Since you 
are the predecessor in the job of Dr. Sampson, you might have 
comments to make during the course of your presentation 
relating to how you view things from your perspective.
    We will start with Mr. Gorshing. Because of the late hour, 
I would like to ask you to confine your remarks to 5 minutes 
and then we will have a round of questioning. Your entire 
statements will be made a part of the record.

STATEMENT OF GARY GORSHING, PRESIDENT, NATIONAL ASSOCIATION OF 
                   DEVELOPMENT ORGANIZATIONS

    Mr. Gorshing. Good morning, Mr. Chairman and members of the 
committee. My name is Gary Gorshing. I am the current president 
of the National Association of Development Organizations, and 
the executive director of the South Western Oklahoma 
Development Authority, an EDA-designated economic development 
district headquartered in Burns Flat. Thank you for the honor 
and the opportunity to testify today in support of the work and 
achievements of the Economic Development Administration. We 
have submitted a lengthy and detailed statement for the record, 
so I will be brief.
    Mr. Chairman, the members of NADO believe there are four 
major reasons for Congress to support a multi-year 
reauthorization of EDA. The Association and its members make 
these recommendations with observations in more than 35 years 
of experience with Federal community and economic development 
programs including EDA. I would also like to mention that NADO 
is a member of the Coalition for Economic Development.
    First, Mr. Chairman, EDA has a clearly defined role within 
the broad portfolio of Federal economic development programs. 
As the only Federal Agency focused solely on private sector job 
growth, EDA is a vital resource for distressed communities. 
Through its diverse portfolio of programs, the Agency has the 
flexibility to meet the needs of local communities. This 
applies from a programmatic standpoint where EDA has resources 
for strategic planning, infrastructure improvements, business 
investment capital, and technical assistance. It also applies 
from a community standpoint, whether a locality is struggling 
with long standing poverty, declines in traditional industries 
such as coal, timber, or fisheries, or even if a community is 
impacted by a natural disaster, a military base closing, or a 
manufacturing plant closing.
    My second point is that the EDA planning program for multi-
county economic development districts is proven and cost-
effective resource for our Nation's distressed communities. As 
reported in a 2002 program evaluation by Wayne State 
University, the national network of 320 regional development 
districts ``provides the critical backbone for economic 
development planning at the local level.'' Therefore, we 
specifically urge the committee to retain the leadership role 
of the districts at the multi-county and local levels. This 
involves both the crafting and, most importantly, the 
implementation of regional roadmaps for economic growth and 
sustainability. It is important to note that the EDA planning 
program is far more than simply developing strategic economic 
development plans for a region. It also involves providing 
hands-on technical assistance to local government officials and 
business leaders in our regions. Without the flexibility and 
expertise of the EDA planning districts, most of our local 
communities would lack the capacity to package infrastructure 
and development deals.
    My third point is that the EDA public works program is 
essential and cost-effective. It is a primary resource for 
distressed communities who are striving to develop the most 
basic building block for economic development--the public 
infrastructure. In my home region of Oklahoma, EDA has made 
several valuable investments. In 1992, for example, the city of 
Clinton received EDA assistance to meet an overwhelming need 
for improved sewer treatment infrastructure. Without the 
assistance of EDA, it is most certain that the BAR-S Company, a 
major local employer, would have been forced to close its plant 
in Clinton, with the loss of approximately 400 jobs. As part of 
any EDA reauthorization package, we encourage the committee to 
maintain fair and flexible eligibility criteria for public 
works grants. Over the years, the success of EDA has been 
rooted in its bottom-up approach. The projects originate from a 
local planning process, with EDA coming into the process later 
as a key catalyst. The bottom line is that most impoverished 
communities, especially small town and rural America, would 
struggle by themselves to build the infrastructure and 
facilities required to support new and expanding businesses 
without the EDA public works program.
    My fourth and final point, Mr. Chairman, is that the EDA 
Revolving Loan Fund program is a powerful tool for addressing 
the credit gaps that exist in many underserved communities, 
especially rural areas. The participation of locally controlled 
EDA RLFs in a business deal usually encourages once-reluctant 
banks to participate in the project. EDA RLFs are a vital 
source of capital in areas underserved by traditional lending 
institutions. You will note that I included numerous examples 
in my written statement of the success and power of the RLF 
program.
    Mr. Chairman, we generally support the modifications made 
in the House bill to the RLF program, including a provision 
allowing local RLF grantees to consolidate their funds. We 
would like to see Congress allow the defederalization of RLFs, 
meaning that all of the funds would become local or nonfederal 
after the money has been loaned out and fully revolved.
    I see my time is up. Thank you.
    Senator Inhofe. Thank you, Mr. Gorshing, for a very timely 
and excellent opening statement.
    Mr. Saudade, you are recognized.

STATEMENT OF JAMES J. SAUDADE, DEPUTY COMMISSIONER, DEPARTMENT 
       OF HOUSING AND COMMUNITY AFFAIRS, STATE OF VERMONT

    Mr. Saudade. Good morning, and thank you for the 
opportunity to provide testimony to the committee this morning. 
I am really glad to hear the Senator remind folks around here 
that Vermont is a very small State that is facing substantial 
economic challenges. The median income for a family of four in 
Vermont grew only about $500 from 1989 to 1998. Our poverty 
level actually increased during that period from 8.1 to 9.6 
percent. While our statewide unemployment averages below the 
national average, Vermont hosts regions of high unemployment 
such as our Northeast Kingdom and substantial underemployment 
is pervasive throughout Vermont.
    To address these disturbing trends, we have undertaken 
economic development planning and projects to stimulate new 
businesses, train workers, and grow the businesses we have. In 
this effort, we have enlisted the assistance of EDA as our 
partners to help underwrite the cost of new infrastructure, 
capitalize Revolving Loan Funds, and build small business 
facilities. In fact, Mr. Chairman, as we are meeting here this 
morning, the ribbon is being cut on a new business facility in 
St. Johnsbury, VT, one of our most economically distressed 
areas. This center, which is largely underwritten with EDA 
funds, resides in an industrial park that was originally 
established with EDA assistance and also expanded with EDA 
assistance.
    I actually helped to establish the business incubator in 
Randolph, VT, that Senator Jeffords and Dr. Sampson visited 
last year. That will open in a couple of months and provide 
much needed jobs to a community that was devastated by a series 
of fires and has suffered recent plant closures. Both the 
Randolph and the St. Johnsbury projects were planned and 
executed in accordance with comprehensive economic development 
strategies, CEDS, as they are known to us. These CEDS are a 
requirement for participation in EDA activities and are a 
planning feature which I, and the Agency that I represent today 
for the State of Vermont, strongly endorse. The process to 
complete these plans is arduous, time consuming, and not 
without cost, but their value for smart development is 
indispensable.
    This week, perhaps even as we are meeting right here, our 
State's legislature is considering changes to our limited 
liability program for brownfields reclamation. I believe the 
improvements in these laws will result in a watershed of new 
interest in brownfield reclamation. With over 2,000 brownfields 
in Vermont, as Senator Jeffords noted, we will need the help of 
EPA and EDA to remediate and reuse those sites.
    Vermont is a rural State by character and it is very 
different than urbanized areas of this country. As such, we 
sometimes find ourselves working within constructs of the 
Federal Government that do not work quite as well as they might 
in more populated States. This is true with EDA. We recommend 
that EDA allow some discretion in the design and implementation 
of its programs to absorb inherent differences that exist 
across the country, and particularly in small States.
    I am very glad to hear this morning that the $22-to-$1 
ratio is a goal that is not necessarily shared by everyone in 
all regions because, I can tell you, it is unattainable in 
Vermont and would threaten to make EDA an anachronism in our 
State.
    Also characteristic of very rural States is a lack of 
professional staff for small communities. EDA relies heavily on 
regional representatives to provide technical assistance. These 
EDRs, as they are known, are responsible for large geographic 
areas that prohibit frequent visits and limit accessibility. 
This dependence on very few individuals to provide both 
technical assistance and firewall review of new proposals for a 
huge area does not do justice to the otherwise well thought out 
EDA system of resource deployment.
    We would also appreciate an improved EDA application 
process that did not place project viability in the hands of 
one person initially, and also allowed for the capture of time 
sensitive and unusual, but creative projects. The existing 
application process is multi-tiered and cumbersome. We 
recommend a special review process for applicants that can 
demonstrate a need for an extraordinary procedure. We might 
also suggest a closer partnership with EDA field 
representatives to State community development departments. In 
Vermont, as is the case in many States, development department 
staff have become proficient in the review and administration 
of CDBG small cities projects and may offer EDA some assistance 
in extending field capacity and offering field support to EDA.
    In conclusion, we enthusiastically recommend 
reauthorization of EDA. While we recommend some flexibility and 
discretion in applying program standards to small States, EDA's 
major program features are sound, its products are invaluable, 
and Vermont's economic distress would become further 
exacerbated without EDA support.
    Senator Inhofe. Thank you, Mr. Saudade.
    Mr. Gatson.

   STATEMENT OF R. CHARLES GATSON, VICE PRESIDENT AND CHIEF 
          OPERATING OFFICER, SWOPE COMMUNITY BUILDERS

    Mr. Gatson. Mr. Chairman, Senator Jeffords, and members of 
the committee, thank you for inviting me to testify in front of 
your committee on the EDA reauthorization bill. I want to 
particularly recognize Senator Bond who has been a friend and a 
champion of our efforts to improve the lives of thousands of 
folks living in Kansas City, MO.
    I am currently vice president/chief operating officer of 
Swope Community Builders, a position I have held for the past 
13 years. Swope Community Builders is one of the Nation's 3,600 
community based development organizations represented by the 
National Congress for Community and Economic Development. We 
are a nonprofit community development corporation with a $7.5 
million annual budget. On December 31, 1991, our total assets 
were approximately $60,000. On December 31, 2003, our total 
assets exceeded $61.4 million. We have completed in excess of 
$120 million in development projects--single and multi-family 
housing, as well as commercial and institution projects--over 
the past 10 years. Every dollar the Federal Government invests 
in our work leverages another $7 to $12. We manage more than 
$100 million in investment. We have over $100 million of new 
investments in our development pipeline.
    One of our most important projects, the H&R Block 
Technology Center, was completed in December 1999. This 
project, a corporate technology center built using cutting edge 
construction, cabling, and computer technology, relocated 150 
employees earning an average of $45,000 per year from suburban 
Kansas to Kansas City's urban core and created 400 full-time 
equivalent jobs with starting salaries of $15 per hour. The 
total annual payroll at the H&R Block Technology Center exceeds 
$20 million.
    Swope Community Builders is in the development phase of a 
new project called the New Village at Technology Center, a 
480,000 square foot office/warehouse project, accompanied by a 
50,000 square feet in companion retail/service space and 175 
units of work force and market rate housing. This will be a 
$48.6 million project that will employ over 1,200 people.
    None of the projects that we have done to date would have 
been possible without Federal involvement. But the one Agency 
missing from that list is the Economic Development 
Administration. Despite our best efforts, Swope Community 
Builders has never received any funding from the EDA. Indeed, 
none of the 14 Community Development Corporations in Kansas 
City has received substantial funding from the EDA in the past 
16 years. It is not an isolated case. NCCED has surveyed our 
membership nationwide and, with the exception of the western 
region, none of the CDCs have had real good access to EDA.
    We are in the pre-application stage of the New Village at 
Technology Center, as I described earlier. It has been very 
difficult to make that project work and it will not be able to 
work without substantial up front cash from the Federal 
Government. As mentioned before, the $22-to-$1 leveraging 
factor for us just does not work. I hear people talking jobs, 
leaving their communities. Our communities do not have jobs in 
the first place. So to get investment at a $22-to-$1 ratio is 
almost impossible for us, yet we have been successful using 
other techniques and we would like to be able to access this 
one.
    I have 1 minute and 39 seconds left. It normally takes me 
that much time to introduce myself. But I want to use part of 
that other minute and a half to just basically talk about the 
Senator from Missouri, who has been very instrumental in every 
project that we have done for the last 13 or 14 years. He 
understands how it works in urban areas. He understands how we 
do what we do.
    I am here today basically because he invited me to talk 
about EDA. I do not pretend to be an expert about EDA. What I 
am an expert on is taking dollars and leveraging them into 
projects to create jobs in the urban core. Again, we have not 
been successful with the EDA. We plan on being successful in 
the future. But if you are going to have a $22-to-$1 leverage, 
it is going to be very difficult for us. We would recommend, 
however, maybe a special set aside for not-for-profits like us 
that we could access on a national level. We would also like 
you to take a look at special impact districts that could be 
created to deal with projects specifically in the urban core. 
We have also discovered from looking at rural opportunities for 
our organization that it is no different. There is 
disinvestment in rural communities, there is disinvestment in 
urban communities. We feel that the EDA can help that 
particularly with public infrastructure dollars. I will yield 
my 22 seconds to the next speaker.
    Senator Inhofe. Mr. Gatson, thank you very much. I will 
pass on your complimentary comments to Senator Talent.
    [Laughter.]
    Mr. Gatson. Senator Talent is too new. He is just getting 
here.
    Senator Inhofe. Dr. Singerman.

STATEMENT OF PHILLIP A. SINGERMAN, EXECUTIVE DIRECTOR, MARYLAND 
     TECHNOLOGY DEVELOPMENT CORPORATION, ON BEHALF OF THE 
           INTERNATIONAL ECONOMIC DEVELOPMENT COUNCIL

    Mr. Singerman. Mr. Chairman, members of the committee, I am 
really honored to be invited to testify before you. I currently 
serve as the executive director of the Maryland Technology 
Development Corporation. More relevant to this proceeding, from 
1995 to 1999 I served as Assistant Secretary of Commerce and in 
that capacity was responsible for EDA when you reauthorized the 
Agency in 1998. That was a milestone achievement of the 
Congress, carried out in a bipartisan fashion, and I want to 
congratulate you for that visionary action.
    I also want to commend Assistant Secretary Sampson for his 
leadership of the Agency. He and members of his staff have made 
a special effort to reach out to me and my colleagues in the 
local economic development community. I want to thank him for 
these personal and professional courtesies.
    I am also here today as a member of the board of director 
of the International Economic Development Council, IEDC, which 
is the leading association of 4,000 members serving economic 
development professionals around the world. IEDC is holding its 
2005 conference in St. Louis this September and we look forward 
to seeing you there, Senator.
    I have carefully reviewed both the House-passed legislation 
and the Senate introduced Administration bills. I have attached 
a set of policy recommendations provided by IEDC to my written 
testimony. I just want to briefly highlight three points: No. 
1, the importance of prompt passage of EDA reauthorization; No. 
2, the importance of providing adequate funding authorization 
levels; and No. 3, the importance of allowing more efficient 
management of EDA's Revolving Loan Fund.
    In 1998, I had the privilege of testifying before this 
committee then chaired by the late Senator Chafee, joined at 
that hearing by Senator Baucus, the Ranking Member, and Senator 
Warner, the Subcommittee Chair. I was told afterwards that 
during the hearing Senator Warner turned to his colleagues and 
asked, ``Does everybody like this Agency?'' The answer then and 
the answer now is, yes, because EDA, as members of this 
committee have stated, is perhaps the most efficient and 
effective Federal Agency to assist local economic development 
communities and can play a significant role in addressing the 
decline of manufacturing jobs.
    I respectfully urge the committee to consider prompt 
passage of the reauthorization prior to the August recess. Here 
is why. This spring the Congress will be reviewing the 
Administration's budgetary request for fiscal year 2005, and 
this summer Agencies will be submitting their requests to the 
Administration for fiscal year 2006 funding. In the normal give 
and take of the budgetary process, an Agency that is not 
reauthorized will suffer. To those who care about the ability 
of EDA to provide critically needed support to our most 
distressed communities, tardiness in reauthorization will limit 
the Agency's competitiveness. I can talk about this at greater 
length in the question period.
    Second, it is essential that robust funding levels are 
authorized. The House-passed legislation proposes an 
authorization level of $400 million for fiscal year 2004, 
rising annually to $500 million by fiscal year 2008. This 
legislation provides Congress with the authorization 
flexibility it needs to address unanticipated economic 
difficulties. What we learned in the 1990's is that every 
region in the country and nearly every community will 
inevitably face sudden and severe economic distress--tornadoes 
in Oklahoma, floods in Missouri, ice storms in Vermont, 
closures of military bases and DOE facilities across the 
country.
    During the latter part of my tenure we were faced with 
economic crises in the steel and textile industry, yet the lack 
of sufficient authorization levels prevented an adequate 
response to address these problems. The result was that funding 
to communities suffering long term deterioration was taken away 
and a pernicious competition among equally needy communities 
was created. This new authorization language does not eliminate 
the ultimate authority of Congress to make judgments about 
budget priorities, but it does remove an artificial constraint 
to your ability to exercise an appropriate level of 
discretionary flexibility.
    My final point, Mr. Chairman, relates to the Revolving Loan 
Fund modifications, which have already been mentioned. Just let 
me state briefly that modifications of this legislation will 
eliminate an unnecessary and, frankly, unmanageable 
administrative burden on EDA and its local partners. This is 
really a very modest step. Defederalization of local loan 
programs is already guaranteed by other Federal Agencies and 
EDA already releases its interest in construction projects 
after 20 years. So if this is applied to Revolving Loan Funds, 
it will level the playing field. You should note that it would 
only be carried out pursuant to formal regulations issued by 
the Secretary and under the guidance of the Inspector General.
    I think I used up my 22 seconds as well. Just let me thank 
you again for the opportunity to testify before you.
    Senator Inhofe. Thank you, Dr. Singerman. I will confine my 
questions to Mr. Gorshing and Dr. Singerman since I am sure 
that my colleagues from Vermont and Missouri will have 
questions for the other two witnesses.
    Mr. Gorshing, we in Oklahoma, or you are responsible for 
using technology that I dare say is not used nationwide. I am 
talking about your mapping with GIS and GPS. Do you have any 
idea as to how many other States--are we ahead of the pack in 
technology?
    Mr. Gorshing. We like to brag we are, Senator.
    Senator Inhofe. That is all the answer we need.
    [Laughter.]
    Senator Inhofe. I compliment you for that. I am not saying 
this just to blow smoke at you, but you are doing such a great 
job. We are doing a great job in Oklahoma. I am just so 
appreciative of Dr. Sampson and his predecessor for all the 
things that have taken place in Oklahoma. But of all the 
programs that come to your mind, which one do you think would 
serve best as a model? Could you single out one that has had 
unusual success?
    Mr. Gorshing. You mean a specific EDA investment?
    Senator Inhofe. Yes.
    Mr. Gorshing. There are a great many of them out there. I 
can share with you one incident in a very small community which 
certainly is not unique across the national landscape. But 
there is the small town of Thomas, a population of 1,000, and 
the city, because of its size and lack of resources, has no 
management staff whatsoever. They had an opportunity in the 
year 2000 for a new manufacturing company. We are losing 
manufacturing jobs all over, so this was a great opportunity. 
W.W. Manufacturing Company made cattle handling equipment--
loading chutes, temporary pens, et cetera. It was a $3 million 
project. But EDA invested a public works grant of $500,000 to 
the city's economic development authority in order to support 
the infrastructure that was needed in terms of water and sewer. 
The company itself invested $2 million into the project and the 
differences were provided by a variety of State and Federal 
funds. But it was a packaging project which the city clearly 
had no capability of putting together. It was our economic 
development staff, through our economic development planning 
program, that was able to put that package together. Today, 
that company has grown from about 8 or 10 employees to a little 
over 80, and additional growth is in sight.
    Senator Inhofe. That is great. I appreciate that very much, 
and we appreciate very much your being here to testify.
    Dr. Singerman, you said during your opening statement there 
are a couple of things you would elaborate on. I will give you 
that opportunity with the remainder of my time. I think you 
have already covered your feelings on the $22-to-$1 issue, but 
perhaps you could elaborate a little bit more on brownfields.
    Mr. Singerman. Yes, Mr. Chairman, thank you. I concur with 
Secretary Sampson's remarks. EDA's ability to provide flexible 
funding focused on job creation is very important and to have 
it entangled with a very complex set of legislation and 
regulations that flow properly from the EPA and their approach 
to brownfields would severely restrict EDA's ability to address 
those communities and those problems. I had not thought about 
this before, but Secretary's Sampson's comments about the 
impact of future BRAC communities I think is very significant 
because that will be a major issue coming before the Congress 
and EDA's ability to assist those communities has been 
historically very important.
    Senator Inhofe. Specifically, how? What ideas do you have 
on how you could assist someone after this BRAC round takes 
place?
    Mr. Singerman. Well, I believe you will need, as you did in 
the earlier BRAC rounds, supplemental funding to address the 
problems of those communities. EDA gets in pretty quickly right 
after the Office of Economic Adjustment's planning grants and, 
as Secretary Sampson mentioned in regard to some of the 
communities in Colorado, I believe in Oklahoma as well, Texas, 
providing flexible funding not just for construction projects 
but for Revolving Loan Funds, and for planning, and for 
training, and for the kinds of technology transfer projects 
that you have mentioned, Mr. Chairman, and that Secretary 
Sampson has mentioned, the ability to provide timely, flexible, 
and adequate funding is really critical to be able to help the 
communities affected by the BRAC process.
    Senator Inhofe. Thank you very much, Dr. Singerman.
    Senator Jeffords.
    Senator Jeffords. Jim, pleased to have you here. I would 
like to get your views on a couple of things here. What key 
changes would you make to EDA's programs to improve your 
working relationship with the Agency?
    Mr. Saudade. I think that having one EDR, Economic 
Development Representative that covers all of up-state New 
York, all the State of Vermont, and all the State of New 
Hampshire provides a unique challenge for anybody to try to 
provide a reasonable level of service and technical assistance. 
To me, I think we would like to help EDA through our community 
development department at the State level to try to extend that 
field capacity, provide support, maybe an initial level of 
review on applications so that the EDR has a little bit more 
assistance in the region closer to its constituents to provide 
that assistance that is very much needed.
    Senator Jeffords. Please elaborate on how EDA's planning 
process could be improved.
    Mr. Saudade. The CEDS is a terrific process in that it 
enlists the planners, businessmen, bankers, and other 
interested parties to take a sobering view of the economic 
picture in a region, to take a look at its resources, and then 
to come up with a solid plan for action. The problem with the 
CEDS process in Vermont that we experienced is that it seems to 
be geared to more of an urbanized environment. In Vermont, we 
do not have lots of people that are closely aggregated that can 
serve on boards and committees and can make a lot of meetings 
and things of that nature. It is tough. We also do not have the 
diversity representation that you might find in Philadelphia or 
New York or some other cities. So it is very difficult for us 
to assemble the type of committee that has been the model for 
EDA.
    What we did in Vermont was we took the boards of existing 
regional planning commissions, three of those, and two regional 
development corporations to assemble about 74 individuals that 
were broadly representative of the region. However, this model 
was simply very different than anything EDA had seen before.
    So I would recommend flexibility and a higher level of 
understanding that small States are not necessarily going to 
have the type of constituencies and the type of organizations 
that you would find in more urbanized and populated areas.
    Senator Jeffords. As you know, Vermont historically was the 
machine tool industry of the Nation. As a result of that, I 
think we have a lot of brownfields. What problems does that 
give to you in trying to find suitable sites for industries?
    Mr. Saudade. Well, along our rivers where most of the 
manufacturing originally started because of water power, we 
have many, many, many of those sites, as you say. The machine 
tool industry is just one of the many industries that 
contributed to this problem.
    We recently had a site that cost $800,000 to do the testing 
and to write the corrective action plan for remediation, but it 
only cost $300,000 to actually remediate it. That is still $1.1 
million to get over the hurdle of one small spill. The reason 
why we need EDA and EPA is EPA can help us with the testing and 
the remediation, but the costs are so extreme in this spots 
that EDA assistance can help us to underwrite and credit 
enhance the redevelopment of those sites. A developer is not 
going to arrive at a feasibility decision on a project that has 
that kind of up front cost related to the brownfields problem. 
However, I am optimistic because our brownfield legislation in 
Vermont had a catch. Even if you did everything right, if there 
was something found wrong at the end of the cleanup, even if it 
was completely within the corrective action plan, the secretary 
could make you do more. This left a blank check, basically, 
wide open. Frankly, attorneys for our banks would not allow 
anybody to get involved with such projects. We think that hole 
is going to be plugged this week or next week in our 
legislature and I think you are going to see a lot more people 
excited about getting involved with brownfields. I am hoping 
that EDA is going to be an important player along with EPA to 
help us address those sites because they are critical to the 
stability of our towns and our village centers, they are 
important to the creation of jobs, and they help us to protect 
our undeveloped countryside.
    Senator Jeffords. Thank you. Thank you, Mr. Chairman.
    Senator Inhofe. Thank you, Senator Jeffords.
    Senator Bond.
    Senator Bond. Thank you, Mr. Chairman. I guess Mr. Gatson 
blew the cover, so I might as well tell you that he has an 
extensive background in urban affairs and economic development, 
more recently he is branching out from the great work he has 
done with Swope Community Builders in Kansas City to work in 
rural areas, and he was a recipient in 2002 of Fannie Mae 
Foundation's Johnson Community Fellows Award for leading 
development professionals. He is currently serving a 3-year 
term on the Federal Reserve's Consumer Advisory Council. So 
with that background, without getting into the Kansas City 
Chiefs, Chuck, I would like you to tell us briefly why your 
organization has been unable to tap into the EDA funding? What 
do you see as the problems of accessing EDA funding for urban 
and to the extent that you have experience in the rural areas? 
What impedes your ability to go to EDA?
    Mr. Gatson. I think the biggest issue that we have with 
accessing is staffing. The gentleman to my right talked about 
that in Vermont. We have one person in the State of Missouri 
that everybody goes through and it is very difficult to get his 
ear, to get time with him. That is No. 1 for us. No. 2, it is 
the difficulty in taking the EDA funds and getting them into 
our projects at the appropriate time. We have not on a regular 
basis attempted EDA because we have had other paths to go 
through. I guess the district in Kansas City, MO, that deals 
with EDA is administered by two separate agencies, Economic 
Development Corporation and the city of Kansas City, MO, and 
those two are not often talking to each other or dealing with 
each other. So that is a problem for us, the local politics, 
the local bureaucracies. That is why I spoke earlier about 
special set asides for not-for-profit community development 
corporations that can by-pass those kinds of local issues and 
deal directly with the office in Washington, DC, based upon the 
kind of projects that we do. I think the third thing is just a 
fear from our organization of spending the kind of time and 
effort it takes to put together that kind of application and 
then not being successful. As I said, we have assets of about 
$61 million but that does not mean that we have a lot of time 
and a lot of staff. We have about 25 people and they are all 
assigned to projects on a regular basis. So to take somebody 
off of a process that we know that we can go through and be 
successful and put them on a process that is a lot more 
difficult, a lot less reasonable for success, that is the third 
reason, Senator.
    Senator Bond. The $22-to-$1 ratio you feel would be beyond 
the ability of your organization and others with which you 
deal?
    Mr. Gatson. We thought we were pretty hot when we said we 
were doing $7-to-$12-to-$1. In the communities I work in, if 
you have $22 to do a project, you do not need $1 more. We have 
$5 to do a project, we need $5 or $6 more to make it work. 
Everything we do we thought was pretty highly leveraged, 
everything from Community Development Block Grant funds to home 
funds, to philanthropic program related investments, to bank 
dollars, special equity funds. We use all of that. So for us to 
go out and find another $10 or $12 to do a project, it will not 
work for us. If there were those kinds of returns on investment 
in the communities we worked in, the private sector would be 
doing it already.
    Senator Bond. Thank you, Mr. Gatson.
    I wanted to followup with Dr. Singerman on a couple of 
little ideas. Again, I join with Dr. Sampson in expressing 
appreciation for the leadership you gave the Agency. We have a 
local EDA project in my part of the State where a group of 
farmers, a cooperative were trying to qualify for a private 
loan from a bank and the bank could not lend the money without 
assurance of EDA funding, but that cannot be announced until 
the EDA completes its prevention of unfair competition study. 
Is that really still necessary to do that? How important is 
that?
    Mr. Singerman. I do not think it is important at all and I 
think we tried to get rid of it 6 years ago and were 
unsuccessful. I believe the Administration's bill ends that 
anachronistic provision, and I think the House agreed with 
that. So that would be a step in the right direction.
    Senator Bond. Finally, some people are saying that the 
House bill gives EDA too much room to rewrite rules and 
regulations. You have been in the other seat and now you are in 
the International Economic Development Council, and I know you 
have to watch your step because you have to apply to Dr. 
Sampson, but is it going too far in giving him leeway to 
rewrite rules and regulations?
    Mr. Singerman. Well I do not know the provision in the 
House legislation that does that. But I do know that between 
the Department of Commerce's lawyers, the Department of 
Commerce's budget office, OMB, congressional appropriating 
committees, the congressional authorizing committees, and the 
Office of Inspector General, there are lots of people who have 
their eyes on EDA's programs and it is very hard to sneak 
something through without the proper vetting. So I think you 
would agree that the problem in the Federal Government is not 
too much flexibility but really too little flexibility and too 
many burdensome and onerous regulations and rules.
    Senator Bond. Thank you, Dr. Singerman. Thank you, Mr. 
Chairman.
    Senator Inhofe. Thank you. I have no further questions but 
if either of my colleagues do, feel free to ask.
    Let me thank all five of our witnesses. Dr. Sampson is 
still here and it is very unusual to stay for the second panel. 
I appreciate that very much, Dr. Sampson. If anyone of you has 
one or two things that you should have said and just realize 
you did not, and you too, Dr. Sampson, get up here, we will 
give you that chance to do so. Mr. Saudade?
    Mr. Saudade. I would like to say that one of the problems I 
had when we first got into planning our CEDS was that the 
website was not very good at EDA. I want to commend EDA for 
improving that website enormously. Today, it is such a great 
resource and they have done a wonderful job with that. I really 
appreciate that.
    Senator Inhofe. Well, that is good. All right, anybody 
else? Yes, Mr. Gatson?
    Mr. Gatson. I would like to say I do recognize that there 
are two Senators in the State of Missouri.
    [Laughter.]
    Senator Inhofe. That is what is unusual about Missouri.
    [Laughter.]
    Senator Inhofe. Dr. Sampson.
    Mr. Sampson. Thank you, Mr. Chairman, for your flexibility. 
I know we will have an opportunity to respond to questions, and 
we look forward to that, written questions, and, again, I 
certainly want to make myself available to members on both 
sides for a personal sit-down with questions. But I do want to 
clarify one thing in the public setting.
    We have heard a lot about the $22-to-$1 as a goal. The 
reality is that we have many, many grants that are far below 
the $22-to-$1 ratio. We have some grants--as a matter of fact, 
and I am sorry Senator Wyden is not here--we have one grant 
that is in the process now for Port West in Oregon that is a 
$980-to-$1 ratio, in a very poor, very rural community that is 
going to have a significant impact on that whole region of the 
State. Clearly, when the Seattle regional office has one grant 
that has a $980-to-$1 ratio, that enables us to have a great 
deal of flexibility on the small side of the scale to do small 
projects that are not highly leveraged. That is why I talk 
about this as it is an overall goal for a very broad portfolio 
at the regional level but then at the national level.
    What we look forward to is providing you with the full 
range of grants so you can see that we do extremely small 
leveraged grants as well as some that are very highly 
leveraged. But the important principle is economic development 
cannot be successful at any level unless there is significant 
private sector money leveraged into that deal.
    Thank you very much, Mr. Chairman.
    Senator Inhofe. I appreciate that and I am sure that 
Senator Wyden's staff will convey that, that we are talking 
about averages.
    Mr. Gorshing or Dr. Singerman, either of you have anything 
further?
    Mr. Singerman. Yes, Mr. Chairman. I would just like to 
emphasize one point that I perhaps rushed through, and that is 
the significance of this committee's action and your ability, I 
know you are not the appropriators, but by sending a message 
through the authorization levels that you set in the 
legislation, to really set a benchmark for not only your 
colleagues in Congress but members of the Administration to pay 
attention to EDA and provide the level of funding that I think 
you all would agree is necessary to support the kinds of 
projects that you endorse.
    Senator Inhofe. Well I appreciate that. I think our 
sentiments have been conveyed to all of you as to our feelings 
about the EDA and the work that you do. Again, we thank you 
very much for all of your efforts.
    With that, we are adjourned.
    [Whereupon, at 11:20 a.m., the committee was adjourned, to 
reconvene at the call of the chair.]
    [Additional statements submitted for the record follow:]

       Statement of Senator Craig Thomas, U.S. Senator from the 
                            State of Wyoming

    Mr. Chairman, I thank you for holding this hearing today. I believe 
it is important that we as legislators continually review the functions 
of the Federal Government so that the policies and programs remain 
effective and efficient.
    All too often it seems that all sorts of assistance programs 
continue without review only to be duplicated by another Agency, 
administration, bureau or nook in the Federal Government to address a 
similar challenge as the previous program.
    The EDA is an organization that many people look to when local 
development, jobs and creating lasting improvements to the business 
environment are needed. This is a unique organization with a mission 
that cannot be understated, and we are fortunate to have Dr. Sampson as 
its administrator.
    As the American economy continues to grow and change, we must be 
prepared to address the challenges that lie ahead. By allowing 
communities to access funds for infrastructure and capacity, technical 
assistance and other obstacles, we can see a one stop shop that will, 
hopefully, allow an economically depressed area get assistance or get 
training or get construction so folks can get back to work. In Wyoming, 
we have seen a number of successes and it is important that as we hear 
testimony and review the reauthorization, we capture the essence of 
this program that will focus our resources to our rural and urban 
communities to create jobs.
    I am particularly pleased that we have Assistant Secretary of 
Commerce Dr. Sampson here today to give us some insight on where his 
program is and where he wants to take it. As I mentioned, this is 
important to ensure our Federal dollars are used wisely. I know the 
President has made the implementation of responsible and accountable 
policy changes a priority and I am glad the EPW Committee can hear 
testimony today.

                               __________

Statement of Senator Max Baucus, U.S. Senator from the State of Montana

    Mr. Chairman, thank you for convening this hearing. As you know, I 
am a big supporter of the Economic Development Administration. This 
Agency has been a major contributor to the development of Montana's 
economy over the years and has been a solid partner in state and local 
efforts to move our state's economy forward. My support for EDA comes 
from first-hand experience in working with EDA on virtually every major 
economic development project and initiative over the past dozen years 
or more.
    I also have first-hand experience in EDA's reauthorization, as 
former Chairman and ranking member of the Environment and Public Works 
Committee. In 1998, I sponsored S. 2364 along with my original co-
sponsor, Senator Snowe. The bill eventually attracted co-sponsorship of 
more than 60 Senators. That bill was unanimously reported out of this 
committee and passed under unanimous consent in the Senate. Later that 
year, the House of Representatives passed S. 2364 unanimously and it 
was signed into law. This marked the first passage of an EDA 
reauthorization bill since 1980, a period of 18 years.
    That bill not only reauthorized EDA, but significantly improved 
EDA's authority to advance this nation's efforts in improving the 
economies of economically distressed communities. I am the first to 
admit, however, that we cannot rest on our laurels. There is a need for 
constant improvement. That improvement should be accomplished with a 
recognition of the core mission of EDA and should recognize its 
strengths while identifying ways to increase its effectiveness.
    With this in mind, I feel that we should identify some of EDA's key 
strengths. First and foremost is this Agency's efforts at the state and 
local level. It is widely recognized that economic development is 
inherently locally driven. That is, economic development is only 
effective when state and local leaders engage the private sector to 
realize economic development goals and objectives. EDA's strength is 
that it is built on this premise.
    A critical component in local economic development, for example, is 
the Comprehensive Economic Development Strategy, or CEDS. These 
strategies, a key requirement for investment, provides the basis for 
consensus among local government and business leaders as they plan for 
critical infrastructure improvements, public-private partnerships and 
investment strategies that are needed to support economic growth and 
job creation. In addition, EDA's assistance programs engage key 
partners at the state and local level. These include state and local 
government, economic development districts, local development 
organizations, university centers, and tribal governments. Consensus is 
created before a project is designed, much less implemented.
    The effective word here is ``Partner''. EDA's programs do not 
operate in a vacuum, directed by Washington bureaucrats. Instead, 
assistance is directed by local and regional planning, with EDA staff 
at the local level providing technical assistance where it is needed 
most--on the ground, where the action is! EDA operates as an active 
partner, working with state agencies and other Federal Agencies to make 
a difference at the local level. This important partnership is greatly 
enhanced by the actions of the Economic Development Representative. I 
have witnessed first hand in Montana on many, many occasions the 
excellent working relationship between the EDR and many Montana 
entities. This is a core strength that we need to enhance. I will be 
interested to hear Dr. Sampson's ideas regarding how we can augment 
this important component of how EDA programs are delivered at the 
state, regional and local level.
    A major factor contributing to the success of EDA is its ability to 
maintain its local partnerships over many years, ensuring continuity 
and stability as economically distressed areas struggle to make lasting 
economic improvements. A prime example is EDA's support for economic 
development districts. Montana currently has four economic development 
districts, providing economic and community development planning and 
assistance to communities in 22 of Montana's 56 counties. The planning 
grants provided by EDA have allowed these districts to develop and 
maintain critical expertise to assist communities in addressing their 
needs. However, funding for economic development districts literally 
has not increased for more than 30 years. In fact, it has diminished 
over that time. In addition, Montana has four economic development 
districts that have been designated by EDA but do not receive any 
planning funds. This means that the remaining 34 Montana counties do 
not receive the substantial benefits of EDA's planning grant program.
    In addition to economic development districts, some Indian Tribes 
within Montana only receive $35,000 to support their economic 
development planning efforts. Indian reservations are some of the most 
economically distressed areas of this country. Quite frankly, I do not 
know how we can expect advancements in the economic development of our 
reservations with such limited resources. I would be particularly 
interested in hearing Dr. Sampson's ideas for increasing funding for 
economic development districts and Indian Tribes.
    In my state, we also have an EDA-funded University Center. The 
University Technical Assistance Program (UTAP) provides critical 
technical assistance to small manufacturers using engineering students 
from Montana State University. I cannot think of a more cost effective 
way to provide valuable ``hands-on'' technical assistance to small 
manufacturers than UTAP does. In fact, this program eventually lead to 
the formation of the Montana Manufacturing Extension Center (MMEC). 
These services are critically needed at this particular moment in time, 
when manufacturers are moving jobs overseas. I would be interested to 
know how EDA will strengthen its commitment to organizations such as 
UTAP.
    Another critical component in EDA's ``tool box'' of programs is the 
successful Revolving Loan Fund program. In Montana, we have realized 
significant private investment in our communities because this program 
was available to economic development districts and local development 
corporations. The program is responsible for literally thousands of 
jobs retained or created in Montana communities. We need to build on 
this program to ensure its effectiveness in combating low per capita 
income, high unemployment, and high out-migration rates in our 
distressed communities. Montana's EDA Districts, local development 
organizations and other political entities have utilized the RLF 
program in many innovative ways to leverage millions of dollars of 
local, state and private sector funds to create significant employment 
opportunities.
    EDA's programs have proven to be effective in addressing local 
economic development needs. These programs avoid duplication of other 
Federal programs while providing assistance that complement other 
Federal, state, and local efforts to create lasting improvements in 
economically distressed areas.
    In summary, I would like to stress that the success of EDA in 
carrying out its mission is dependent on its partnership at the state 
and local level. Assistance that is based on locally driven planning 
through the Comprehensive Economic Development Strategy process, 
coupled with adequate funding of our economic development districts, 
tribal economic development programs, University Centers and the 
Revolving Loan Fund program is the key to EDA's future success.

                               __________

  Statement of David A. Sampson, Assistant Secretary of Commerce for 
       Economic Development, Economic Development Administration

    Chairman Inhofe, Ranking Member Jeffords, Subcommittee Chairman 
Bond, Subcommittee Ranking Member Reid and Members of the Committee, 
thank you for this opportunity to appear before the Senate Environment 
and Public Works committee regarding the reauthorization of the Public 
Works and Economic Development Act of 1965 (PWEDA), as amended.
    We are at a critical time in our economic history and the decisions 
we make today will have profound impact. The challenges of today will 
require policymakers to be forward-looking and innovative. Tomorrow's 
Challenges will not be answered with yesterday's solutions.
    Mr. Chairman, I am convinced that the only constant in economic 
development today is change. Nowhere else is this more evident than the 
scope of competition that American companies and communities face both 
domestically and from worldwide markets. American companies and 
communities must be able to operate in a worldwide marketplace and 
American political leaders must be in synch with business and labor 
leaders to adapt to this reality.
    One significant step in this effort is to reauthorize the Economic 
Development Administration. I urge the Senate to quickly pass this 
legislation so the valuable program changes in this legislation can be 
employed to help the economy grow.
    On October 21, 2003, the House of Representatives passed H.R. 2535, 
legislation to reauthorize the Economic Development Administration 
(EDA). While H.R. 2535 is not the same as S. 1134, legislation the 
Administration proposed to Congress on May 15 of last year and 
introduced by Chairman Inhofe and Bond in on May 22, the House bill is 
a bipartisan compromise that passed the House without dissent.
    In 1965 EDA was created to help communities generate new jobs, 
retain existing jobs, and stimulate industrial and commercial growth in 
economically distressed areas of the United States primarily through 
the construction of infrastructure. Assistance is available to both 
rural and urban areas of the Nation experiencing high unemployment, low 
per-capita income, or other severe economic distress.
    EDA's work to help communities was greatly advanced by my 
predecessor in the previous administration, Dr. Philip Singerman. His 
work with your committee in 1998 to reauthorize EDA for the first time 
in 16 years, set the stage for the improvements we seek in our proposed 
legislation. I believe his testimony today will be valuable to your 
efforts.
    Today, EDA's mission is to lead the Federal economic development 
agenda by promoting innovation and competitiveness, preparing American 
regions for growth and success in the worldwide economy. In order for 
EDA to achieve this mission and for the Federal Government to be 
successful in its overall economic development efforts we need a New 
Federal Economic Development Strategy for the 21st Century.

    A NEW FEDERAL ECONOMIC DEVELOPMENT STRATEGY FOR THE 21ST CENTURY

    As I travel across the Nation, it is clear to me that economic 
development is a top agenda item for almost everyone. However, it is 
also clear to me that America needs a smarter economic development 
strategy for the 21st Century. We need to set clear expectations and 
develop an overall strategy for these efforts by establishing a 
coherent design--including some common management goals and common 
performance measures among Federal economic development programs.

                       WHAT IS THE FEDERAL ROLE?

    The bottom-line of economic development is prosperity--a high and 
rising standard of living. Productivity and productivity growth are the 
fundamental drivers of prosperity and innovation is the key driver of 
productivity. President Bush has said, ``The role of government is to 
create conditions in which jobs are created, in which people can find 
work.'' The economic development focus of the Bush administration is 
supporting innovation and competitiveness on a regional level across 
America. Increased innovation and competitiveness empowers distressed 
regions to attract private-sector investment thereby improving the 
opportunities for American workers.

                          THINKING REGIONALLY

    Economies are not hermetically sealed in artificial political 
boundaries. The dominant reality of economic development today is that 
all communities, cities, towns and counties alike, must think 
regionally and pool their resources to build a strong economic platform 
for growth. By pooling their resources regionally, communities can 
attract the private sector investment necessary to spur job creation, 
because it is the private sector that creates jobs and spurs economic 
growth.
    Let me give you an example: I was in Georgia meeting with officials 
from four counties who were encouraging EDA to assist in the 
development of a development project in one of the four counties. I 
asked them, why three of the counties were asking us to invest in a 
county outside of their own. They told me that they understood that 
this project would be a driver of job growth for the entire region and 
it would benefit all of their constituents. By pooling their resources 
they could attract more private sector investment than if they each 
went it alone.
    Encouraging regional collaboration should be one of the key goals 
for defining the Federal role in economic development--and it is at 
EDA.
    EDA is guided by the basic principle that distressed communities 
must be empowered to develop and implement their own economic 
development and revitalization strategies through close collaboration 
with the private sector, local governments, and universities. Based on 
these regionally developed priorities, EDA partners with state or local 
governments, regional economic development districts, public and 
private nonprofit organizations, and Indian tribes to help them attract 
the critical private sector investment that is necessary to overcome 
long-term economic distress as well as sudden and severe economic 
dislocations due to natural disasters; the closure of military or other 
installations; changing trade patterns; or the depletion of natural 
resources.

            PROMOTING AMERICA'S IMMENSE INNOVATIVE CAPACITY

    The innovative capacity of the United States has always been one of 
our greatest strengths. The innovation infrastructure of our country is 
built on over 200 years of invention, discovery, development and 
commercialization. It is an intricate system that exists no place else 
on Earth.
    Innovation will drive the growth of American industry by fostering 
new ideas, technologies and processes that lead to better jobs and 
higher wages--and as a result, a higher standard of living. America's 
capacity to innovate will serve as its most critical element in 
sustaining prosperity. New products and new production methods embedded 
in the oldest of our mainline manufacturing businesses will raise our 
productivity and ensure that our economy remains the most competitive 
in the world. Only by focusing on innovation and competitiveness can we 
ensure that the jobs created will be good jobs that provide a higher 
standard of living for Americans.
    America's economic infrastructure is dependent upon innovation and 
one key place innovation occurs is on America's university campuses. 
One of EDA's investment priorities is to advance technology-led 
economic development by supporting the commercialization of university 
research and development efforts by linking them with regional economic 
development. We must foster technology transfer and entrepreneurial 
ecosystems, in which private industry, universities and communities can 
partner to drive economic expansion.

                 NATIONAL ECONOMIC DEVELOPMENT STRATEGY

    EDA has a unique position in the national economic development 
strategy. Since its creation nearly forty years ago, EDA has invested 
over $12 billion dollars to help distressed communities create an 
environment conducive to sustained job growth and economic opportunity. 
This is a small fraction of the overall Federal investment in economic 
development activities over the same period.
    According to a General Accounting Office study of Federal economic 
development programs conducted in 2000, there are at least 30 Federal 
economic development programs, providing approximately seven billion 
dollars to support economic development activities. Some more recent 
analysis lists the budget for economic development at over $20 billion.
    EDA's fiscal year 2004 budget of $318 million may seem 
insignificant when compared to the nation's $11 trillion economy. 
Indeed, it is critical to job creation and long-term economic growth 
for the overall economy that the much larger macroeconomic policies in 
President Bush's Six Point Economic Plan are passed by Congress as 
well.
    These critical six items are:
     Making Health Care Costs More Affordable.
     Reducing the Lawsuit Burden on Our Economy.
     Ensuring an Affordable, Reliable Energy Supply.
     Streamlining Regulations and Reporting Requirements.
     Opening New Markets for American Products; and
      Enabling Families and Businesses to Plan for the Future 
with Confidence by Making Tax Cuts Permanent.
    However, at the local and regional level, EDA has a proven ability 
to provide catalysts for economic growth in areas the marketplace 
bypasses or that are experiencing sudden and severe economic 
dislocation. The legislation before the Senate to reauthorize EDA will 
enhance our ability to address these important economic needs. EDA's 
legislation was crafted with the following three principles:
     Being flexible to deal with change;
     Enhancing our coordination with other Federal programs; 
and
     Rewarding Results.

                         INCREASED FLEXIBILITY

    As I travel across the country talking with our economic 
development partners, they repeatedly comment on the value to them of 
our programs' flexibility. They like the existing flexibility of our 
programs, but note that EDA can do better in some areas. We've listened 
to their ideas about increasing that flexibility while maintaining, 
even increasing, accountability for taxpayers' dollars.
    To increase our flexibility, we have reorganized our work force to 
improve and streamline our internal operations and through our 
reauthorization we are seeking to transform EDA into a flexible, 
forward-looking Federal resource that focuses on investing in economic 
infrastructure that will promote development of regional engines of 
economic growth.
    Many of the Administration's proposed changes included in both S. 
1134 and the version that passed the House are related to this 
objective. For example, H.R. 2535 clarifies that certain non-profit 
organizations and special units of government are eligible for EDA 
assistance. As key players in the economic development arena, it is 
important that we be able to work along side community development 
corporations and municipal utility districts to promote strategies that 
will result in economic growth. These types of entities were not 
envisioned when EDA was created in 1965.
    This Administration's proposal allows the savings, from 
construction projects completed under budget, to be recaptured to fund 
additional economic development projects. Under current law, these 
funds are either returned to the Federal treasury or are used to 
improve the project. EDA needs the flexibility to use these funds to 
invest in additional projects in distressed communities. The House has 
agreed to allow the EDA the opportunity to utilize these funds for 
additional projects but modified the language to allow recipients of 
EDA funds to keep under-run costs as an increase in the Federal share 
of their grant.
    Finally, both the Administration's bill and the House version 
eliminate the provision in our law dealing with overcapacity (Section 
208). This provision was relevant to our programs when EDA made large 
loans to entire industry-sectors but has proven to be administratively 
burdensome to both our grantees and our staff. We would also note that 
communities providing mandatory matching funds will not invest in 
projects creating over-capacity because they will not be viable over 
the long term and the private-sector will not invest in a project 
unless market demand exists. We will use investment policy guidelines 
and our regulations to achieve the purposes of this section in a less 
burdensome manner.

         ENHANCING OUR COORDINATION WITH OTHER FEDERAL PROGRAMS

    A highly trained and skilled work force is crucial to our economic 
growth. The legislation we sent to Congress proposes several changes to 
existing law to promote coordination among Federal economic and work 
force development programs, such as those authorized under the 
Workforce Investment Act. The House bill includes similar provisions.
    The President has stated that a better-educated work force means 
America is more productive resulting in more jobs and higher paychecks. 
This Administration is committed to developing closer linkages between 
work force development and economic development. I have been working 
closely with my counterpart at the Department of Labor's Employment and 
Training Administration to build these linkages. Our proposed statutory 
changes would make it easier for these partnerships to be built at the 
local level.
    Additionally, the House added a provision to require EDA to 
coordinate our efforts with other economic development programs, which 
dovetails with our ongoing efforts to partner on a governmentwide basis 
to coordinate Federal Economic Development Efforts.

                           REWARDING RESULTS

    EDA has demonstrated through measurable outcomes the value of its 
leading programs. We have adopted a Balanced Scorecard as a tool to 
measure our performance and scored relatively well in the Office of 
Management and Budget's Program Assessment Rating Tool (PART).
    But these achievements are not enough. We have also focused the 
agencies core values on results. Our values include:

          R esponsibility
          E ntrepreneurship
          S ecurity
          U rgency
          L eadership
          T eamwork
          S uccess

    Responsibility: We act with integrity and respect for others and 
are accountable for our actions.
    Entrepreneurship: We seize opportunities in the midst of change and 
take market-based risks, challenging the status quo. We seek partners 
with similar attributes.
    Security: We enhance economic security. At work, we operate in a 
safe, secure, and alert work environment.
    Urgency: We act now--with alacrity.
    Leadership: We develop leaders, communicate concisely, and exhibit 
a high degree of professionalism. We make tough choices.
    Teamwork: We are passionate about economic growth and build synergy 
by collaborating. We expand relationships.
    Success: We set high goals, stretch our abilities, and exceed 
expectations. We focus on critical items first and commit to implement 
them fully.
    EDA evaluates its programs by measuring the results in such areas 
as the number of jobs created and the amount of private-sector funds 
leveraged. Correspondingly, EDA also requires its grantees to measure 
the results of their projects.
    This Administration expects high levels of results from EDA's 
investments and commits to providing recipients an incentive to reach 
these performance goals. When an EDA-funded project provides excellent 
results taxpayers gain: prompt project implementation, better overall 
stewardship of taxpayer resources, faster creation of higher-skill, 
higher-wage job opportunities, and timely investment of private sector 
funds--all of which help communities become more competitive and 
economically vibrant.

                         REWARDING PERFORMANCE

    EDA's proposed legislation contained a performance-based incentive 
recognizing the importance we place on achieving results and the 
critical role that our partners play in transforming distressed 
communities into successful, economically stable communities. 
Currently, applicants have an incentive to overstate the number of jobs 
they anticipate creating because job creation is a large part of the 
evaluation criteria. The Administration hopes to temper this incentive 
by offering a 10 percent bonus award for projects that exceed their job 
performance targets. This funding for the 10 percent bonus would come 
from the elimination of the 10 percent bonus for projects that flow out 
of the economic development districts, as described below.
    The House was very supportive of the concept, but altered the 
delivery mechanism of this incentive. The House creates a performance 
based incentive program that would reward high performance with a 
straight bonus, rather than EDA's proposed credit, of up to 10 percent 
of the project cost that can be used on other eligible activities.
    For example, if the city of Stillwater, Oklahoma received a $1 
million grant from EDA that promised to create 200 jobs and attract $35 
million in private sector investment and the project created 450 jobs 
and attracted $60 million in private sector investment, it would be 
eligible for an EDA performance award of $100,000. This $100,000 could 
be used by the city of Stillwater for improving the project, for 
another EDA project, or it could be used as non Federal matching funds 
for other Federal grants the city may be seeking.
    This House provision retains the pro-results intent of the 
Administration while rewarding local recipients with additional 
flexibility to make this reward a useful goal. We believe that by 
recognizing high performance recipients with a significant and tangible 
incentive-based reward, this provision will raise the performance bar 
across the board for all EDA recipients. It will also help EDA evaluate 
projects at the front end of the process as it will encourage 
applicants to focus on achievable goals for the projects in submitting 
their applications.
    The House also made an additional performance incentive change. The 
Administration's proposal calls for the elimination of the current 10 
percent bonus for projects that flow out of economic development 
districts under section 403 of the statute (42 U.S.C. 3173) because 
participation in the economic development districts is high. The 
Administration believes the current 10 percent bonus could be better 
spent to incentivize performance, as outlined above. The House bill 
similarly deletes the current 10 percent bonus for economic development 
district projects, but also has added a 5 percent planning performance 
bonus similar to the 10 percent performance award. This 5 percent 
planning bonus would go to recipients who utilized an economic 
development district to process and support an economic development 
project. Projects in a region not covered by an EDA approved Economic 
Development District would not be eligible for this award.

                          REVOLVING LOAN FUNDS

    One component of results is being a good steward of the taxpayer's 
money. At EDA, no where is this more important than our revolving loan 
fund (RLF) program.
    Twenty-seven years ago EDA created the first economic development 
RLFs. Today, with a portfolio of over 600 RLFs, worth approximately $1 
billion, EDA believes that it is both necessary and appropriate to 
implement much needed management reforms to ensure the continued 
effectiveness and accountability of these funds. In its reauthorization 
proposal, EDA seeks new authority to correct technical issues to ensure 
the efficient operation and financial integrity of our Revolving Loan 
Fund Program.

   FINANCIAL INTEGRITY AND ACCOUNTABILITY OF THE REVOLVING LOAN FUND 
                                PROGRAM

    Over the past 3\1/2\ years, the Department Of Commerce's Office of 
Inspector General has conducted 46 audits of EDA Revolving Loan Funds. 
The seriousness of financial integrity problems in the revolving loan 
fund program is demonstrated by the several file cabinets full of 
documents we have had to review to resolve significant problems. All 
but a handful of these audits revealed serious instances of non-
compliance or failure to safeguard RLF assets, including:
    (1) Unused RLF assets due to startup delays or insufficient demand 
for loans;
    (2) Ineligible loans or borrowers, and failure to properly document 
loan decisions; and,
    (3) Poor accounting and financial management practices, including 
failure to safeguard and protect RLF assets.
    The Inspector General reported significant problems for Revolving 
Loan Funds operated in every region of the Nation, by many different 
local, state and regional development organizations. These 46 audits 
cover a significant portion of EDA's overall portfolio and I believe 
are indicative of problems with the program. We must act now to avoid 
much larger problems in the future to make sure this economic 
development tool remains a viable option.
    The Administration's proposed legislation provided EDA with the 
authority to write specific regulations addressing basic financial 
accountability standards that every EDA RLF must meet. These uniform 
standards will then be incorporated into the Single Audit Act 
compliance requirements. This will allow certified public accountants 
conducting RLF audits to verify the financial integrity of EDA RLFs on 
a regular basis.
    These changes in our RLF program will produce positive effects on 
our partners around the country. With a more robust audit, EDA need 
only require an annual report from our RLF's instead of the semiannual 
reports currently required.
    Additionally, over sixty EDA RLF operators manage from two to four 
EDA RLFs, capitalized at different times from different EDA 
appropriations, such as a Long Term Economic Deterioration (LTED) RLF, 
a defense adjustment RLF, or created following a natural disaster. The 
proposed technical corrections will enable EDA to merge multiple RLFs 
into a single, efficient fund per operator, thereby greatly simplifying 
the administrative and reporting burden for both the grantees and EDA. 
In many instances RLFs will decrease from four reports to one more 
comprehensive report, annually, and numerous RLF operators will 
decrease from eight reports to one report, annually. These changes will 
reduce bureaucracy, improve accountability, and save valuable staff 
time and resources for both our RLF operators and EDA.
    The House has accepted these changes with one clarification. The 
House made clear that the consolidation is an option of the RLF 
operator, not a mandate from Washington. That is a helpful distinction 
that the Administration accepts.

           TRANSFER OF RLFS TO THIRD PARTIES FOR LIQUIDATION

    The legislation also seeks new authority to transfer RLF portfolio 
assets to third parties for liquidation. Due to issues of non-
compliance or simply for the convenience of the parties, EDA, in some 
cases, needs to terminate an RLF. To date, the uncertainty of how to 
deal with, and pay for, the liquidation of an outstanding portfolio of 
loans has seriously impaired EDA's ability to dispose of these assets 
in a timely manner. By allowing EDA to arrange the transfer of the RLF 
portfolio to a third party, the new law will enable EDA to arrange for 
the orderly or timely disposition of an RLF while paying for the 
necessary costs of liquidation activities from the assets of the RLF 
being terminated.
    The House accepted this provision in H.R. 2535.

              RELEASE OF THE FEDERAL INTEREST IN EDA RLFS

    Finally, at the request of the RLF community, the Administration 
seeks new authority to closeout existing RLFs by allowing the repayment 
of the initial grant used to capitalize an RLF after a period of 20 
years, similar to the release of EDA's interest in public works grants 
after 20 years. Although EDA does not directly fund RLFs, it does 
provide grants to local governments and non-profits that in turn set up 
revolving loan funds. Unfortunately, the House did not accept this 
change to our RLF program in H.R. 2535.
    It is important to note that this provision is a very modest change 
to current law. Current law provides that an RLF grant recipient can 
cut its strings with the Federal Government by compensating the Federal 
Government for the Federal share of the value of the RLF property. As 
an incentive to encourage a gradual reduction in the number of RLFs 
outstanding, our proposed provision would allow a RLF grant recipient 
to cut their strings with the Federal Government by repaying the amount 
of the initial grant only.
    This provision would apply to RLFs that have demonstrated and 
sustained financial and program performance. I believe that after 20 
years any high performing RLF will have provided considerably more new 
jobs and increased leverage of private-sector investment than 
originally anticipated.
    We anticipate that the proposed buy-out option will be particularly 
attractive for the best performing RLFs and will become an important 
performance incentive for all RLFs. The ability of an RLF to closeout 
their grant from EDA after 20 years of successful management will 
provide EDA a powerful new management tool and RLFs with a strong 
incentive to increase their efficiency.
    Further, this new authority will help EDA to correct the historic 
and growing imbalance of finite EDA resources available to monitor and 
administer an ever-increasing number of RLFs. Without congressional 
action, RLFs will become less attractive to economic development 
professionals as they are perpetual, federally regulated, grants 
despite possible changed circumstances. The gradual reduction of EDA's 
RLF portfolio will enable EDA to effectively utilize its staff for 
higher quality administration of the remaining grant portfolio. It will 
allow us to recognize our economic development successes from the last 
20 years and move on to future challenges.

                  COMMENTS ON ADDITIONAL HOUSE CHANGES

    H.R. 2535 made several other changes to the Administration's 
proposal.
    As part of the last minute negotiations on the bill, a section of 
the House bill raised the Federal share of all planning grants to be a 
minimum of 65 percent. Currently this share is 50 percent-100 percent 
for Native American planning grants. I would like to point out to the 
Senate that this change in Federal minimum percentage will have no real 
dollar impact for economic development districts. Since we have more 
districts than funding, everyone will receive the same amount of money. 
What this does do, however, is lower the local cost share and that may 
negatively impact planning activities as EDA is ``buying'' less of a 
product.
    Similarly, H.R. 2535 did not include the Administration's flexible 
language relating to program funding. The Administration sought 
language to set the budget for the current year at the President's 
request with such sums as necessary for the next 4 years. The House has 
instead chosen to authorize program funding at $2.25 billion over 5 
years.
    H.R. 2535 also places a rider that expands the boundaries of the 
Appalachian Regional Commission. The Administration opposed similar 
language in H.R. 3550, the Transportation Legacy Act. Moreover, this 
provision is not related to EDA reauthorization and should be removed. 
I encourage the Senate to pass a clean bill.

                      BROWNFIELDS AND BRIGHTFIELDS

    The House also added sections 218 and 219 related to Brownfields 
and Brightfields. These provisions purport to allow EDA to engage in 
redevelopment of projects utilizing brightfield technology or in 
brownfield areas.
    I appreciate the interest that the Committee has shown in EDA's 
brownfields activities, which have represented a significant part of 
EDA's investment activities over the past 5 years. From fiscal year 
1999 through fiscal year 2003, EDA has made 269 investments in 
brownfields totaling $266,579,653, or 15 percent of EDA's total program 
appropriations during that time period. That works out to an average of 
54 brownfields investments annually, with an average brownfields 
expenditure of $53,315,931 per fiscal year.
    We look forward to continuing our pro-active work in brownfields 
investments, especially given the anticipated BRAC round scheduled for 
fiscal year 2005. Our major goal with the legislation is to be able to 
continue this work with maximum flexibility in accord with EDA's 
funding priorities and investment policy guidelines. The provisions 
that tie EDA to the Comprehensive Environmental Response, Compensation 
and Liability Act (CERCLA) in the House bill and in legislation that 
passed this committee in the 107th Congress cause us particular 
concern.
    These provisions attempt to graft a set of definitions, obligations 
and limitations from CERCLA onto EDA's brownfields activities that are 
not consistent with EDA's brownfields work. The CERCLA provisions, as 
written, would radically alter and ultimately wither EDA's current 
brownfields work.
    CERCLA brownfields provisions are directed toward a clean-up 
program, because that is the focus of CERCLA--to authorize the Federal 
Government to fund and perform, establishing liability for, and 
reimbursing the Superfund for--environmental clean-up.
    On the other hand, EDA's investments in brownfields rarely involve 
even the most residual clean-up activity. Our work is directed to a 
completely different end--development of an existing project site to 
create jobs and get it back on the tax rolls.
    The consequences of EDA being bound by the CERCLA provisions would 
be extreme. As the most obvious example, funding under this section 
could not be applied to former military bases as CERCLA does not 
consider military bases to be ``brownfields.'' EDA does. What's more, 
EDA recipients would be unable to claim reimbursement for the cost of 
any Federal compliance, as they are currently allowed to do. This is of 
particular concern as it relates to our work with Indian Tribes. 
Currently, federally recognized tribes are eligible for 100 percent 
grants from EDA. This provision would weaken our ability to fund 
brownfields development on Indian lands. But the real overall effect 
would be to limit and steer EDA's existing brownfields activities 
toward those involving clean-up of polluted sites, and we believe that 
would ultimately end EDA's program. Of course, EDA is not seeking to in 
any way relieve a responsible party from liability under CERCLA nor 
provide funds to a party to undertake clean-ups required under CERCLA, 
since to do so would undercut the ``Polluter Pays'' principle on which 
CERCLA is founded.
    I am confident that a mutually agreeable provision can be drafted 
that strengthens our work to redevelop brownfields sites. I stand ready 
to work with the Committee to craft a solution to this issue, with 
consultations, technical drafting assistance and other assistance you 
require.
    I also urge the Committee to retain section 701 of H.R. 2535 which 
provides a general authorization of appropriations for EDA's programs 
without imposing special limits for brownfields redevelopment or other 
programs which could limit EDA's flexibility to respond to a variety of 
economic situations.
    Moreover, the section on Brightfields contains a demonstration 
program for economic redevelopment using solar sources. EDA is not 
opposed to pursing the right Brightfields project provided it is 
consistent with our goals to create as many jobs and attract as much 
private sector support as possible. Again, the goals of the House's 
Brightfields language can be furthered using existing EDA program 
authority.

                                SUMMARY

    The Administration's legislative proposals and H.R. 2535 contain 
valuable program enhancements, critical to EDA's continued success. 
They will safeguard the financial integrity of EDA's programs while 
ensuring a more flexible and forward looking organization to meet the 
challenges of the 21st Century.
    The testimony from my colleagues that you will hear from today 
demonstrates exciting new growth opportunities in the area of economic 
development. To take advantage of these opportunities the 
Administration's legislation focuses on:
    (1) Increasing flexibility to allow us to take advantage of these 
exciting opportunities;
    (2) Enhancing coordination to work in a comprehensive fashion with 
other agencies to achieve results; and, most importantly,
    (3) Rewarding the performance of our most successful partners.
    I urge that the Senate act quickly to pass legislation to give EDA 
and our partners across the Nation serving regions in economic distress 
the economic development tools necessary achieve the President's goal 
to leave ``no demographic or geographic area behind in the pursuit of 
more fully participating in the American Dream.''
    Thank you for the opportunity to testify before you today and I 
look forward to answering your questions about this legislation.
                                 ______
                                 
    Responses by David Sampson to Additional Questions from Senator 
                           James M. Jeffords

    Question 1. EDA would like to achieve leveraging ratios of 22:1 of 
other funds to EDA dollars. As Mr. Saudade testified, this level of 
leveraging, while laudable, is very difficult for a rural state like 
Vermont to achieve. How can you guarantee that rural states will still 
receive a fair share of EDA dollars? Please provide a completing 
listing of EDA's grants to Vermont over the last six years, the 
leveraging ratio on each project, and the annual leveraging average 
broken down by state covered by the Philadelphia Regional Office during 
each of the last six years i.e. FY 1998-FY 2003--if data are available 
for FY 2004, please provide this as well.
    Response. Since 2000, EDA has shown impressive results in 
attracting private capital investment in distressed communities, 
especially rural communities. It increased the average ratio of private 
capital investment per every EDA dollar invested across its 
infrastructure projects portfolio by 405 percent from 8.7:1 to 43.9:1. 
In rural areas in particular, EDA increased that ratio 115 percent from 
10.5:1 to 22.6:1. And the percent of EDA's investments in rural areas 
have not changed to any statistically-significant degree (69 percent in 
2000 versus 66 percent as of May 6, 2004). Therefore, while the percent 
of EDA's funds invested in rural areas remain substantially the same, 
the amount of private capital investment in rural areas has 
dramatically increased. This dramatic increase is a leading indicator 
of future increased job creation. Reducing private capital investment 
is a dangerous proposition that will lead to reduced job growth.
    See attachments 1A, 1B and 1C. Please note that on chart 1B private 
sector investment is not calculated for grants other than 
infrastructure projects. As a result there are missing data points and 
zeros in the private sector investment columns.
    [The referenced documents follow on pages 51-54.]

    Question 2. EDA has a number of investment criteria they consider 
when evaluating grants that appear to be subjective. How does EDA 
evaluate these criteria?
    Response. All proposals for EDA investment assistance are reviewed 
by EDA's regional office. Each regional office utilizes an Investment 
Review Committee (IRC) comprised of career EDA staff professionals 
experienced in EDA's programs and economic development work. Most of 
these career staff members have been with the agency for many years, 
even decades. The IRC process includes the review of each proposal in 
light of EDA's investment criteria. Proposals are evaluated in 
comparison to other proposals under consideration in that specific 
regional office and based on previous proposal evaluated by the IRC.
    EDA's five investment policy guidelines are: (1) The investment 
must be market-based and results oriented; (2) The investment must have 
strong organizational leadership; (3) The investment must advance 
productivity, innovation and entrepreneurship; (4) The Investment must 
look beyond the immediate economic horizon, anticipate economic changes 
and diversify the local and regional economy; (5) The investment must 
demonstrate a high degree of commitment from other governmental 
partners and the private sector.

    Question 3. A number of EDA investment criteria appear to drive 
federal assistance to large companies versus small enterprises that 
exist in distressed communities. For example, the investments must be 
market-based, a high level matching funds is required, and the 
investment must maximize return on taxpayer investment. While it is the 
private sector that must create the jobs, the public sector can help 
ensure that communities have a chance to level the economic playing and 
support local small and medium enterprises.
    It seems that these investment criteria might lead EDA to assist 
larger companies rather than helping small and medium-sized companies 
generate economic opportunities in communities. EDA awarded a $1 
million grant to support BMW's manufacturing plant in Greer, South 
Carolina. Please explain the rationale for the grant to this BMW plant? 
Please provide a yearly listing of the private and public companies 
with over 500 employees in the United States that received EDA 
assistance between FY 2001 and FY 2004, and the amount of such 
assistance.
    Response. EDA does not provide grants or direct loans to any for-
profit entities. In fact, EDA has regulations (13 CFR 314.3(c)) to 
guard against the indirect ``pass through'' of the benefits of EDA 
grants from EDA eligible entities (e.g. government entities, non-profit 
organizations) to a for-profit entity. However, EDA investments may--
and in fact are geared toward--the benefit of the local economy, which 
naturally includes private, for-profit entities.
    The $1 million grant that you referenced was made to the Greer 
Commission of Public Works in 1994 and involved the construction of 
water lines, relocation of an elevated water tank, and an emergency 
backup power system that would help serve the new BMW facility located 
in Greer. This grant was made to support the long-term development of 
the regional economy and the automotive cluster in South Carolina. The 
entire project resulted in over 4,500 direct-hire jobs at BMW and over 
7,500 jobs with local area suppliers.
    There is no data to match your request.

    Question 4. In February, Secretary Evans announced that the 
Manufacturing Extension Partnership program (MEP) would be eligible to 
compete for up to $45.4 million in economic adjustment assistance 
provided by the EDA. How much funding has EDA made available to the MEP 
Centers and how is EDA reaching out to these Centers to make this 
funding available?
    Response. EDA strives to be forward looking and to approaching its 
responsibilities in a pro-active manner. As a result, EDA's regional 
offices have a good idea of the investments they will approve several 
months in advance. This means that once fiscal year funds become 
available to EDA, much of the `pipeline' for EDA investments is already 
filled.
    At Secretary Evans' direction, EDA held in abeyance all non-
committed EDA Economic Adjustment funds, totaling about $5 million. 
These funds will be focused on communities experiencing job losses in 
the manufacturing sector and initiatives geared to advancing America's 
competitiveness in manufacturing, including MEP Centers.
    A joint EDA and Technology Administration (the parent entity for 
the Manufacturing Extension Partnership) committee has been formed and 
will be responsible for identifying those MEP Centers in a position to 
successfully compete for EDA funds. Once identified, a representative 
from EDA accompanied by a representative from the MEP Program will work 
with the MEP Center to complete and process their application for EDA 
funds.

    Question 5. Please comment on any future plans to reorganize or 
reassign the regional economic development representatives?
    Response. EDA has had flat funding for S&E since FY 2002, and 
anticipates this level of funding for FY 2005. Through the Headquarters 
restructuring effort, EDA was able to absorb inflationary increases to 
payroll and other cost categories such as rent and utilities without a 
reduction in force. Because EDA is small and operates on an extremely 
frugal budget, the tangible impact of flat funding was an inability to 
transfer the savings from the headquarters reorganization to increase 
resources in the regions. In light of anticipated future flat funding, 
EDA is now analyzing its regional operations to look for opportunities 
for streamlining, process improvements and increased efficiency. EDA 
has not yet completed its analysis nor developed final recommendations 
at this time but will look forward to the opportunity to work with your 
staff to ensure EDA can continue to provide the highest level of 
service within available resources.

    Question 6. Please provide an annual breakdown of RLF 
capitalizations and recapitalizations grants from FY 1998 through FY 
2004. Please include grant amounts, grantee name, and type of 
geographic location served i.e. urban or rural.
    Response. [The referenced documents follow on pages 55-58.]

    Question 7. Please provide a list of EDA grants over $1 million for 
FY 2002-FY 2004 that fit under the President's faith-based initiative.
    Response. It is important to note that all EDA investments in 
faith-based initiatives are subject to the same review process and 
investment criteria as all other EDA proposals.
    Response. [The referenced document follows on page 59.]

    Question 8. Should planning funds be set aside to help create new 
economic development districts?
    Response. Economic Development Districts (EDD) were a concept 
included in EDA's original legislation in the mid-1960s. Since that 
time, EDA and local development entities have been very successful in 
creating EDDs that cover most of the Nation, and a vast majority of 
populated areas.
    Planning is a critical element of economic development and EDA will 
continue to advocate sound, market-based and collaborative planning 
efforts by economic regions. However, with limited funds, EDA is unable 
to dedicate additional funds to support local planning efforts without 
having a substantial, negative impact on our programs that directly 
support the creation of higher-skill, higher-wage jobs.
    EDA's appropriation for planning has remained at $24,000,000 since 
FY1997.

    Question 9. On April 22, 2004, Tom Friedman wrote in the New York 
Times that the United States is currently engaged in a war for 
innovation. Clearly our manufacturing sector is under siege. EDA's 
entire budget of about $315 million is tiny compared with the overall 
Federal budget and this country's GDP. Are we in danger of losing our 
competitive edge, because we are not devoting enough resources to 
economic development?
    Response. EDA's modest budget makes it even more critically 
important that the agency leverage federal dollars with private sector 
investment. EDA often provides the critical final component allowing 
high-impact development projects to proceed. While EDA's budget may 
only be about $300 million, we anticipate EDA will be able to leverage 
over $10 billion in private sector investment, a key indicator of 
future job growth.
    In addition, EDA is not the only federal agency with economic 
development responsibilities. A recent analysis by the Office of 
Management and Budget cites over $20 billion annually in federal 
programs across nine federal departments and agencies with economic 
development responsibilities. In addition, the federal government 
spends about $15 billion a year in workforce development programs. 
These federal resources highlight the need to increase federal 
coordination of job producing efforts.
    It is also important to keep in mind that in fiscal year 2004, the 
federal government will spend a record $126 billon on research and 
development (a 42 percent increase since 2000) and President Bush has 
proposed increasing this amount further to $132 billion. The American 
private sector will spend an additional $193 billion on research and 
development, a trend that can be enhanced by making permanent the R&D 
tax credit.

    Question 10. As part of an economic redevelopment project, 
recipients of EDA grants on occasion engage in environmental 
remediation and other clean up related activities at their sites. Does 
EDA currently fund projects that primarily involve environmental 
remediation or is such remediation typically incidental to the economic 
redevelopment project?
    Response. Environmental remediation activities undertaken as part 
of an EDA funded economic redevelopment project are always incidental 
to the larger redevelopment activities. As a general rule, as an 
economic development entity, EDA believes that cleanup activities are 
most appropriately handled by state and federal environmental 
regulatory agencies with the background and technical expertise to 
address complex remediation issues. EDA is exclusively focused on the 
end use of the parcel, and has a policy of not engaging in land 
banking, or cleanup for cleanup's sake. Therefore, EDA would not fund a 
project that consists only of environmental remediation simply to 
prepare a site for an unknown future use. EDA's Hazardous Waste Cleanup 
Policy states that ``EDA will . . . participate in cleanups as a 
relatively minor part of an overall economic development-related 
project that directly results in beneficial economic activity in 
distressed communities.''
    Furthermore, cleanup activities exclusive of a market-based 
redevelopment plan would not be competitive under EDA's established 
investment policy guidelines. EDA is not interested in funding projects 
that lack solid market fundamentals and that have limited likelihood of 
supporting the future growth of the regional economy. This would 
include speculative projects with no clear plan for future development 
or very long development lead times. As a general rule, EDA is also not 
interested in funding projects that have a minimal impact on securing 
jobs and leveraging private investment or have undefined purposes.
    Finally, some institutional history may be instructive. In 1995, 
EDA became the U.S. Environmental Protection Agency's first federal 
partner in EPA's then-newly-minted national Brownfields Redevelopment 
Initiative. At that time, and during the ensuing years, EDA's mission 
has been recognized not as that of a cleanup authority, but as an 
agency that can facilitate brownfields redevelopment. The brownfields 
revitalization process has been characterized by both entities as a 
continuum, with EPA focused on the front end with assessment and 
cleanup, and EDA focused on the back end with the economic 
redevelopment of the sites.

    Question 11. When EDA grant recipients engage in environmental 
remediation activities as part of an economic redevelopment project, 
what environmental cleanup standards apply, and how does EDA oversee 
the projects to ensure that the work performed is consistent with 
federal environmental standards?
    Response. When EDA investment recipients engage in environmental 
remediation activities as part of an economic redevelopment project, 
all applicable federal and state cross-cutting statutory requirements 
apply. This could include the Comprehensive Environmental Response 
Compensation and Liability Act (CERCLA), the Resource Conservation and 
Recovery Act (RCRA), the National Environmental Policy Act (NEPA), the 
Clean Water Act, the Safe Drinking Water Act, and the Clean Air Act, 
among others. EDA is typically involved in a brownfield redevelopment 
project after the site or facility has been certified ``clean'' to 
applicable standards by federal and state environmental authorities. In 
instances where incidental cleanup is involved, that cleanup is always 
conducted pursuant to applicable state and federal requirements and EDA 
works closely with applicable entities (i.e., federal and state 
environmental regulatory authorities) to ensure that all applicable 
cleanup standards have been satisfied.
    EDA has environmental compliance specialists in each of the 
bureau's six regional offices. These individuals, in coordination with 
EDA project engineers and attorneys, work closely with representatives 
from other federal and state environmental regulatory authorities to 
confirm that when remediation work is performed, all applicable 
environmental standards have been satisfied. These same individuals are 
involved in ensuring environmental compliance in instances of EDA non-
brownfields related infrastructure development work as well.

    Question 12. Federal facilities are required under CERCLA 
Sec. 120(h) to ensure that all remedial action necessary to protect 
human health and the environment are taken prior to a transfer of the 
property to a non-federal owner. To the extent that remediation 
activities are needed as part of an overall economic redevelopment plan 
of a Department of Defense site, for example, DOD would be required to 
pay for the cleanup. Is it accurate that EDA would not use its economic 
redevelopment funds to perform remediation activities at federal 
facilities?
    Response. Instances of EDA remediation activities at former federal 
facilities are similar to those carried out at typical EDA brownfield 
project investments. As noted previously, in the context of the 
bureau's brownfields redevelopment work, in isolated instances EDA has 
been involved in cleanups where they are subordinate or incidental to a 
much larger economic development project. In all of these cases cleanup 
eligibility has hinged on the fact that the costs have been reasonable, 
related to a larger redevelopment project, and have not consumed a 
significant portion of the investment award. Moreover, remedial work at 
former federal facilities being redeveloped can go beyond the 
``hazardous substance'' warranty under Section 120(h) of CERCLA. For 
example, EDA has addressed asbestos remediation as part of the 
demolition and removal of structures on former federal facilities, and 
underground storage tank removal as part of the construction of new 
infrastructure (e.g., roads, utilities, etc.) to support site 
redevelopment. Nevertheless, in all instances, EDA-funded remediation 
has represented a very small portion of the larger redevelopment 
effort. Like EDA's other brownfields redevelopment work, in most cases 
the hazardous substances at the site have already been fully cleaned by 
the federal landowner, e.g., the Department of Defense, prior to 
transfer or lease of the site to the project sponsor. EDA carefully 
vets with all involved parties the documentation certifying the 
environmental condition of the site to be transferred.
    However, as you know, in rare instances additional remediation 
needs arise following transfer of the site during the redevelopment 
phase. This may occur because of unknown circumstances, unforeseen 
future uses or a change in project scope. If these additional 
remediation needs are substantial, EDA suspends funding of the project 
and reverts the project to the appropriate federal authorities, 
including the prior landowner. EDA does not have the technical, 
financial or program resources to undertake such work. If, however, 
those needs are purely incidental to the project (as with the examples 
cited above), EDA will fund the incidental remediation if doing so will 
safely and legally ensure the efficient and expeditious reuse, 
redevelopment or expansion of the site. Reversion of the project to the 
prior landowner in these circumstances would almost certainly 
substantially delay the project, which could jeopardize its overall 
progress and success. EDA's policy is to undertake such remediation 
only in service of its economic development objectives. In doing so, 
EDA ensures that this work is conducted pursuant to applicable state 
and federal requirements, and it works closely with applicable 
authorities to ensure that all applicable cleanup standards have been 
satisfied.

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 Responses by David Sampson to Additional Questions from Senator Thomas

    Question 1. What are your thoughts on including Census tract data 
to calculate the eligibility for projects?
    Response. EDA currently allows applicants to submit requests for 
EDA investment based on Census tract data. EDA allows Census tract data 
to identify pockets of poverty for eligibility within jurisdictions 
that otherwise do not meet the distress thresholds for eligibility. Of 
course, there must be a pocket identified with one or more census 
tracts, and the proposed EDA investment must be directly and 
specifically linked to benefiting the residents of the pocket of 
poverty. Often this is the most accurate data available to local 
communities.
    The Bureau of Land Management has recently funded a program to 
provide economic profiles to western communities free of charge by 
using Census and other data. This data can be found at www.sonoran.org 
under the link Economic Profile System link.

    Question 2. Do you know how many districts, nationwide, within the 
EDA are in a similar situation? It seems unusual that we would create 
this program and go through the process of creating these districts and 
treat them differently.
    Response. Of a total of 358 recognized economic development 
districts, 320 were funded with partnership planning funds in FY03, 
leaving 38 EDD's without an annual funding commitment from EDA. 36 of 
38 districts are not receiving funding from EDA in any form for their 
planning activities. There are also three pending designations that are 
not able to be funded under this year's budget. However, many districts 
receive assistance out of other Economic Development Assistance Program 
funding such as short-term planning grants or technical assistance 
funding, in order to develop a Comprehensive Economic Development 
Strategy application to make a region eligible for additional EDA 
investment.
    For example, in FY03, EDA received $23,844,000 for it planning 
program. EDA provided for 392 investments with this funding in this 
manner:


------------------------------------------------------------------------

------------------------------------------------------------------------
Partnership planning--districts...........  $17,328,345 (283
                                             investments)
Partnership planning--Indian..............  $2,728,778 (56 investments)
Partnership planning--eligible areas......  $230,000 (4 investments)
Short term planning--substate.............  $2,026,548 (30 investments--
                                             9 of these were to EDDs for
                                             total of $579,343)
Short term planning--urban................  $883,658 (12 investments--1
                                             of these was to an EDD for
                                             $35,000)
Short term planning--state................  $749,445 (7 investments)
------------------------------------------------------------------------

    Fourteen EDD grants for Kentucky and thirty-four EDD grants for the 
Austin region are not accounted for within the above funding breakdown. 
The 14 EDDs in Kentucky receive their funding through a statewide grant 
that is then parceled out to the 14 districts and the Austin regional 
office funds districts in 3 year intervals.
    Some counties within economic development districts (EDDs) move in 
and out of the distress designation as economic conditions change. 
(This is the case with Wyoming, where economic shifts have recently 
moved several EDDs out of eligibility. Wyoming currently has only three 
counties that are distressed based upon Census data--Goshen, Big Horn 
and Lincoln. In addition, Laramie, for example, meets distress criteria 
as a city.)

    Question 3. What is the cost for getting all of the districts 
funded?
    Response. A funded district averages $56,000 in annual grant funds 
from EDA. EDA would need an additional $2,128,000 in partnership 
planning funds in order to fund all unfunded districts (38) at this 
$56,000 level.

    Question 4. Can you tell me about how the EDA recently moved to 
reduce the rate of $10,000 per job created to $5,000 per job with a $22 
to $1 capital requirement?
    Response. The $5,000 per job measurement is an overall average goal 
set for all the EDA regions and only applies to infrastructure and 
revolving loan funds grants. It is not a requirement that all specific 
EDA investments must meet. The $5,000 per job measurement was recently 
added to the internal EDA balanced scorecard that consists of 35 
separate measurements to score the performance of the regional offices. 
It is a cumulative measure that accounts for an entire fiscal year of 
activity. As with the 22:1 ratio, EDA regularly discuss the $5,000 per 
job measurement as a factor for evaluating investment proposals. Since 
demand for EDA support typically exceeds the funding allocated to a 
region, these job and investment factors can be important determinants 
assessing the relative merits of proposals under consideration. These 
factors are not the sole determinants but are part of five EDA 
investment priorities against which all proposals are evaluated.
                                 ______
                                 
 Responses by David Sampson to Additional Questions from Senator Baucus

    Question 1. As you know, I have been concerned for some time about 
the effect of the ongoing reorganization at EDA on the management 
structure of the Trade Adjustment Assistance for Firms program. This 
program works well with a very small central staff in Washington, 
supplemented by the activities of the regional Trade Adjustment 
Assistance Centers. To my mind, the management structure of the TAA for 
Firms program is not broken and it doesn't need to be fixed.
    In the past, you have told me that the overall reorganization is 
motivated by a desire to: (1) reduce layers of government; and (2) 
bring EDA programs closer to their intended beneficiaries. Unlike other 
EDA programs operated out of the Washington office, TAA for Firms 
already has close ties to its intended beneficiaries through the TAACs. 
Making petitioners work through both the TAAC and the EDA Regional 
office, with continued policy control from Washington, seems to add a 
layer of government. And it certainly appears to require a much larger 
EDA staff in seven different locations instead of one.
    Please explain how moving the TAA for Firms program to EDA Regional 
offices improves program management, reduces layers of government, and 
brings resources closer to their beneficiaries.
    Please also provide in writing EDA's plans for staffing TAA for 
Firms in the regional offices and details of the timing and content for 
training regional staff in the operation of this program. Will the 
current staff administering TAA for Firms be retained, and if so in 
what capacities and locations? Will regional staff be fully trained 
before Washington staff are released or reassigned?
    Response. While the Trade Adjustment Assistance (TAA) for Firms 
program can work better--and as stewards of taxpayer resources we 
should continually be looking to improve the efficiency and 
effectiveness of public programs. For example, during my tenure, we 
have identified numerous deficiencies in the management of this 
program, for example: TAA Centers have sought approval for firms that 
do not meet certification guidelines or have other irregularities that 
has led EDA to embark on a complete review and update of policies, 
procedures and regulations to ensure compliance with all applicable 
statues. We anticipate this process to be completed later this year.
    One of the challenges the program has faced is the lack of 
resources to provide sufficient oversight of the program. Currently, 
EDA has three staff dedicated to the TAA for Firms programs, the senior 
most of these three also handles issues related to EDA's University 
Center and Economic Development District programs. This does not 
provide the capacity to enable sufficient oversight for the program. 
The location of these personnel in Washington, DC, is also a hindrance 
to adequate oversight.
    The President's Management Agenda calls for moving program delivery 
closer to the people that the government programs are designed to 
serve. EDA's current reorganization began in the Clinton Administration 
and moved all of EDA's primary programs to our six regional offices. I 
would note that contrary to your question, there is only a very small 
national research and similarly small national technical research 
program operated out of the Washington office. EDA's continuing 
reorganization, which began in 1998, simply brings Headquarters 
structure and staffing in line with its reduced role as per the 1998 
EDA reauthorization and decentralizes the one remaining mainline 
program that is still administered out of the Washington office, the 
Trade Adjustment Assistance for Firms program. One of the primary 
advantages, of course, of EDA's proposed decentralization is that EDA 
can incorporate TAA for Firms into the operations of the regional 
offices, reaching more potential firms and presenting to communities a 
more complete portfolio of programs to spur economic growth.
    I would also note that EDA's proposed decentralization would not, 
as you state, require ``petitioners work through both the TAA Centers 
and the EDA Regional office''. As it is now, petitioners have no 
contact with EDA Headquarters. It is the TAA Centers that deal with 
Headquarters--and would deal with the Regional Office under the 
reorganization. There is no additional layer of management, just an 
administrative change of where the TAA Centers receive approval, and 
the movement of decisionmaking authority to the regional level, closer 
to the people the program serves.
    As you correctly note, the service delivery of the TAA for Firms 
program occurs through the network of TAA Centers across the nation--
these are the entities, funded by EDA, that work directly with eligible 
firms and serve as liaison with EDA. EDA has no intention of changing 
this service delivery model.
    EDA regional offices will incorporate TAA for Firms-related 
functions (primarily petition certification, adjustment proposal 
approval and annual grant processing) into their workload. With an 
average of only two or three TAA Centers per EDA regional office, the 
impact on EDA regional staffing is minimal.
    You also raised the critical issue of training and the timing of 
the transfer of TAA for Firms responsibilities to our regional offices. 
We agree this is a critical issue and we are addressing it in a 
methodical and serious manner. The training for the regional personnel 
cannot be completed until EDA completes its regulatory update and 
develops new guidance, which will be geared toward EDA and TAA Center 
staff alike. The current guidance was issued in the early 1990's in 
draft form, was never finalized and is outdated. Once the regulations 
have been updated, guidance developed and reviewed, we will embark on a 
systematic training program for regional staff. After the training is 
complete, we will phase in the transition of the duties from 
Headquarters to the regional offices over a period of time, keeping 
redundant capability in Headquarters for a reasonable period of time. 
We anticipate this entire process will not be completed until the end 
of this calendar year. We will include TAA Center staff in our plans--
especially when it comes to training our regional staff and we will not 
transition the responsibilities until all the pieces are in place, even 
if it means delaying the transition.
    EDA remains in close communication with the TAA Centers. Senior EDA 
staff will be meeting with Center directors in June and again in 
September to keep them apprised.
                                 ______
                                 
        Responses by David Sampson to Additional Questions from 
                           Senator Murkowski

    Question 1. You have been in office a few years now, and have had 
an opportunity to look at how well EDA's grants have worked in many 
different areas. What examples can you provide of the best result in 
terms of economic development?
    Response. The best grants are ones that bring local government and 
business together to create higher-skill, higher-wage jobs and spur 
private sector investment. When a community expresses interest in EDA 
funding with a united front of community support and private business 
need, results are invariably positive. This does not necessarily 
meaning coming to EDA with a ``bird in hand'' prospective business, 
rather it is a clear line of communication between local elected 
leaders and the business leaders on the forward looking, market-based 
decisions on what is needed to move the regional economy forward.
    There are two recent examples that illustrate the important role 
EDA can play in supporting economic development efforts include. 
Recently EDA announced a $1,800,000 investment in Kettering University 
in Flint, Michigan to construct a Fuel Cell Systems and Powertrain 
Integration Center. This investment will help develop create a business 
incubator to create both individual business applications of this 
critically important energy need and a trained workforce. This 
investment will help create 704 new jobs and attract $158,000,000 in 
private sector financing. This project ties in all aspects of the 
community: business, local and state leaders, universities, and high 
technology sectors. It highlights how EDA is on the leading edge of new 
forms of economic development.
    The second is a recent $2,000,000 investment in the town of 
Hayneville, Alabama. This town is Lowdes County which was the 
birthplace of the civil rights movement but has had tremendous economic 
distress. It is one of the 100 poorest counties in the Nation. EDA was 
able to recently invest in basic infrastructure to support the town's 
first industrial park. This town has already attracted a tier one 
supplier of the new Hyundai plant. The 200 higher-skill, higher-wage 
jobs created will significantly raise the standard of living for this 
community.

    Question 2. Are there any grants you regret having made? If so, how 
do you plan to avoid similar cases in the future?
    Response. This is an interesting question. Rather than singling out 
a grantee perhaps I should mention a line of grant making that I 
believe EDA should not be involved in absent compelling job creation 
figures. Specifically, there are often requests for EDA assistance to 
make ``downtown pretty again.'' When EDA's budget was more robust it 
was able to participate in street beautification and other efforts more 
closely related to `community' development. However, the realities of 
our smaller budget and more competitive grant process dictate that EDA 
concentrate on projects that have a direct impact on the creation or 
retention of higher-skill, higher-wage jobs.

    Question 3. I understand EDA's results have led to a good rating 
for effectiveness from OMB. What factors do you feel influenced OMB's 
opinion? Have these resulted from changes to the agency during your 
tenure?
    Response. OMB has recognized the focus this Administration has 
placed on improved management efficiencies and effectiveness. The 
efforts EDA has undertaken during the past 3 years, resulting in 
significantly improved business management and grant performance has 
been duly noted by OMB in the form of their good rating of EDA's 
management and effectiveness. This has also led to the President's 
request--for a second year--for increased funding for EDA. In fiscal 
year 2000, EDA commissioned a workforce analysis conducted by Booz-
Allen and Hamilton and applied its findings by re-evaluating its 
workforce, mission, and overall strategy. As a result of the study, EDA 
successfully undertook a major headquarters restructuring effort that 
reduced staff and streamlined operations without any involuntary 
separations.
    EDA adopted investment criteria that clarify the kind of projects 
EDA will fund in order to achieve its mission and goals and focused on 
utilizing limited resources on projects that have regional impact and 
support competitiveness. EDA has adopted a balanced scorecard framework 
that integrates management and performance objectives into its strategy 
and EDA uses these performance measures to monitor progress. The 
balanced scorecard is an innovative management tool that EDA has 
successfully adapted to be one of the first public agencies to use in 
the government sector. The EDA has adopted this leading edge tool to 
help manage its work and drive improved performance for the taxpayer 
and grant recipients.
    EDA's increased performance is so remarkable that Dr. Robert S. 
Kaplan of Harvard Business School and Dr. David P. Norton of Balanced 
Scorecard Collaborative, inventors of the Balanced Scorecard, included 
a case study on it in their latest book as a best practice for the 
private sector as well as other government agencies.
    The application of these efforts has resulted in a consistent level 
of funding to rural and urban areas (approximately \2/3\ rural and \1/
3\ urban), and significantly increased levels of private sector 
investment and job creation without disadvantaging otherwise worthwhile 
projects with limited private investment or minimal job creation.
    EDA also undertook a variety of other program improvements. EDA 
reviewed its Government and Performance Results Act (GPRA) performance 
measures. Certain processes were eliminated and replaced with outcome-
oriented measures. Verification and validation procedures were 
implemented to ensure the accuracy and validity of all data reported. 
EDA has also incorporated performance as an element of the funding 
formula for Trade Adjustment Centers and is piloting a program to 
competitively award University Center grants on a 3-year cycle.

    Question 4. EDA has been active in attempts to convert closed 
military bases to productive civilian uses. We are likely to face a new 
round of base closings in the relatively near future. Is EDA ready for 
that and what resources are needed to effectively redevelop these 
bases?
    Response. EDA has learned a great deal from the last base closing 
round and is prepared to apply these lessons in a positive manner for 
affected communities for any future base closings.
    Sections 202 and 209 of EDA's legislation provide expansive 
legislative authority to EDA to rapidly and effectively address the 
economic impact of a military base closing. This legislative language 
is broad by design to allow EDA to accommodate the wide range of 
economic development challenges posed by base closings.
    EDA has a very close working relationship with the Office of 
Economic Assistance (OEA) at the Department of Defense and expects 
smooth and efficient execution of any projects it undertakes in 
partnership with OEA. With the existing EDA grant processing and 
monitoring system, EDA's operational infrastructure is fully scaleable 
to accommodate an increased appropriation to fund a new round of base 
closings just as EDA has increased the scale of its operations to fund 
economic recovery from natural disasters or industries affected by 
environmental regulations.
    Although Congress is currently debating the future of base closing, 
EDA stands ready to assist and will be developing a FY06 budget to 
accommodate a potential BRAC. EDA will welcome your assistance in 
making sure EDA has the necessary resources to get the job done 
correctly.
    The EDA success with the reuse of Fitzsimmons Army Hospital is a 
great success story. EDA has invested $15 million supporting the 
economic reuse of the former Fitzsimmons Army Medical Center. EDA has 
awarded grants to the University of Colorado, the Fitzsimmons 
Redevelopment Authority and the city of Aurora to assist with the 
redevelopment of the 577-acre site into a new campus for the University 
of Colorado Health Sciences Center and the Colorado BioScience Park in 
Aurora. The Bioscience Park is the major commercial component of the 
Fitzsimmons Redevelopment Plan and will contain research-oriented 
bioscience and biotechnology companies seeking a planned business park, 
in close proximity to an academic medical campus. The park will be the 
first of its kind, west of the Mississippi. Total EDA investments have 
amounted over $15 million. Private investment is expected to be $1.2 
billion and job creation is estimated at 12,000.
    Moreover, EDA was so impressed with the work done at Fitzsimmons 
that it has hired Robert Olson as the EDA Denver Regional Director (a 
career SES position). Olson led the highly successful redevelopment of 
the Fitzsimmons Army Hospital in Colorado and will be a tremendous 
asset to EDA during the next BRAC round. Bob Olson's in-house expertise 
will be invaluable as EDA prepares to address issues surrounding making 
closed military bases more attractive to private industry.

    Question 5. I am somewhat concerned about the possibility that 
funding may be decreased for the Northwest Trade Adjustment Assistance 
Center, which provides services to a number of Alaskan entities. It is 
my understanding that requests for assistance already far outweigh 
available funds even without a change. What are you doing to address 
this issue?
    Response. President Bush's proposed a 25 percent increase in 
funding for FY04 for Trade Adjustment Assistance (TAA). The Congress, 
however, provided a 16 percent increase. While less than the 
President's request, this increase will enable the TAA Centers which 
administer this program, to address the serious backlog of projects. 
Upon our arrival at EDA, we discovered that the allocation between the 
12 Trade Adjustment Assistance Centers was not based on any objective, 
consistent formula. Rather, the distribution among the TAA Centers was 
modified yearly in an ad hoc manner. In 2003, EDA worked closely with 
the 12 TAA Centers to remedy this situation and jointly developed a 
standard funding methodology. All TAA Centers, including the Northwest 
Trade Adjustment Assistance Center participated in is the process. 
Developing a funding methodology is a difficult process, and this 
proved to be no exception. However, EDA was very pleased to achieve an 
exceptionally high level of consensus among the TAA Centers with the 
new methodology. We believe that the increased funding and refinement 
of its allocation will greatly help the administrative feasibility of 
this program.

    Question 6. EDA is very focused on regional economic development 
these days. While I understand the strong desire to redevelop depressed 
industrial areas, there is also a great deal of need in more rural 
areas. What steps are you taking to ensure your approach is balanced?
    Response. The data shows that EDA has and continues to be a strong 
supporter of investment in rural America. EDA staff takes great care to 
ensure a proper balance of rural and urban projects. Over the last 5 
years, EDA has, on average, invested 66 percent of its annual 
infrastructure appropriations in projects in rural communities. 
Additionally, EDA has significant outreach to rural communities through 
regional summits and forums to expand EDA's technical assistance and 
reach communities that may have had very little exposure to EDA in the 
past. EDA has also funded a major study with Harvard Business School 
professor Michael Porter to address the issue of competitiveness in 
rural U.S. regions and will use nearly 65 percent of its National 
Technical Assistance and Research budget to fund additional cutting-
edge studies on rural economic development in 2004.
    Economies are not hermetically sealed in artificial political 
boundaries. The dominant reality of economic development today is that 
all communities, cities, towns and counties alike, must think 
regionally and pool their resources to build a strong economic platform 
for growth. By pooling their resources regionally, communities can 
attract the private sector investment necessary to spur job creation, 
because it is the private sector that creates jobs and spurs economic 
growth.

    Question 7. I understand you have strong feelings about technology 
development as a driver for economic development. What is EDA's role in 
this area?
    Response. EDA's mission statement is ``to lead the Federal economic 
development agenda by promoting innovation and competitiveness, 
preparing American regions for growth and success in the worldwide 
economy.'' It is clear that innovation and investment create high-wage 
jobs and improve our standard of living. Innovation is the key to 
prosperity. As a result, government must reinforce, rather than 
obstruct, the process of bringing innovations to the marketplace. That 
is why EDA and the Administration continues to fund investments, 
initiatives, and research that furthers innovative activity, such as 
unique capabilities of national labs and universities, including 
establishing cooperative research programs for the benefit of small and 
medium-sized businesses. In addition, the Bush administration is 
promoting manufacturing technology transfer to ensure that the benefits 
of R&D are diffused broadly throughout the manufacturing sector, 
particularly to small and medium enterprises.
    The private sector and the Bush administration recognize the need 
for continuing investment in research and development (R&D) of new 
products to remain ahead of the competition. The U.S. leads the world 
in innovation. Investments in technology create new industries and 
careers in U.S. firms that introduce products, create jobs, and spur 
economic growth. America's competitive edge flows directly from 
innovation and rising productivity. Job creation is increasingly 
dependent on innovation. The U.S. private sector spends $193 billion on 
R&D, while the Federal Government is investing more than ever in 
research by spending a record $126 billion this year and a proposed 
$132 billion in fiscal year 2005, a 42 percent increase of 2001. 
Today's labs are generating the industries of tomorrow.
    One of EDA's key objectives is to enable communities to increase 
their standard of living, thus becoming more prosperous. Technology-led 
economic development has successfully shown that it raises a 
community's standard of living by creating higher-skilled, higher-wage 
jobs. Communities prosper and grow and are successful when they 
innovate, and innovation is often tied to technology. Although 
innovation and technology development are not mutually exclusive, 
technology is an area of competitive advantage for communities and the 
country when it is pursued, developed, and meets a market need. It is 
important to note, however, that EDA's support for technology-led 
economic development does not limit EDA to new and emerging industries. 
Established, core industries must continue to adopt new technologies 
and look for innovative solutions in order to remain competitive. EDA 
has a strong commitment to working with those regions that are working 
to upgrade their core industries in order to enhance their 
competitiveness.

    Question 8. We have talked before about the need to find a way to 
support small-scale projects in remote rural areas as a way of 
generating business activity and stimulating employment appropriate to 
the circumstances in those areas. Are you taking specific steps to 
encourage such programs equally to the more traditional, large-scale 
bricks and mortar projects?
    Response. First of all I believe that bureaucracy should not get in 
the way of good economic development projects. For that reason, I 
believe the Special Impact Areas legislative language has been included 
in the Administration bill and the bill passed by the House. This 
language will allow EDA, in unique circumstances to wave the necessity 
for a Comprehensive Economic Development Strategy (CEDS) under 
compelling circumstances such as those faced by the extremely rural 
communities you represent. This CEDS requirement can, in some 
instances, significantly delay EDA funding for a given project in a 
small community--even when it is generally accepted by all parties as 
being the critical project for that local community. I urge the Senate 
to approve this limited authority to get EDA dollars to support good 
small projects in small Native American Communities. This language will 
allow EDA to create more small scale projects in hard to reach 
communities.

                               __________

Statement of Gary Gorshing, Executive Director, South Western Oklahoma 
     Development Authority and President, National Association of 
                       Development Organizations

                           EXECUTIVE SUMMARY

    The Economic Development Administration (EDA) is a vital Federal 
resource for distressed areas striving to improve their local economies 
through private sector job growth. This applies to localities 
struggling to overcome both long-term economic challenges and sudden 
and severe hardships caused by manufacturing plant closings, military 
base closures, natural disasters, declines in core industries and other 
related events.
    The Economic Development District planning program is a proven and 
essential resource for our nation's distressed communities, 
particularly in small metropolitan and rural America. As stated in a 
2002 program evaluation by Wayne State University, the national network 
of 320 planning and development districts has built a notable record of 
facilitating a comprehensive strategic planning process that ``provides 
the critical backbone for economic development planning at the local 
level.''
    The EDA public works program provides valuable financial assistance 
to build, rebuild or expand the basic public infrastructure needed to 
develop new businesses or retain existing companies. The average EDA 
public works investment is typically leveraged ten to one by the 
private sector, according to an in-depth study by Rutgers University. 
Long-term jobs have been created and retained historically at an 
average cost of $3,058 per job, among the lowest ratios in government.
    The EDA Revolving Loan Fund (RLF) program is a powerful and 
essential economic development tool for addressing the credit gaps that 
exist in distressed communities, particularly in underserved rural 
areas. By using limited public funds to leverage private capital, 
locally managed RLFs are providing business capital to thousands of new 
and existing companies that have difficulty securing conventional 
financing.
    Thank you, Mr. Chairman and members of the committee, for the 
opportunity to testify today on issues related to the reauthorization 
of the Economic Development Administration (EDA).
    My name is Gary Gorshing. I am the Executive Director of the South 
Western Oklahoma Development Authority (SWODA), headquartered in Burns 
Flat, and I also currently serve as the President of the National 
Association of Development Organizations (NADO).
    In my testimony, Mr. Chairman, I plan to discuss the unique role 
EDA plays within the portfolio of Federal economic development 
programs. I will highlight the impact of EDA investments at the local 
level and demonstrate the overwhelming value of the planning, public 
works, revolving loan fund and economic adjustment assistance programs. 
While NADO strongly supports the compromise bill (H.R. 2535) adopted by 
the US House of Representatives in October 2003, I will also offer some 
modest suggestions to improve and clarify the legislation from the 
regional and local perspective.

                          ABOUT NADO AND SWODA

    The National Association of Development Organizations (NADO) 
provides training, information and representation for regional 
development organizations serving the 82 million residents of small 
metropolitan and rural America. The association, founded in 1967 as a 
national public interest group, is a leading advocate for a regional 
approach to community and economic development. NADO is part of the 
intergovernmental partnership among Federal, state, regional and local 
officials. The association is also a member of the Coalition for 
Economic Development, a consortium of national organizations working to 
advance the goals and mission of the Economic Development 
Administration. The coalition includes representatives of regional 
councils of government, city and county officials, economic development 
councils, EDA university centers and community-based nonprofits.
    NADO members-known locally as councils of government, economic 
development districts, local development districts, planning and 
development districts and regional planning commissions--provide 
administrative, professional and technical assistance to over 2,000 
counties and 15,000 small cities and towns. These organizations 
administer and deliver a variety of Federal and state programs. Based 
on local needs, programs may include aging, census, community and 
economic development, emergency management planning, homeland security, 
housing, small business development finance, transportation and work 
force development. A policy board of local elected officials, business 
leaders and citizen representatives typically governs each regional 
organization. Associate members of NADO include state and local 
agencies, educational and nonprofit organizations, businesses and 
individuals.
    The South Western Oklahoma Development Authority (SWODA) serves 
eight counties, 46 cities and towns, and ten conservation districts 
within the region. In addition to providing planning and technical 
assistance to local communities, SWODA delivers aging services as an 
Area Agency on Aging; administers four loan programs including USDA 
Intermediary Relending Program (IRP), SBA 7A loan Guaranty Program, SBA 
504 loan program and a SWODA revolving loan fund; manages the 3,000-
acre Clinton-Sherman Industrial Airpark, a former defense facility; 
administers local Workforce Investment Act programs; and assists local 
communities with EDA, USDA and HUD Community Development Block Grant 
proposals, capital improvement planning, rural fire defense 
initiatives, solid waste projects, historic preservation efforts and 
other community development initiatives.
    We believe, Mr. Chairman, there are four major reasons for the 
committee to support a multiyear reauthorization of the Economic 
Development Administration (EDA).
    1. EDA has a unique and clearly defined role within the broad 
portfolio of Federal economic development programs.
    2. The EDA planning program for multi-county economic development 
districts is a proven, costeffective and essential resource for the 
nation's distressed communities, particularly in small metropolitan and 
rural regions.
    3. The EDA public works program is a flexible and vital resource 
for helping distressed communities develop the most fundamental 
building block for economic development--public infrastructure.
    4. The EDA Revolving Loan Fund (RLF) program is a powerful and 
indispensable economic development tool for addressing the credit gaps 
that exist in many distressed communities, especially in underserved 
small metropolitan and rural areas.
    First, Mr. Chairman, the Economic Development Administration (EDA) 
has a unique and clearly defined role within the broad portfolio of 
Federal economic development programs. As the only Federal Agency 
focused solely on private sector job growth and sustainability, EDA is 
a vital resource for distressed communities striving to improve their 
local economies. Whether it is through infrastructure grants, strategic 
planning assistance, business development capital or technical 
assistance, EDA investments are designed to promote economic 
opportunities in impoverished communities. Most importantly, EDA 
investments are typically the seed funds or gap financing that make 
locally identified projects a reality in the nation's poorer areas.
    Over the years, the Agency has developed a strong record in 
assisting communities who are struggling to overcome both long-term 
economic challenges and sudden and severe hardships. Through its full 
range of program tools, the Agency has been uniquely positioned to help 
areas recover from military base closures, manufacturing plant closings 
and job losses, natural disasters and declines in natural resource-
based industries like coal, fisheries and timber.
    The Agency has also developed important partnerships at the state, 
regional and local levels. These relationships with regional 
development organizations, local governments, Tribal governments, 
universities and others are an essential part of carrying out the 
Agency's traditional ``bottom-up'' philosophy. As reinforced in various 
academic studies and evaluations, EDA investments are among the most 
efficient and cost-effective in government because they originate from 
a local planning process, require a substantial financial match from 
local grantees and focus on private sector job creation.
    At a time when Congress must make difficult choices on Agency 
budgets, EDA is an Agency that merits the full support and commitment 
of the committee. Therefore, we respectfully urge the committee to 
develop and approve a multi-year reauthorization bill that maintains 
the Agency's current mission and program focus of helping bring 
economic opportunities to all of the nation's distressed communities, 
with a special emphasis on small metropolitan and rural America.
    Second, Mr. Chairman, the economic development district-planning 
program is a proven, cost-effective and essential resource for our 
nation's distressed communities, particularly in small metropolitan and 
rural regions. As reported in a 2002 program evaluation by Wayne State 
University, the national network of 320 economic development districts 
has developed an impressive record of facilitating a comprehensive 
strategic planning process that ``provides the critical backbone for 
economic development planning at the local level.''
    By leveraging modest EDA planning funds with local dollars, these 
multi-county development districts provide vital professional, 
administrative and technical assistance to local government officials, 
business leaders, nonprofits and communities. This is particularly true 
in small metropolitan and rural regions where local governments often 
lack professional staff capacity. According to a 2001 study by the 
National Association of Counties, over 60 percent of metropolitan 
counties have full-time economic development staff, compared to only 34 
percent of rural counties. Furthermore, nearly 85 percent of the 
nation's 39,000 units of local government serve populations below 5,000 
and almost 30 percent have no professional staff. As a result, most of 
the nation's smaller communities rely heavily on EDA-funded planning 
and development districts for professional and technical support.
    As part of the Comprehensive Economic Development Strategies (CEDS) 
process, districts bring local elected officials, business leaders and 
community representatives together to prepare and implement strategies 
aimed at helping a multi-county region become or remain full 
participants in the nation's economic mainstream. Whether a region is 
currently enjoying economic stability or coping with long-term 
challenges such as declines in traditional industries, it must prepare 
for tomorrow or risk falling behind in today's competitive global and 
high-tech marketplace.
    Districts are now engaged in comprehensive planning and 
implementation that reflects the dramatically changing national and 
global economy. Today's regional plans may encompass strategies for 
using technology as an economic development tool, building local work 
force capacity in distressed areas and enabling communities to 
diversify economies. In addition to the planning functions, districts 
spend a significant amount of time and staff resources helping local 
communities administer and package public and private sector financing 
for projects, navigate the reams of bureaucratic red-tape, and collect 
and analyze the data needed to make informed and educated decisions.
    With advanced technologies, such as Geographic Information Systems 
(GIS) and Global Positioning Systems (GPS), many districts are now 
providing state-of-the-art assistance to local constituents. While the 
possibilities for GIS are almost endless, activities range from mapping 
areas with failing septic systems in order to identify areas where 
alternative treatment systems are needed, to simulating the land use 
and environmental impact of business locations in a specific area, to 
marketing and showcasing business parks over the Internet. As noted in 
the 1998 House committee report on EDA reauthorization, EDA should be 
encouraged to further enhance GIS-related activities of the districts.
    The Southeast Tennessee Development District offers a good example 
of the power of comprehensive planning. McMinn County, located in the 
southeast corner of the state, was facing overcrowded jails, an 
overflowing landfill and growing debt. Over a 10-year period, the 
district facilitated a strategic planning process with county leaders 
to address these pressing needs. After implementing ideas developed 
during the planning process, the county is now debt-free and follows a 
pay-as-you-go policy. As a result, the county is now in a better 
position to pursue new economic opportunities, such as the expansion of 
NuMarkets, a consignment seller for e-Bay that plans to expand from 21 
workers today to at least 300 in the next 2 years.
    The planning districts in Oklahoma, including SWODA, are using GIS 
and GPS technologies to develop capital improvement plans for local 
governments, a process that requires inventorying of all public assets. 
By cataloging and mapping every road, bridge, water line, public 
building and other assets, the districts can create visuals and data 
for local elected officials and business leaders who are developing 
economic development strategies. The information can also be used for 
transportation planning, zoning decisions, land use management, 
disaster mitigation planning and an endless list of other activities. 
Without the expertise and capacity of the districts, most local 
jurisdictions would never have the economies of scale, resources or 
skills required to engage in this important visioning activity.
    In Missouri, the Boonslick Regional Planning Commission leveraged 
EDA planning resources to lead an effort to craft a Comprehensive 
Economic Development Strategy for its region in the late 1990's. The 
planning process resulted in several new ambitious goals for the Agency 
and the region to pursue. Four of the top goals involved establishing 
affordable housing opportunities for working families, securing 
resources for infrastructure improvements, enhancing services for 
special populations within the region, and creating a financing tool to 
help local banks support business growth and job creation. Since the 
creation of the CEDS, significant progress has been made toward 
achieving these four goals.
    The Boonslick Regional Planning Commission has worked with local 
communities and developers to improve affordable housing opportunities. 
Thirty-six new homes have been built for families working in the 
region. These homes are 1,200 square feet and were sold for less than 
$80,000. Down payment assistance was provided to help homebuyers secure 
conventional financing. Additionally, the region has completed 
renovations on more than 60 housing units, improving the housing 
quality for working families in rural communities.
    To assist special populations, the planning district helped with an 
innovative project that provides public transportation services in 
Lincoln County. The system, know as The Linc, provides public 
transportation Monday through Friday for any resident of Lincoln 
County. Since its inception in 2002 The Linc has provided more than 
12,000 trips. Fifty-four percent of these trips are for employment. 
Individuals that could not work because of transportation limitations 
are now able to hold full-time positions because of the availability of 
public transportation.
    The Boonslick RPC has been working diligently to secure financing 
to assist communities improve and expand their infrastructure to 
support economic growth in the region. Since the CEDS was completed, 
more than $30 million has been invested in local infrastructure 
projects. The organization also created a new revolving loan fund (RLF) 
to assist local banks finance business startup and expansion. The 
district leveraged $200,000 in local money with $300,000 from EDA and 
$100,000 from the State of Missouri. Since the fund was created 2 years 
ago, the RLF has loaned $580,000, helped create or retain 170 new jobs, 
and leveraged private investments of more than $3.5 million.
    The Northeast Oregon Economic Development District has also worked 
to diversify the economy of its rural region. The group established 
Enterprise Facilitation to increase community capacity by promoting 
local entrepreneurship and assisting individual startups, business 
improvement and expansion planning. The program draws on the expertise 
of a volunteer local board and facilitator to help each entrepreneur 
build a support team with the strengths to cover business development 
areas, such as marketing and financial management. The program has 
served 264 entrepreneurs, 15 startups and 11 business expansions with 
job creation. The organization has leveraged public and private sector 
funds, including EDA, to maintain the initiative.
    In central Pennsylvania, SEDA-COG established a resource center 
that helps organize partnerships for community success, achieve local 
development objectives and shape community identity through town 
planning and urban design. The project is the culmination of a regional 
effort to strengthen bonds between Lewistown and the surrounding 
municipalities. By placing downtown development in the context of a 
regional community, this initiative breaks new ground for small town 
conservation and economic development. It has stimulated a constructive 
dialog, spawned new regional connections and improved intergovernmental 
cooperation. In addition, nonprofit capacity has been enhanced, private 
capital has been committed and leveraged, and businesses have benefited 
from the resulting downtown-based services and training opportunities.
    These examples offer only a small sample of the impact and 
achievements of the nation's 320 EDA designated economic development 
districts. These locally--controlled organizations have consistently 
demonstrated the indispensable value of EDA planning grants. Although 
the average $54,000 grant for each district is small by Washington 
standards, it means a world of difference to the thousands of rural 
counties and small towns served by the program. Unfortunately, the true 
purchasing power of the district planning money has been eroded over 
the past 30 years to less than 15 cents on the dollar. In addition, the 
limited pool of resources has been stretched in recent years as the 
Agency tries to assist designated-but-unfunded districts across the 
country.
    As mentioned above, the comprehensive evaluation conducted by Wayne 
State University's Center for Urban Studies in 2002 found that 
districts are both effective and essential to local development. The 
summary of the report frames the work of the districts best by stating, 
``economic development districts have been effective instruments 
promoting cooperation, coordinating needs assessments, and through the 
CEDS [Comprehensive Economic Development Strategies] process, 
generating the kind of regional planning needed to effectively promote 
positive economic change.''
    To further enhance the performance of economic development 
districts, NADO specifically urges the committee to increase financial 
resources for the national network of 320 economic development 
districts. While the districts have stretched and leveraged their 
modest resources for years, nearly 30 years of inflation costs and new 
program demands make a modest funding increase a top priority.
    NADO urges the committee to maintain and strengthen the leadership 
and coordinating role of the economic development districts in the 
crafting of regional and local Comprehensive Economic Development 
Strategies. This includes retaining the revised planning performance 
bonus incentive established in the House bill (H.R. 2535). This modest 
bonus of 5 percent for public works and economic adjustment projects is 
an important incentive at the local level to promote and facilitate 
regional cooperation of local communities. While it is often easy to 
preach and talk about regional cooperation, the reality is frequently 
more difficult to achieve.
    In addition, the association and its members remain concerned that 
there is a misunderstanding of the value and role of the planning 
program at the regional and local levels. Historically, EDA planning 
grants have been used to help regions develop comprehensive development 
strategies, which is an important and critical mission. But their more 
important outcome is the professional and technical capacity developed 
at the local level within the economic development districts. Without 
the flexibility and expertise of the districts, most local communities 
would severely lack the ability to pursue new economic opportunities, 
have the skills to package complex development deals and navigate the 
burdensome and intricate reams of Federal and state paperwork. 
Therefore, we ask the committee to ensure that the district-planning 
program will remain a vibrant and flexible resource for local areas.
    Third, Mr. Chairman, the EDA public works program is an essential, 
flexible and cost-effective partner for helping distressed communities 
develop the most basic economic building block--public infrastructure.
    Year after year, local elected officials and economic development 
professionals in rural and small town America identify infrastructure 
development as their primary concern for economic development. While 
there are other Federal programs, such as the HUD Community Development 
Block Grant program, USDA rural development and the EPA clean water and 
drinking water funds, the EDA public works program is the only program 
focused solely on projects tied to private sector job growth and 
sustainability. It is also different because it is a cost-sharing grant 
program targeted directly at distressed local communities, unlike many 
of the other Federal programs that either are administered by the 
states or only offer loans and loan guarantees to communities already 
financially strapped.
    The value and success of the EDA public works program has been 
validated repeatedly over the years. Traditionally, the average EDA 
infrastructure investment has been leveraged ten to one by the private 
sector, according to an in-depth study by Rutgers University. More 
importantly, EDA projects help distressed communities create quality 
long-term jobs at an average cost of $3,058 per job, which is among the 
lowest and most efficient in government. The Rutgers report underscores 
that the near perfect on-time completion of EDA public works projects 
is the direct result of the planning phase that precedes the project 
selection.
    Throughout its history, EDA has also been recognized as a national 
leader and innovator in the economic development field. Many cutting-
edge practices have emerged from the public works program, such as 
business incubator buildings, smart technology parks, eco-industrial 
parks, and the redevelopment of brownfields. Without the financial and 
technical support of EDA and its local partners, most distressed 
communities in small metropolitan and rural America would never have 
the opportunity to implement these essential infrastructure-related 
projects.
    In my home region in Oklahoma, EDA has made several valuable 
investments. In 1992, for example, the city of Clinton received 
assistance from EDA to help meet an overwhelming need for expanded 
sewer treatment. Without this assistance, it is most certain that BAR-S 
Company, a major local employer, would have been forced to close its 
plant in Clinton. This would have resulted in the loss of approximately 
400 quality jobs in our very rural region.
    In Tennessee, EDA invested $1.5 million in public works money to 
partially finance water system improvements at the North Etowah 
Industrial Park. The project allowed a brake manufacturer for the 
automotive and truck industry to commence production operations of its 
second state-of-the-art facility in 2001. The EDA project also helped 
locate a second automotive supplier in a spec building within the 
industrial park.
    Since the completion of the EDA financed infrastructure 
improvements, the city of Etowah has realized an 18 percent increase in 
its local tax base. Moreover, given the quality of the companies and 
the higher-than-average wages ($12 per hour or better) the per capita 
income increased from $16,924 to $20,395. Recently, the two businesses 
have announced expansion plans due to upcoming regulatory changes in 
the automotive industry. The changes are expected to generate an 
additional 250 jobs coupled with a $115 million private sector 
investment.
    EDA invested nearly $3 million in infrastructure improvements to 
sustain a major local industry in Montana. A local company constructed 
a $550 million plant in Silver Bow, just west of Butte. The company 
converts metallurgical-grade silicon into silane gas and 
polycrystalline silicon products including rods and chunks. These 
products are sold to other companies that use the material to produce 
single crystal wafers, which are later sold and used by companies, such 
as, Motorola, Micron, and Intel to make semiconductor devices such as 
memory chips and microprocessors. Currently, 220 people are employed at 
the plant and an additional 60 jobs will be created in this small city. 
The average annual salary of the workers is $55,000.
    In Florida, EDA is playing an instrumental role in helping the Town 
of Altha develop the basic infrastructure needed to support and sustain 
existing businesses. EDA contributed about $320,000 of the total 
project cost of $823,000 to construct a new water line, upgrade an 
existing water line and install a new well and pump. As a result of the 
project, Oglesby Plants International, Inc. is committed to creating 15 
new jobs and retaining 125 existing jobs.
    EDA has also helped the city of Palatka in Florida, a traditionally 
distressed community, build the basic infrastructure needed to retain 
and attract light industrial and manufacturing firms. The project 
involved making improvements to an industrial park, including the 
installation of water and sewer lines, a lift station and fire 
suppression infrastructure. Among the immediate impacts, Sykes 
Enterprises, Inc. will create 423 new jobs and make a private sector 
investment of $14 million when they establish operations in the 
industrial park. Overall, the project will help the city provide 
employment opportunities to unemployed and underemployed workers who 
are seeking higher wage jobs.
    As part of the EDA reauthorization package, we strongly encourage 
the committee to maintain fair and flexible eligibility criteria for 
public works grants. This includes retaining the Agency's long-standing 
policy of helping the nation's most impoverished communities, with a 
special emphasis on small metropolitan and rural communities. We 
strongly disagree with any ``one-size-fits-all'' approach that directs 
EDA investments to only one type of industry or project, to any one 
type of community or to any one type of economic development 
philosophy. Over the years, the success of EDA has been rooted in its 
``bottom-up'' approach. The EDA public works program is a proven 
program that serves as a key catalyst for economic development in 
distressed areas. Without it, impoverished communities would struggle 
to develop and sustain the infrastructure and facilities needed to 
develop new businesses and retain existing companies.
    My fourth and final point, Mr. Chairman, is that the EDA Revolving 
Loan Fund (RLF) program is a successful and powerful economic 
development tool for addressing the credit gaps that exist in many 
distressed communities, particularly in underserved rural areas. By 
using limited public funds to leverage private capital, locally managed 
RLFs are providing business capital to thousands of new and existing 
companies that have difficulty securing conventional financing.
    Capitalized with an EDA grant, RLFs are managed by public and 
private nonprofit organizations (including economic development 
districts) and are designed to further local economic development goals 
by lending their initial capital and then re-loaning funds as payments 
are made on the initial loans. Loans are typically used for fixed 
assets or working capital needs. Organizations are also required to 
demonstrate how the RLF fits their local needs, as defined in a 
comprehensive economic development strategy.
    The participation of RLF funds in a business deal usually 
encourages once-reluctant banks to also lend, since loan funds normally 
agree to let banks recoup their losses first from the business' 
collateral in the event of default. By providing such gap financing, 
loan funds have been instrumental in the growth of companies that 
otherwise would not have received funding.
    The approximately 600 RLFs capitalized by EDA play a particularly 
critical role in the economic development of distressed rural areas, 
where alternatives to conventional financing are limited. In inner 
cities, community development corporations (CDCs) and municipal 
agencies often manage loan funds. In rural areas, where there are few 
CDCs and limited municipal capacity, RLFs managed by regional 
development organizations are often the only source of alternative 
financing for entrepreneurs and existing businesses. A January 2002 
NADO survey of regional development organizations with loan funds found 
that half are the sole lender in all or part of their multi-county 
service area, underscoring the important role played by public entities 
and RLFs in creating private sector jobs in rural America. (For more 
details, see the NADO Research Foundation report, ``EDA RLFs Make a 
Difference.'')
    In a rural region of Missouri, the Meramec Regional Planning 
Commission has helped provide business capital to a local company that 
has grown into a worldwide supplier of specialty chemicals, materials, 
and equipment to micro-electronics and opto-electronics manufacturers. 
In 1995, the Meramec RPC supported the company's expansion by making a 
working capital loan of $150,000, which in turn leveraged $1.3 million 
in private sector funds. Sixteen jobs paying an average of $23 per 
hour, much higher than the regional average of $14, were created in the 
small town of 16,000. Since 1992, the Meramec RPC has made 37 loans 
that have created and saved 758 jobs.
    As noted earlier, the Boonslick RPC also established an RLF in 2002 
based on recommendations made during the region's strategic planning 
process. The most challenging project the RLF has been involved in, 
according to the organization's executive director, is the construction 
and financing of a local food market, the Loutre Market. The market was 
the only grocery store serving the southwest portion of the region. It 
was wiped out after floods in 1993 and 1995, and the owners closed the 
business. This meant that the southern portion of the county was left 
without any grocery.
    The community worked for years to attract a new store or owner. A 
potential owner was finally located and the community worked with all 
possible agencies to make the project work. They included local 
financing, Small Business Administration financing and community funds 
to try and finance the project. In the end, the group needed $150,000 
to complete the $2 million deal. The Boonslick RPC provided the gap 
financing that made this project a reality. While this project example 
lacks the glamour of many high-priced, large-scale deals, it was a 
vital endeavor for this rural region. Without a local food market, it 
would be extremely difficult to retain existing businesses let alone 
attract new employers.
    The decline of southwest Oregon's wood products and fishing sectors 
has contributed to the region's unemployment rate of more than 8 
percent in recent years. To combat this trend, the CCD Business 
Development Corporation--which serves Coos, Curry and Douglas 
Counties--has used its loan fund to create and retain over 3,200 jobs 
in an array of sectors. One of its borrowers is FCC Commercial 
Furniture in Roseburg, now one of the nation's leading manufacturers of 
restaurant furniture.
    The company relocated from California in 1993 and occupied a vacant 
building formerly owned by a defunct log loader manufacturing company. 
CCD coordinated a loan deal that included a $115,000 RLF loan to 
finance equipment and $395,000 from the organization's other loan 
programs and a bank to finance other relocation costs. They hired all 
local workers and currently have about 110 employees.
    The Genesee-Finger Lakes Regional Planning Commission, based in 
Rochester, has used its RLF to support high-wage, high-skills jobs in 
various sectors, including the region's struggling printing industry. 
The organization's RLF has helped finance the purchasing of software 
and high-end computers for high-quality printing. The RLF has also made 
loans to growing businesses for working capital. In the past decade, 
the fund has made a total of 44 loans to 42 businesses and has created 
or saved 920 jobs in this transitioning region.
    Despite the effectiveness of locally managed RLFs, the EDA program 
could be dramatically improved by implementing several no-cost or low-
cost recommendations:
     EDA should recapitalize and expand the lending capacity of 
existing RLFs that have established a successful track record and 
demonstrated demand.
     A new technical assistance program should be added to 
complement the loan fund program to better safeguard the investments 
made by RLFs. The Agency should allow a limited amount of RLF grant 
funds to be used for professional development training and continued 
education of RLF managers.
     The EDA RLF program should emulate other Federal loan 
programs and defederalize RLF moneys once they have been loaned out and 
repaid one time. Defederalization will reduce paperwork and regulatory 
burdens, while still requiring local accountability. It would also 
lessen the oversight responsibilities of EDA, which are currently 
perpetual for the Agency.
     The Agency should lower or eliminate the requirement that 
75 percent of funds be loaned out at any one time. This mandate is 
particularly burdensome during slow economic times and in rural and 
remote regions. At a minimum, the Agency should have the flexibility to 
deal with hardship cases. By mandating the 75 percent requirement, the 
Agency runs the real risk of forcing local RLF policy committees and 
managers to make investments in unsound and the riskiest of deals.

                               CONCLUSION

    In closing, Mr. Chairman, I want to reinforce NADO's support for a 
multi-year reauthorization bill that maintains EDA's current mission 
and program focus of helping bring economic opportunities to our 
nation's impoverished communities, particularly small town and rural 
America. Through its existing programs--including the planning, public 
works and economic adjustment programs--the Agency serves as a vital 
resource for localities striving to improve their economies through 
private sector job growth. The Agency should retain the flexibility to 
help all of the nation's distressed areas, whether they are struggling 
to overcome long-term economic challenges or sudden and severe 
hardships. EDA is an Agency that merits the full support the committee.
    I also want to state that NADO remains supportive of the Agency's 
brownfields redevelopment efforts. In March 2002, NADO member Mary Lou 
Bentley of the Western Nevada Development District presented the 
association's positions on the issue. The association's leadership also 
sent a letter to Ranking Member Jim Jeffords and Senator Carl Levin in 
general support of the Brownfield Site Redevelopment Assistance. In the 
current Congress, the bill is S. 645.
    Most importantly, we strongly support retaining a leadership and 
coordinating role for EDA-designated economic development districts 
both in the development of regional and local Comprehensive Economic 
Development Strategies and the implementation and pursuit of new 
economic opportunities at the local level. In the end, economic 
development is inherently a locally driven process that requires 
regional coordination, collaboration and partnerships. The established 
network of economic development districts has proven over time to be an 
effective, cost-efficient and professional group that should be further 
strengthened and maintained.
    Thank you again, Mr. Chairman and members of the committee, for the 
opportunity to testify today on the views of NADO and its membership. I 
would welcome any questions.

                               __________

   Statement of James J. Saudade, Deputy Commissioner, Department of 
            Housing and Community Affairs, State of Vermont

    Good morning Mr. Chairman and members of the Committee, and thank 
you very much for the honor and opportunity to provide testimony to you 
today regarding the reauthorization of the Economic Development 
Administration (EDA).
    My name is James J. Saudade, and I am the Deputy Commissioner for 
the Vermont Department of Housing and Community Affairs, Agency of 
Commerce and Community Development.
    This morning I would like to tell you how important the assistance 
available through EDA is to a small, rural state like Vermont. I will 
share with you some of our experience with the EDA in Vermont, and 
offer some suggestions for making EDA even more effective in rural 
parts of our country.
    As I am sure my Senator, Jim Jeffords, reminds folks around here 
once in awhile, Vermont is a small state that is facing substantial 
economic challenges. The median income for a family of four in Vermont 
grew only about $500 from 1989 to 1998, our poverty level during that 
period actually increased from 8.1 percent to 9.6 percent, and our 
share of poverty level jobs increased in the 1990's to fully 25.5 
percent of all jobs. While unemployment for much of the state remains 
below the national average, Vermont hosts regions of high unemployment 
such as our Northeast Kingdom and substantial underemployment is 
pervasive throughout Vermont. These are serious conditions that impair 
our economic health.
    To address these disturbing trends, we have undertaken economic 
development planning and projects to stimulate new business, train 
workers, and grow the businesses we have. In this effort we have 
enlisted the assistance of EDA as our partners to help underwrite the 
cost of new infrastructure, capitalize revolving loan funds, and build 
small business facilities. In fact Mr. Chairman, as we are meeting here 
this morning, the ribbon is being cut on a new business center in St. 
Johnsbury, Vermont. A business center that offers new hope for quality 
jobs in our most economically distressed region. This center, which is 
largely underwritten with EDA funds, resides in an industrial park that 
was originally established and expanded with EDA assistance.
    Although my personal experience with the EDA has been over many 
years, most recently I was very involved with a new, EDA assisted, 
business incubator in Randolph, Vermont. This incubator will open in a 
few months and is in partnership with Vermont Technical College. It 
will offer businesses a supportive environment to become established 
and grow. These businesses will derive research and expertise from the 
resources of the college and, in turn, provide students and faculty 
with a laboratory for fostering technological achievements. And most 
importantly, this new incubator will provide jobs in a community that 
had been devastated by a series of fires and has suffered several 
recent plant closures. Already, several businesses are lined up to 
occupy the incubator, including a very promising business working with 
new, light emitting diode technology and a software developer.
    Both the Randolph and St. Johnsbury projects were planned and 
executed in accordance with regional Comprehensive Economic Development 
Strategies (CEDS). These CEDS are a requirement for participation in 
EDA activities and are a planning feature which I, and the Agency I 
represent today, strongly endorse. The process to complete these plans 
is arduous, time consuming, and not without cost, but their value for 
smart development is indispensable. These plans provide a sobering view 
of the current regional economy, a retrospective evaluation of previous 
development, an inventory of available resources, and most importantly, 
a solid plan for action. The process draws in the interests of 
planners, businesses, community interest groups, and government and 
ensures that broad representation is a feature of the planning process. 
While EDA has always provided helpful materials to regions in support 
of these plans, I would like to commend EDA on its much-improved web 
site that now provides a wealth of information, resources, and 
contacts.
    As previously stated, the Vermont Agency of Commerce and Community 
Development endorses the development planning required by EDA. In fact, 
we now look to those plans, where they exist in Vermont, to make 
investment decisions regarding the deployment of state resources. When 
a project comes to the state for assistance from a region where a 
comprehensive plan was completed, we ask where that project is in the 
regional plan, how does it help fulfill the goals of the plan, and what 
strategic opportunities identified in the plan are captured by this 
project? In order to make this policy effective statewide, we have 
recently issued 2005 work plans to regional agencies making the 
completion of regional economic development plans a top priority where 
they currently do not exist.
    The array of assistance products provided by EDA has helped to 
address many of Vermont's economic development requirements and, 
without them, there would be no alternative. The public works 
assistance has been vital in underwriting infrastructure improvements. 
The Economic Development District program has helped the Northeast 
Kingdom to plan projects in this very rural and distressed region of 
Vermont. And the Revolving Loan Program has provided credit enhancement 
and gap financing to hundreds of Vermont's small businesses. But as 
effective as these products have been to our work to regain economic 
vitality, we look forward to implementing the elements of our regional 
economic plans not yet accomplished and to fulfilling the promise of 
the regional plans not yet completed.
    This week, perhaps as I speak, adjustments to our state's limited 
liability program for brownfields reclamation are being considered in 
our state legislature. I believe the improvements under consideration 
will result in a watershed of new interest in our existing brownfields 
sites. With over 2,000 known brownfields in Vermont, we will need the 
help of the EPA and EDA to help us remediate and reuse these areas. 
Returning these sites to productivity is crucial to our need for jobs, 
critical to the stability of our town and village centers, and 
protective of our yet unspoiled landscapes.
    Vermont is a rural state and its character is very different than 
urbanized areas of the country. As such, we sometimes find ourselves 
working within constructs of the Federal Government that do not work as 
well as they might in more populated states. This is true with EDA. We 
would recommend that EDA allow some discretion in the design and 
implementation of its programs to absorb inherent differences that 
exist across the country, and particularly in small states. For 
example, EDA and other agencies look to counties as important 
representations of regional boundaries. In many states where county 
governments conduct a wide range of governmental functions this makes 
sense. However, in Vermont, although counties exist as representations 
on maps and for judicial and law enforcement purposes, there are no 
``county governments.'' EDA would be better served by a more flexible, 
working definition of regional boundaries.
    Similarly, small states cannot begin to garner the resources that 
larger states are able to assemble in support of economic development 
activities. Again, flexibility in the goals of EDA programs would allow 
for more realistic and scaled expectations for smaller states. For 
instance, EDA would like to achieve leveraging ratios of 22:1 of 
``other funds'' to EDA dollars. This level of leveraging, though 
laudable, is simply unattainable in Vermont and threatens to make EDA 
an anachronism in our state.
    Rural states also have a more difficult time fielding committees 
such as those required in developing economic plans. It is difficult to 
find enough people who are able to commit the time and energy to serve 
on required boards and, in Vermont, it is impossible to supply the 
diversity that might be attainable in other states. EDA has with great 
difficulty, accepted some variation on its model for public 
participation but, while we understand the need to be accountable to 
all of our constituents, additional flexibility is warranted.
    Also characteristic of very rural states is the lack of 
professional staff for small communities and the logistical obstacles 
to attending meetings, accessing program representatives, and 
maintaining good contacts. The EDA relies heavily on regional 
representatives. These EDR's as they are known are responsible for 
large geographic areas that prohibit frequent visits and limit 
accessibility. This dependence on very few individuals to provide both 
technical expertise and firewall review of new proposals for a huge 
area does not do justice to the otherwise well thought out EDA system 
of resource deployment.
    We would also appreciate an improved EDA application process that 
did not place project viability in the hands of one person initially, 
and also allowed for the capture of time sensitive and unusual, but 
creative projects. The existing application process is multi-tiered, 
and cumbersome. The process tends to delay if not defeat projects that 
either require quick action, or offer new and innovative approaches to 
traditional problems. We recommend a ``special review'' process for 
applicants that can demonstrate a need for an extraordinary procedure. 
We might also suggest a closer partnership with EDA field 
representatives to state, community development departments. In 
Vermont, as is the case in most states, development department staff 
have become proficient in the review and administration of CDBG small 
cities projects and may offer EDA some assistance in extending field 
capacity and offering support to EDA field staff.
    In conclusion, we enthusiastically recommend reauthorization of 
EDA. While we would recommend flexibility and discretion in applying 
program standards to small states, EDA's major program features are 
sound, its products are invaluable, and Vermont's economic distress 
would become further exacerbated without EDA support. EDA has and is 
providing resources that we could not otherwise replace, and we look to 
a re-authorized and invigorated EDA to help shape Vermont's economic 
future.
      

  Statement of R. Charles Gatson, Vice President and Chief Operating 
                   Officer, Swope Community Builders

    Chairman Inhofe, Senator Jeffords and Members of the Committee, 
thank you for inviting me to testify in front of your committee on the 
Economic Development Administration reauthorization bill. I want to 
particularly recognize Senator Bond who has been a friend and a 
champion of our efforts to improve the lives of thousands of folks 
living in Kansas City, Missouri.
    I am currently the Vice President/Chief Operating Officer of Swope 
Community Builders, a position I have held for the past 13 years. Swope 
Community Builders is one of the nation's 3,600 community based 
development organizations represented by the National Congress for 
Community Economic Development.
    We are a nonprofit community development corporation with a $7.5 
million annual budget. On December 31, 1991 our total assets were 
approximately $60,000. On December 31, 2003 our total assets exceeded 
$61.4 million. We have completed in excess of $120 million in 
development projects--single and multi-family housing, as well as 
commercial and institutional--over the past 10 years. Every dollar the 
Federal Government invests in our work leverages another $7. We manage 
more than $100 million dollars of investment. We have over $100 million 
of new investments in our development pipeline.
    In 1991, when I came to work at Swope Community Builders, many in 
our was troubled with high poverty and unemployment rates, low housing 
values coupled with many vacant and abandoned buildings. Many in our 
community did not have adequate health care coverage or access to 
retail shopping. Community residents were not engaged in planning 
activities nor were they beneficiaries from higher economic growth.
    As I stated earlier, Swope Community Builders has completed in 
excess of $120 million in redevelopment projects during its 14 years of 
existence. One of our most important projects, the H&R Block Technology 
Center, was completed in December 1999. This project, a corporate 
technology center built using cutting edge construction, cabling and 
computer technology, relocated 150 employees earning an average of 
$45,000 per year from suburban Kansas to Kansas City's urban core and 
created 400 full time equivalent jobs with starting salaries of $15.00 
per hour. The total annual payroll at the H&R Block technology center 
exceeds $20 million. The building generates annual real estate taxes of 
approximately $225,000 which, coupled with economic activity taxes, 
generates enough income from a Tax Increment Finance District to debt 
serve a $2 million tax exempt bond issue that has been used to spur 
other job creating redevelopment projects. Across the country, the 
computer needs of over 8,000 of H&R Block's franchisees are serviced by 
this Center. This project did more than provide jobs to area residents; 
it provided hope to the residents, spurred further development and 
provided proof to other corporations and investors that urban Kansas 
City locations are safe and can be the sites of sound investments.
    The FirstGuard Office Building, a 72,000 square foot 
technologically advanced office building completed in 2002, is home to 
the FirstGuard HMO, Mazuma Credit Union, the Dalmark Corporation, the 
Housing and Economic Development Financial Corporation and Swope 
Community Builders. This $14 million facility is geared toward 
companies with a need for fast computer links, advanced telephone 
systems and video capabilities and a trained labor force. This building 
is home to over 300 employees.
    Swope Community Builders is in the development phase of the New 
Village at Technology Center, a 480,000 square foot office/warehouse 
project, accompanied by 50,000 square feet in companion retail/service 
space and 175 units of work force and market rate housing. The New 
Village at Technology Center will be designed to attract office/
warehouse tenants whose businesses are based upon the uses of new 
technologies, who have similar needs as the tenants in the H&R Block 
Technology Center and the FirstGuard Office Building and who need easy 
access to rail and surface transportation. This center will employ over 
1,200 people at average wages of $19.50 per hour which translates into 
an annual payroll of $48.6 million. It is expected that a large 
percentage of the jobs created will be filled by residents from Kansas 
City's 3d Council District, statistically its most economically 
distressed location, located due east of the Central Industrial 
District. This project will have a lasting effect on at least 1,200 
families while providing another example to the investment community 
that community development corporations are excellent partners who 
understand how to make deals work in urban core America.
    The revitalization of our community and the H&R Block project would 
not have been possible without substantial federally funded and 
supported investments. Again I want to recognize Senator Bond's efforts 
in securing millions of Federal dollars for these initiatives. We 
regularly make great use of HUD funds through HOME and the Community 
Development Block Grant, Health and Human Services through the Office 
of Community Services, the Department of Justice through COPS and the 
Neighborhood Initiative and Economic Development Initiative programs. 
We have also utilized local governmental funding techniques such as Tax 
Increment Financing, Special Taxing Districts, Property Tax Abatement 
(home ownership projects) and the city of Kansas City's Capital 
Improvements programs. All these funding mechanisms, coupled with 
private capital from conventional loans and equity investments, are 
crucial to bringing more technology based projects and investments to 
urban core locations where sites are available and easily trained labor 
forces are available.
    One Agency missing from that list is the Economic Development 
Administration. Despite our best efforts, Swope Community Builders has 
never received any funding from the Economic Development 
Administration. Indeed, none of the 14 Community Development 
Corporations in Kansas City has received substantial funding from the 
Economic Development Administration in the past 16 years.
    The experience in Kansas City is not an isolated case. Our 
membership association, the National Congress for Community Economic 
Development (NCCED), surveyed some of the leading Community Development 
Corporations in the Nation in 2002 to learn of their experiences. 
Outside of the Western region, which includes California and 
Washington, no Community Development Corporation could report access to 
Economic Development Administration investments.
    To his credit, Assistant Secretary David Sampson has taken this 
lack of access of community based organizations to Economic Development 
Administration seriously. Dr. Sampson told NCCED members at our Policy 
Summit in March that, ``I have a great appreciation of what you do in 
local communities every single day.'' Dr. Sampson has a personal 
commitment to community based organizations, including those that are 
faith-based because he knows Community Development Corporation's create 
conditions so our communities have a growing standard of living. Over 
the past 3 years, Dr. Sampson has made community based organizations 
and faith-based organizations a funding priority of the Economic 
Development Administration. Dr. Sampson clearly stated that the 
Economic Development Administration should not discriminate against 
faith based or community groups in funding decisions. Economic 
Development Administration headquarters is looking at regional offices 
to see if they are working with new groups, expanding the deal flow, 
and expanding the group of partner agencies. ``We do not want to work 
with the same groups all the time'', he said. ``It is our goal that no 
geographic sector or community is left behind in the economy 
geographically or demographically'', he added. The Economic Development 
Administration has added a community based partnership category to its 
annual Awards for Excellence.
    However, the intention has not translated into reality due to a 
combination of inadequate appropriations for the Economic Development 
Administration and an institutional culture that is closed to 
community-based nonprofits like mine.
    In the previous Economic Development Administration 
reauthorization, Congress expressly made community based organizations 
an eligible group for Economic Development Administration investments 
and relaxed the requirements that any project have approval from the 
development department of the participating jurisdiction.
    Making nonprofits eligible for poverty alleviation resources is a 
typical Federal strategy including programs like the Temporary 
Assistance to Needy Families, Workforce Investment Act, and the 
Economic Development Administration. However, in most of these 
programs, eligibility does not translate into partnerships that build 
on the abilities of nonprofits.
    While I support the reauthorization of the Economic Development 
Administration, I hope that the Agency and Congress will more 
aggressively seek opportunities to enable nonprofit community based 
organizations to better utilize Economic Development Administration 
funds. Some opportunities include providing a set-aside investment pool 
specifically for community development corporations that is available 
through competitive applications to headquarters.
    Swope Community Builders is preparing a pre application as 
described in the Catalog of Federal Domestic Assistance, Grants for 
Public Works and Economic Development Facilities, for $2.5 million to 
assist in the predevelopment stage of the New Village at Technology 
Center. One of the selection criteria states that the project must 
``involve innovative partnerships and private investment leveraging''. 
Swope Community Builders' projects are always based upon partnerships 
with local, state and Federal partners, local and regional banks, 
national intermediaries, philanthropic foundations and, most 
importantly, local residents. While I am sure this criterion is 
utilized, I would like to see some type of application scoring system 
that would give higher priority to community development corporations 
that leveraged relationships as well dollars. Economic Development 
Administration assistance will, allied with the type of financing tools 
that we have utilized on our completed projects, be crucial to the 
speedy and efficient development of this most important project.
    It is my personal belief that the future of urban core 
neighborhoods is closely tied to job creation and economic development 
that are tied directly to new and emerging technologies from 
biomedicine to information dissemination and management to light 
industry and manufacturing. The Economic Development Administration can 
and must act as a catalyst, providing dollars that can be leveraged 
seven (7) times by those who have the commitment to urban core 
communities and the experience to produce job creating development 
projects.
    Thank you for the opportunity to testify on how community 
development corporations are building strong vibrant communities with 
the Federal Government as our investment ally. We look forward to being 
able to add the Economic Development Administration's programs to our 
arsenal as we continue to attack the problems that plague some parts of 
our nation's urban cores. I personally look forward to a continued 
working relationship with Senator Bond, a true champion of urban 
revitalization.

                               __________

Statement of Phillip A. Singerman, Ph.D., Executive Director, Maryland 
  Technology Development Corporation, on behalf of the International 
                      Economic Development Council

    Mr. Chairman, distinguished members of the Committee, I am truly 
honored to be invited to testify before you on the Reauthorization of 
the Public Works and Economic Development Act of 1965. My name is 
Phillip Singerman, Executive Director of the Maryland Technology 
Development Corporation (TEDCO) and member of the International 
Economic Development Council Board of Directors. I believe I have a 
special perspective to bring to your deliberations: from 1995 to 1999 I 
served as Assistant Secretary of Commerce for Economic Development, and 
in that capacity was responsible for the Economic Development 
Administration (EDA) when Congress reauthorized EDA in 1998--the first 
time the Agency had been reauthorized in nearly 20 years. That was a 
milestone achievement of the Congress, carried out in a bi-partisan 
fashion, and I want to congratulate you for that visionary action.
    I also want to commend Assistant Secretary David Sampson for his 
leadership of the Agency and for helping push for an innovative bill to 
reauthorize EDA for the next 5 years. He and members of his staff have 
made a special effort to reach out my colleagues in the local economic 
development community and myself. I want to thank him for these 
personal and professional courtesies.
    Since 1999 I have directed a public instrumentality in the State of 
Maryland, established by the General Assembly to create and sustain 
businesses through the development, transfer, and deployment of 
innovative technology. In Maryland EDA has played a crucial role in 
distressed urban areas such as Baltimore, rural communities on the 
Eastern Shore of the Chesapeake Bay, and depressed Appalachian counties 
of Western Maryland. EDA has taken a leadership role in helping 
underserved areas connect to high-speed internet service, and in aiding 
small companies through the development and support of business 
incubation.
    I am also here today as a representative of the International 
Economic Development Council. IEDC is the leading association serving 
economic development professionals and those in allied fields. IEDC's 
more than 4,000 members are committed to building local and regional 
economies worldwide. The key to IEDC's reputation and steady growth is 
its access to a large and diverse pool of professionals and the quality 
of the council's staff. For more than 30 years, IEDC and its 
predecessor organizations have been producing quality services that 
help find solutions to the complex and varied issues of economic 
development. For the past year, IEDC has been working with EDA and 
Congress to help contribute to the reauthorization of the EDA On behalf 
of the thousands of economic development professionals that I represent 
today, I thank you for this opportunity to voice our support for this 
critical Agency.
    I have carefully reviewed both the House passed legislation (H.R. 
2535) and the Senate introduced Administration bill (S 1134), and have 
attached a set of policy recommendations provided by IEDC. In my 
testimony I want to highlight the following points:
     The importance of prompt passage of EDA reauthorization
     The importance of providing adequate funding authorization 
levels
      The importance of allowing more efficient management of 
EDA's Revolving Loan Fund Projects, specifically, removing Federal 
restrictions on these projects after 20 years.

      EDA: HELPING TO ENSURE THE FUTURE OF AMERICAN MANUFACTURING

    EDA is generally viewed in Washington as an anti-poverty program, 
alleviating low income, under-employment, and unemployment. Having 
worked and studied this general issue for my entire professional 
career--nearly 30 years--I have come to the conclusion that EDA is 
perhaps more importantly a capacity building program, which increases 
the productivity of the Nation. It does this by making investments that 
leverage under-utilized economic resources--human capital, financial 
capital, and real estate--that are reflected in unemployment, 
inadequate business financing, and low valued land. It does this by 
redeveloping physical infrastructure that is threatened by abandonment 
due to such things as military base closures and changes in 
international flows of capital. And it does this by broadening the 
participation of minorities and women in the work force.
    Over the past 3 years, American manufacturing jobs have 
dramatically declined. The cause of this decline can be traced to 
decisions made by domestic manufacturers to relocate plants and 
factories in foreign countries offering a more lenient production 
environment and lower wage work force. In light of these global 
changes, the Administration is actively seeking ways to address the 
critical loss of U.S. manufacturing jobs. Some of this attention is 
focused appropriately on job training, and some will seek to support 
emerging industries, including high-tech manufacturing. IEDC supports 
and encourages all of these steps, and believes the EDA, as the lead 
Federal Agency working with economic development districts and related 
state and local government agencies, should play a major role in these 
efforts to address the decline in the American manufacturing industry.
    The EDA provides a number of demonstrated tools that can be used to 
secure manufacturing employment by creating new opportunities for job 
creation, technology advancement, skills and job training and 
infrastructure development. The EDA works directly in the communities 
that are most devastated by the loss of major manufacturers. The EDA's 
Economic Adjustment grants provide the much-needed support for 
communities dealing with the ``sudden and severe'' distress caused by 
layoffs, downsizing and plant closings. This spring the Congress will 
be reviewing the Administration's budgetary requests for fiscal year 
2005, and this summer, agencies will be submitting their requests to 
the Administration for fiscal year 2006 funding.
    I can assure this committee that in the normal give and take of the 
budgetary process, an Agency that is not reauthorized will suffer in 
the process; for those who care about the ability of EDA to provide 
critically needed support to our most distressed communities and 
populations, delay is not an option.
    Quick reauthorization of EDA will also be important for communities 
that suffer the closure--or significant downsizing--of a local military 
base during the 2005 Base Realignment and Closure (BRAC) round. During 
the previous four base closure rounds, the Agency provided almost $650 
million in grants to 106 communities for economic planning and 
redevelopment assistance. Up to approximately 100 installations could 
be closed through the 2005 round. EDA grants help communities achieve 
productive civilian reuse of closed military bases and rapid economic 
development through technical and financial assistance.
    Although I believe there are one or two areas in which the House 
bill could be improved, I respectfully urge the committee to promptly 
consider passage of legislation that reauthorizes the EDA.

      PROVIDING THE APPROPRIATE AUTHORIZATION LEVELS (SECTION 701)

    The House passed legislation proposes an authorization level of 
$2.25 billion for EDA programs for 5 years: $400 million for fiscal 
year 2004, and an additional $25 million each year from fiscal year 
2005-fiscal year 2008. The Administration requested $321 million for 
fiscal year 2005 and such sums as necessary in the remaining years. The 
House bill provides authorization levels for the EDA that will allow 
Congress to respond to unanticipated economic difficulties.
    The House passed version is a significant improvement over the 
current level of the budget in a number of major ways.
    First, the legislation provides Congress with the authorization 
flexibility it needs to address unanticipated economic difficulties, 
such as those occasioned by international trade competition and 
homeland security. This is comparable to the flexibility previously 
utilized by the Congress to respond to natural disasters and defense 
conversion/base closures.
    During the latter part of my tenure we were faced with economic 
crises in the steel and textile industry, yet the lack of sufficient 
authorization levels prevented an appropriate addition to EDA's funding 
to address these severe and sudden problems. The result was that 
funding to address these issues was taken away from other communities 
that were suffering long-term economic deterioration, creating a 
conflict among equally needy regions. This new language does not 
eliminate the ultimate responsibility of Congress to make judgments 
about budget priorities, but it does remove an artificial constraint to 
your appropriate level of flexibility.
    Second, IEDC and those in the economic development profession who 
rely on EDA funding, are concerned about the steady decline in funding 
for EDA programs, and particularly the disproportionate cuts imposed by 
the fiscal year 2004 Omnibus Appropriations Act. The fiscal year 2004 
appropriation of $288 million is 15 percent below the authorized level 
and 30 percent below the House recommended authorization level of $400 
million. Based on EDA performance data, a $43 million investment could 
result in an additional $129-430 million in private sector investment 
and the potential for 22,000 jobs. The House approved authorization 
levels give the economic development community options for addressing 
future funding needs for projects and initiatives the spur investment 
and help create jobs.

     REVOLVING LOAN FUND (RLF) PROGRAM MODIFICATIONS (SECTION 207)

    EDA's revolving loan fund program (RLF) is a very important 
component of a local communities' overall economic development 
activity. In 2002 the Center for Urban Policy Research, Rutgers 
University, released three reports totaling nearly 950 pages on EDA's 
RLF program (Burchell, et al.) The study's authors concluded that (1) 
an RLF is one of the most effective tools available to economic 
development agencies, (2) RLF loans enable businesses to prosper that 
would not have prospered under convention lending guidelines, and (3) 
the RLF program was supported by effective regional economic planning 
and good program planning. I recall that during my tenure the RLF 
program was particularly helpful in communities affected by base 
closure and natural disasters; by contrast emergency loan programs 
administered by the SBA are limited in the time during which they are 
available and not part of an overall local recovery strategy.
    The House passed legislation does modify several regulations 
concerning the revolving loan fund (RLF) program of the EDA. The bill 
allows for more flexibility and options in delivering this important 
program. The House bill specifically gives EDA broad authority to 
issues new rules and regulations to ensure the ``proper operation and 
financial integrity'' of Revolving Loan Funds (RLF). The bill also adds 
new language allowing EDA to permit grantees that are operating more 
than one RLF to consolidate funds at the request of the local grantee. 
EDA is also given the authority to transfer assets of RLF to 3d party 
for purpose of liquidation and adds new provision allowing EDA to 
authorize RLF operators to securitize or sell loans to secondary 
market.
    One major provision was, however, left out of the House passed 
version that was included in the Administration's proposed legislation. 
As proposed in the Administrations legislation and included in S. 1134, 
modifications of section 209 to release the Federal interest in a 
revolving loan fund grant is a long overdue correction to the law, 
which currently creates an unnecessary--and frankly--unmanageable 
administrative burden on EDA and local communities. This will remove a 
significant reporting requirement from local communities and monitoring 
responsibility from EDA.
    This is really a very modest step and other agencies--such as 
USDA--``defederalize'' local loan programs once the funds have been 
fully recycled (loaned out and then repaid). However, EDA's revolving 
loan fund program is structured as a grant to a local community, and 
therefore a more stringent standard than in a loan program is 
appropriate. The requirement of 20 years of successful performance 
ensures that only well run programs will be able to qualify for this 
step, and the requirement of a reimbursement to the Federal treasury--
not to EDA--ensures that the Agency will have no financial incentive to 
defederalize non-qualifying programs. Please understand that this 
process can only be undertaken pursuant to formal regulations 
promulgated by the Secretary of Commerce, and that the Department's 
Inspector General will undoubtedly also be monitoring this process 
carefully.
    One final comment: we tried to defederalize RLFs 6 years ago but 
did not pursue it in the face of opposition by EDA's friends in the 
Congress. The argument put forward at that time was that through 
defederalization, Davis-Bacon protection would be weakened. At that 
time we did not have the data necessary to analyze that issue: however, 
the Burchell report on RLFs previously cited clearly demonstrates that 
these loans are not used in construction or public works but for 
working capital to small businesses for startup, retention or expansion 
purposes, and thus Davis-Bacon does not apply.

                 CONCLUSION: ENDURING IMPORTANCE OF EDA

    In these times of economic recovery, it is imperative that the EDA 
continue its stated mission to ``help our partners across the Nation 
(states, regions and communities) create wealth and minimize poverty by 
promoting a favorable business environment to attract private capital 
investment and higher-skill/higher-wage jobs through world-class 
capacity building, planning, infrastructure, research grants and other 
strategic initiatives.'' By quickly and decisively acting on this 
important reauthorization, the Congress can send a lucid and convincing 
message that EDA and its programs, that help create jobs and stabilize 
distressed economies, are a high priority of the Federal Government.
                                 ______
                                 
      Respones by Phillip Singerman to Additional Questions from 
                            Senator Jeffords

    Question 1. You have always been a supporter of the comprehensive 
economic development strategy; do you think that this process is still 
relevant in this technology lead new economy environment?
    Response. Over the past 8 years, Rutgers University Center for 
Urban Policy Research conducted a series of comprehensive studies of 
EDA's programs, and found that local planning was critical in the 
success of EDA's programs, such as public works. My personal experience 
as EDA Administrator is that when communities had not engaged in a 
comprehensive planning process, but received funding (e.g., post flood 
disaster, base closures), the programs were not as well managed. EDA's 
planning programs are terribly under-funded - communities are receiving 
the same level of funding that they received nearly forty years ago. 
EDA should devote a minimum of $50 million annually for planning, 
technical assistance, and research, and any community- and State - that 
wishes to engaged in a comprehensive planning process, should receive 
funding (although wealthier communities would be required to provide a 
higher cost share).

    Question 2. The House EDA reauthorization bill creates a new five 
percent planning performance award, but only for projects located in 
economic development districts. What is your opinion of this award and 
the overall incentive structure put forward in the House bill?
    Response. Communities should be encouraged to work with their local 
EDA-designated planning region; in this way local planning will be 
taken seriously. Accordingly, I support all incentives which encourage 
closer relationships and greater attention to comprehensive, inclusive 
planning.
                                 ______
                                 
   Reauthorization of the Economic Development Administration Policy 
                            Recommendations
   Provided by the International Economic Development Council (IEDC)

    EDA programs direct vital resources for infrastructure development, 
local capacity building, and business development to alleviate 
conditions of unemployment and underemployment in economically 
distressed areas and regions across the U.S. The Federal law to 
authorize programs and funding for the Economic Development 
Administration (EDA), The Economic Development Administration Reform 
Act of 1998 (P.L. 105-393), expired on September 31, 2003. Renewal of 
our national commitment to the economic development priorities 
supported by this small, but highly effective Federal agency should be 
made a legislative priority for Congress in 2004.
    The House of Representatives reauthorization proposal, H.R. 2535, 
was approved on October 21, 2003, laying out a 5-year plan to continue 
EDA's mission with some modifications designed to improve performance 
and increase flexibility and funding levels. The Senate introduced S. 
1134 reflects the Administration's proposal. No additional hearings or 
legislation action occurred in 2003. Pending reauthorization, EDA 
continues to operate under the authority of the 1998 Act.
    [``This legislation was developed through an intense process of 
hearings and markups. It was an open process that allowed for the input 
of all Members and groups with an interest in the legislation. This 
process has resulted in legislation that has broad bipartisan support, 
the support of the administration, and the support of such important 
partners as the National Association of Development Organizations, 
International Economic Development Council, National League of Cities, 
National Association of Counties, and the United States Conference of 
Mayors.'' Stated Chairman LaTourette in his opening House floor remarks 
for EDA reauthorization.]
    In these times of economic recovery, it is imperative that the EDA 
continue its stated mission to ``help our partners across the Nation 
(states, regions and communities) create wealth and minimize poverty by 
promoting a favorable business environment to attract private capital 
investment and higher-skill/higher-wage jobs through world-class 
capacity building, planning, infrastructure, research grants and other 
strategic initiatives.'' By quickly and decisively acting on this 
important reauthorization, the Congress can send a lucid and convincing 
message that EDA and its' programs, that help create jobs and stabilize 
distressed economies, are a high priority of the Federal Government.
    IEDC, as the nations' largest organization representing economic 
development professionals, urges the Congress to complete the EDA 
reauthorization this year. IEDC supports passage of a comprehensive 
bill that will maximize funding, performance and accountability in EDA 
programs. This action will send a strong message to economic 
development agencies and their private sector partners that Congress is 
committed to the EDA mission of providing vital seed money to high 
performing regional and local economic development projects.
    The IEDC has prepared some policy guidelines for consideration in 
the formulation of an EDA reauthorization bill in the Senate. IEDC is 
committed to working with the Congressional leadership to pass 
legislation widely supported by industry and economic development 
practitioners committed to national priorities of job creation and 
economic growth.

                             EDA IMPORTANCE

     The EDA is the only agency within the Federal Government 
that works solely to promote private sector job growth with programs 
and activities that directly relate to economic development.
     EDA maintains effective interagency partnerships with 
other Federal agencies, including the Departments of Defense, Labor, 
Energy, Agriculture, HUD, the EPA, ARC and FEMA/DHS, to promote 
economic development in distressed areas.
     EDA has a strong regional operation working side-by-side 
with state and local economic development agencies to plan, prioritize 
and implement economic development projects emphasizing the creation of 
jobs and sustainable, comprehensive economic growth.
     EDA's record of performance under the Government 
Performance Review process is one of best among Federal programs and 
agencies. EDA was also heralded recently in a study released by Rutgers 
University to evaluate the public works program at EDA. Rutgers rated 
EDA's work exemplary. They found a 100 percent return on investment for 
all projects (public and private) supported by EDA funding. For every 
$1 million of Federal money spent, another $1 million was leveraged in 
Federal, state, or local investment dollars. The study found, on 
average, this level of investment also produced 325 direct permanent 
jobs in the impacted community. EDA reporting shows an even more 
optimistic outcome. Looking at data collected on investments since 
1965, EDA shows public works investments have generated $10 million in 
private sector dollars and $10 million in the local tax base for every 
$1 million spent by EDA.
     Quick reauthorization of EDA will also be important for 
communities that suffer the closure--or significant downsizing--of a 
local military base during the 2005 Base Realignment and Closure (BRAC) 
round. During the previous four base closure rounds, the agency 
provided almost $650 million in grants to 106 communities for economic 
planning and redevelopment assistance. Up to approximately 100 
installations could be closed through the 2005 round. EDA grants help 
communities achieve productive civilian reuse of closed military bases 
and rapid economic development through technical and financial 
assistance.
    The mission of EDA is to address severe and persistent conditions 
of unemployment and underemployment in severely distressed communities, 
many struggling to recover from the loss of a major employer or other 
economic dislocation. Through infrastructure grants, strategic planning 
assistance, business development capital and technical assistance, EDA 
provides a level of investment that acts as a catalyst for economic 
development that would typically not progress if not for the EDA funds 
to close financing gaps and spur capital investment. Moreover, EDA 
requirements for state and regional collaboration in planning and 
implementation of economic development strategies works to build 
capacity and partnerships that are sustainable and innovative.
     IEDC urges the Senate to draft EDA reauthorization 
legislation that builds upon the existing successes and structure of 
the Administration,
     Increases and commits to higher funding levels and 
performance standards, and
     Encourages partnerships at the local level across numerous 
stakeholders and service providers.
      eda: helping to ensure the future of american manufacturing
    EDA is also an important capacity building program, which increases 
the productivity of the nation. It does this by making investments that 
leverage under-utilized economic resources--human capital, financial 
capital, and real estate--that are reflected in unemployment, 
inadequate business financing, and low valued land. It does this by 
redeveloping physical infrastructure that is threatened by abandonment 
due to such things as military base closures and changes in 
international flows of capital. And it does this by broadening the 
participation of minorities and women in the work force.
    Over the past 3 years, American manufacturing jobs have 
dramatically declined. The cause of this decline can be traced to 
decisions made by domestic manufacturers to relocate plants and 
factories in foreign countries offering a more lenient production 
environment and lower wage work force. In light of these global 
changes, the Administration is actively seeking ways to address the 
critical loss of U.S. manufacturing jobs. Some of this attention is 
focused appropriately on job training, and some will seek to support 
emerging industries, including high-tech manufacturing. IEDC supports 
and encourages all of these steps, and believes the EDA, as the lead 
Federal agency working with economic development districts and related 
state and local government agencies, should play a major role in these 
efforts to address the decline in the American manufacturing industry.
    The EDA provides a number of demonstrated tools that can be used to 
secure manufacturing employment by creating new opportunities for job 
creation, technology advancement, skills and job training and 
infrastructure development. The EDA works directly in the communities 
that are most devastated by the loss of major manufacturers. The EDA's 
Economic Adjustment grants provide the much-needed support for 
communities dealing with the ``sudden and severe'' distress caused by 
layoffs, downsizing and plant closings. We urge the Senate to support 
the need to focus on manufacturing jobs, and to consider a new program 
or title in the EDA reauthorization that will invest new dollars in 
this seriously impacted sector of the economy.
    This spring the Congress will be reviewing the Administration's 
budgetary requests for fiscal year 2005, and this summer, agencies will 
be submitting their requests to the Administration for fiscal year 2006 
funding. During the normal give and take of the budgetary process, an 
agency that is not reauthorized will suffer in the process; for those 
who care about the ability of EDA to provide critically needed support 
to our most distressed communities and populations, delay is not an 
option.

                LEGISLATIVE OVERVIEW & POLICY STATEMENTS

    As a general statement of support, the IEDC membership endorses the 
position taken by the House legislation, H.R. 2535, almost entirely. 
IEDC's support is consistent with our industry and association 
colleagues, including The National Association of Development 
Organizations, the National League of Cities, the U.S. Conference of 
Mayors and the National Association of Counties. The following summary 
of key issues for the reauthorization highlights provisions in H.R. 
2535 supported by IEDC members and offers some recommendations for 
additional provisions or modifications for consideration in a final 
package.
    Support H.R. 2535:
    New Performance Incentive Award.--Support incentive award under the 
Public Works and Economic Adjustment Program(s) of up to 10 percent of 
the original grant amount. The award could be used to fund up to 100 
percent of any other EDA-eligible project or activity, or to meet the 
non-Federal match requirement for another project funded by EDA or 
another Federal agency. The flexibility of use on this award sends a 
strong signal of the high premium EDA will place on high standards of 
performance. The award will allow EDA and local grantees to leverage 
even greater success from innovative challenges in struggling 
communities to invest in new job creation and economic growth projects. 
The award program will provide a strong incentive for grantees to 
complete projects on or ahead of schedule.
    New District Bonus Award.--Support replacing the existing 10 
percent district bonus award with a tiered system that includes the 
original 10 percent bonus award, as well as the potential for an 
additional 5 percent planning bonus award to a project grantee who are 
part of an economic development district. The bonus will be available 
only to grantees who are active participants in an economic development 
district and for projects that are in accordance with the comprehensive 
economic development strategy of the district. The bonus award provides 
added incentive for cooperation and comprehensiveness in EDA project 
funding.
    Ensuring Planning Coordination.--Support requirement that state and 
local governments and economic development districts continue to 
develop EDA-funded state plans in a cooperative manner, ``to the 
maximum extent practicable.'' Currently, states are required to certify 
that the state plan is consistent with local governments and economic 
development district plans. H.R. 2535 amends the law to require states, 
before receiving EDA planning funds, to outline the extent to which 
they will consider local and district plans. [The Administration 
proposes to eliminate the requirement that states work with local 
districts. S. 1134 would only require states to take regional economic 
development strategies ``into consideration'' when creating new plans.] 
It is critical to the success of economic development efforts that all 
affected parties remain involved in the process of attracting new 
investment and spurring job growth.
    Matching Requirements.--Support replacing the current 75-25 
Federal-local matching requirement with a flexible system that allows 
EDA to adjust the Federal share of infrastructure and economic 
development projects based on the specific circumstances of the 
grantee. As a general rule, the Federal share is capped at 80 percent, 
with exceptions made for Indian tribes, local governments, planning 
districts and other groups who have exhausted their financial capacity. 
The Federal share for planning grants is set at 65 percent with the 
potential for an 80-20 cost split. The Administration request is 
reflected in the House approved language. EDA funding has contributed 
to thousands of successful projects and is often the catalyst for 
moving a project forward. EDA should be allowed to utilize its 
extensive experience in project planning and investment to adjust the 
Federal share for grant projects to address special needs.
    Cost Underrun Provisions.--Support changes that allow local 
grantees to use excess funds from EDA-funded projects, known as cost 
underruns, to increase the Federal share of the project costs. This 
would, in affect, lower the local match of the project, as well as 
provide more flexibility at the local level. EDA would also be allowed 
to recapture and reprogram excess funds where the grantee is not 
undertaking a new project and cannot otherwise use the funds. Current 
law requires excess funds to be returned to the general fund. Project 
grantees should be rewarded for completing projects under budget and 
should be given the flexibility to reduce local matching funds, and/or 
reinvest excess funds from cost underruns. This provides more options 
and increased levels of funding for EDA supported activities.
    Special Impact Areas.--The House bill allows the EDA to waive the 
CEDS requirement for certain project grantees. This provision is 
intended for remote areas and requires that the EDA provide 
congressional committees with a justification for any waiver. This 
provision is a modified version of the Administration's proposal for 
special impact areas.
    Authorization of Appropriations.--Current Law authorized $1.71 
billion over 5 years: $335 million for FY2001-2003, $368 million in 
FY2000 and $398 million in FY99. H.R. 2535, as approved in the House, 
authorizes $2.25 billion for EDA programs for 5 years: $400 million for 
FY2004, and an additional $25 million each year for FY2005-FY2008. The 
Administration requested $321 million for FY2005 and such sums as 
necessary in the remaining years.
    IEDC is concerned about the steady decline in funding for EDA 
programs, and particularly the disproportionate cuts imposed by the 
FY2004 Omnibus Appropriations Act. The FY2004 appropriation of $288 
million is 15 percent below the authorized level and 30 percent below 
the House recommended authorization level of $400 million. Based on EDA 
performance data, a $43 million investment could result in an 
additional $129--430 million in private sector investment and the 
potential for 22,000 jobs.
    IEDC strongly urges Congress to fund EDA programs in the budget and 
appropriations process at fully authorized levels, especially the 
public works program and planning grants. EDA has one of highest 
performance ratings of any Federal agency program. The Public Works 
program provides valuable infrastructure development leverage for 
encouraging new investment and business growth. Economic planning 
allows communities to weather short-term economic challenges and 
implement long-term economic recovery. This is particularly important 
during times of recession, industry decline and worker displacement 
events.

                   POLICY AND PROGRAM RECOMMENDATIONS

    In general, IEDC supports the House passed version for EDA 
reauthorization. The following are ideas that would help strengthen and 
improve upon the H.R. 2535. These recommendations are based on the 
needs that IEDC has recognized in the field of economic development. 
These recommendations would dramatically impact local economic 
development efforts and help to improve the services, programs and 
benefits furnished by the Economic Development Administration.

Recommendation #1: Authorize EDA to implement new regulations to 

        DEFEDERALIZE CERTAIN REVOLVING LOAN FUNDS.

    H.R. 2535 is consistent with the Administration proposal by 
expanding EDA authority to revise regulations for the Revolving Loan 
Fund (RLF) program, as appropriate. H.R. 2535 specifically modifies RLF 
provisions, including a clarification that only local grantees may 
request an amendment or consolidation of RLF agreements.
    The RLF Program could be dramatically improved by:

          1. Allowing EDA to recapitalize and expand the lending 
        capacity of existing RLFs that have established a successful 
        track record and demonstrated demand.
          2. Implementing a new technical assistance program to 
        complement the RLF program that will better safeguard 
        investments made by the RLF, including authority to allow RLF 
        grant funds to be used for professional development for RLF 
        managers.
          3. Allow EDA to deFederalize RLF moneys once they have been 
        loaned out and repaid one time. This is consistent with other 
        Federal loan programs, will reduce paperwork and regulatory 
        burden while continuing to require local accountability.

    The EDA RLF program is one of the most successful and powerful 
economic development tools for addressing the credit gaps that exist in 
many distressed communities, particularly in underserved rural areas. 
By using limited public funds to leverage private capital, locally 
managed RLFs have provided business capital to thousands of new and 
existing companies that have difficulty securing conventional 
financing.
    Capitalized with an EDA grant, RLFs are managed by public and 
private nonprofit organizations (including economic development 
districts) designed to further local economic development goals by 
lending their initial capital and then reloaning funds as payments are 
made on the initial loans. Loans are typically used for fixed assets or 
working capital needs. Organizations are also required to demonstrate 
how the RLF fits their local needs, as defined in a comprehensive 
economic development strategy.
    The participation of RLF funds in a business deal usually 
encourages once-reluctant banks to also lend, since loan funds normally 
agree to let banks recoup their losses first from the business' 
collateral in the event of default. By providing such gap financing, 
loan funds have been instrumental in the growth of companies that 
otherwise would not have received funding.

Recommendation #2: Broaden the scope and authority of current 
        Brownfield funding legislation by amending the 2003 Small 
        Business Liability Relief and Brownfield Revitalization Act.
    H.R. 2535 provides language that specifically allows nonprofit 
organizations to be eligible for brownfield redevelopment projects. 
This additional provision will expand both the EDA and nonprofit 
sector's ability to redevelop these sites. IEDC supports these 
provisions and urges the Senate to include such language in their 
version of EDA reauthorization.
    However, other barriers need to be removed which prevent 
communities from tapping into Federal resources for brownfield 
redevelopment. IEDC recommends that the Senate include language in the 
EDA reauthorization legislation that amends the 2003 Small Business 
Liability Relief and Brownfield Revitalization Act.
    The amendment would remove the prohibition against the use of EPA 
grant funds for clean up and redevelopment of sites acquired prior to 
the law's January 11, 2002 enactment. This amendment should also 
include language to eliminate the prohibition on using EPA grant funds 
for reasonable administrative costs to carry out brownfield projects. 
These prohibitions limit the range and scope of Federal brownfield 
redevelopment efforts and changing these rules would qualify numerous 
sites across the country for Federal funding to spur redevelopment and 
revitalization. Ultimately leading to increased investment in local 
project and the creation of new jobs.
    While this technical change does not apply directly to the EDA 
reauthorization measure, it is an important technical problem facing 
brownfield redevelopment. EDA is committed to the practice of 
redeveloping brownfields and these technical changes would open up the 
range of projects that may apply for funding from both the EPA and EDA.

Recommendation #3: Stipulate that the newly created Brightfields 
        Program under H.R. 2535 is subject to specific appropriations 
        over and above current funding levels for existing EDA 
        programs.
    IEDC in general does not support special categories of funding such 
as this new program because they tend to reduce the overall portion 
available for all EDA activities rather than adding to the total 
appropriations level. However, in case of the newly proposed 
Brightfield Program, IEDC feels that this problem can be remedied by 
authorizing a new program under the EDA that is funded at up to $5 
million annually from fiscal year 2004 through 2008, subject to 
appropriations, and under the additional stipulation that no funds may 
be transferred from the EDA program budget allocation for this new 
program unless Congress has appropriated the full amount authorized for 
EDA programs under the Act. If appropriated at fully authorized levels, 
EDA may set aside up to $5 million into the budget for these purposes. 
If less than fully authorized levels are appropriated, brightfields 
projects can compete for funding under existing EDA program authority.

Recommendation #4: Strengthen language to reinforce the partnership 
        between business and industry sectors and Workforce Development 
        planning and implementation.
    Under local and economic development district plans. The 
Administration had provided language that supports the coordination of 
economic development plans with the Department of Labor's work force 
investment plans. The House bill reinforces that plans developed with 
EDA funding need to be ``consistent and coordinated with any existing 
comprehensive economic development strategy for the area.''
    Workforce development is becoming a critical factor in economic 
development considerations. The U.S. Department of Labor has 
appropriately concluded that ``businesses in high-growth industries 
face increased difficulty in finding workers with the skills they need 
as a result of globalization, the aging of America's work force, and 
the fact that technology and innovation are continuously changing the 
nature of work. As a result, job training community colleges will be 
increasingly critical providers for workers needing to retool, refine, 
and broaden their skills.'' IEDC supports the goal of DOL that 
partnerships among industry and the public work force system, including 
community colleges and universities, will be a critical economic 
development tool in every labor market.
    IEDC supports the inclusion of work force development activities as 
a factor in developing plans and urges the Senate to support strong 
language that directly links work force and economic development 
efforts, and seeks a formal partnership between EDA and DOL in pursuing 
these objectives.

                               ABOUT IEDC

    The International Economic Development Council (IEDC) is the 
leading association serving economic development professionals and 
those in allied fields. IEDC's more than 4,000 members are committed to 
building local and regional economies worldwide. The key to IEDC's 
reputation and steady growth is its access to a large and diverse pool 
of professionals and the quality of the council's staff. For more than 
30 years, IEDC and its predecessor organizations have been producing 
quality services that help find solutions to the complex and varied 
issues of economic development.
    To support these endeavors, IEDC cultivates an ever-increasing 
wealth of resources that includes:

     An active Advisory Services & Research department that 
fulfills private and government contracts,
     A history of designing successful conferences and events 
for membership and Federal agencies such as Economic Development 
Administration,
     An extensive in-house library and an information 
clearinghouse that incorporates member and staff expertise,
     Leading-edge case-study-oriented publications,
     Timely and expert legislative tracking services, and
     Management, design and operation of industry's leading 
professional development program.

    IEDC is the one source, one voice and one force in economic 
development.
    IEDC is pleased to offer expertise and assistance to the U.S. 
Senate Environment and Public Works Committee over the coming months in 
designing legislation that reauthorizes the Economic Development 
Administration. Contact Toby Rittner, Director of Legislative Affairs; 
at 202-942-9489 or via email at [email protected] for more 
information on how IEDC can be of assistance.
                                 ______
                                 
   Statement of the National Association of Regional Councils\1\ and 
                    National Association of Counties
---------------------------------------------------------------------------
    \1\ The National Association of Regional Councils is a public 
interest group formed in 1965 by the National Association of Counties 
and the National League of Cities to address the growing interest in 
regional cooperation among local governments. The association became an 
independent organization in 1967, serving the interests of all regional 
councils (councils of government, planning commissions, development 
districts, metropolitan planning organizations and rural transportation 
planning organizations) throughout the United States in both 
metropolitan and rural areas. Twenty of its 24 board members are 
elected officials representing counties and cities. NACo and NLC still 
appoint a representative each to the NARC board. NARC is active in 
supporting regionalism and the utilization of the network of regional 
councils across the United States to address issues involving 
transportation, economic development, housing, work force development, 
senior citizens programs and numerous environmental issues including 
water quality and quantity and air quality.
    With headquarters on Capitol Hill, NACo is the only national 
organization that represents county governments. More than 2,000 
counties, representing 85 percent of the nation's population, are 
members of NACo. The association acts as a liaison with other levels of 
government, works to improve public understanding of counties, serves 
as a national advocate for counties and provides them with resources to 
help them find innovative methods to meet the challenges they face.
---------------------------------------------------------------------------
    Chairman Inhofe, Ranking Member Jeffords, distinguished members of 
the panel, the National Association of Regional Councils (NARC) and the 
National Association of Counties (NACo) are pleased to present 
testimony for the record regarding reauthorization of the Economic 
Development Administration.
    Since its inception in 1965, the Economic Development 
Administration (EDA) has been a major factor in supporting economic 
development efforts in distressed cities and counties throughout the 
country. It is one of the few agencies that supports strategic planning 
efforts that allow cities and counties to develop a road map for 
economic recovery over a broad, multi jurisdictional area. Working 
through their designated Economic Development Districts, local 
communities have participated in Their own recovery plans through 
development of a Certified Economic Development Strategy (CEDS). The 
CEDS process is a bottoms-up approach to economic development.
    This approach has helped thousands of distressed areas build 
infrastructure that attracts business development.
    EDA is an important component of local, regional economic 
development. EDA's role is to address longer-term economic problems 
that affect the national economy and cyclical national patterns of need 
or distress, such as defense economic adjustment, post disaster 
economic recovery, resource or industry based downturns (coal, plant 
closures, timber, textiles, fisheries, etc.). EDA is equipped with a 
strong portfolio of program tools that can be readily engaged to 
accomplish their mission--planning and technical assistance, public 
works, research and national technical assistance, trade adjustment 
assistance, and economic adjustment.
    EDA remains as the only program with a specifically established 
national network solely focused on the economic revitalization of 
localities and regions experiencing longer-term or unanticipated 
distress. It is the only agency with a clear legislative mandate to 
address national cyclical economic needs in America's communities.
    NARC and NACo, along with several other organizations, were 
actively involved with the Administration and the House Transportation 
and Infrastructure Subcommittee on Economic Development, Public 
Buildings and Emergency Management in working out agreements on the 
House-passed version of EDA reauthorization, H.R. 2535.
    We support the contents of that bill. A new and potentially 
innovative provision will allow up to a 10 percent bonus to the grant 
recipient that meets or exceeds all the objectives outlined in the 
original grant proposal. However, the proposal is untried and gives 
some concern about how requirements will be structured and how 
management of provision will be accomplished.
    For example, a grantee that is seeking funding to develop 
infrastructure for a promised business or industry location can receive 
the bonus provided all objectives as outlined in the original grant 
proposal are met or exceeded. Objectives in a grant proposal are based 
on what a company has said it will invest financially in the project, 
and on how many jobs the company says it will create or retain. There 
are instances in which a company has decided at the eleventh hour to 
invest less money for a variety of reasons and therefore hire fewer 
people. Local governments should not be held responsible for such 
business decisions that can be based on a variety of reasons. We 
believe there is a way to address this potential problem.
    We urge the committee to allow up to 5 years for a grant recipient 
to receive its bonus and to recognize the investment and growth 
potential as outlined in its original application. Any time during the 
5-years, a community that reaches its stated goals could receive its 
bonus and use it as non-Federal share for another EDA grant or for an 
economic-development related grant from any other Federal Agency.

                PLANNING AS AN ECONOMIC DEVELOPMENT TOOL

    The Economic Development Administration has always recognized the 
value of regional planning. The CEDS is a document that is developed by 
local elected officials, private citizens and business organizations as 
a blueprint for economic growth. Planning funds, however, have been 
static. Economic development districts are receiving the same $52,000 
per year that they received 25 years ago. In today's economy, that 
$52,000 has the purchasing power of about $13,000 or 75 percent less 
than in 1970. Obviously this makes it extremely difficult for a 
district to maintain the skilled work force needed to develop economic 
strategies.
    We urge the committee to support a substantial increase in planning 
funds from the current $24 million that will allow districts to receive 
additional planning funds and provide funding for new district that 
have been unsuccessful in receiving EDA designation. For example, 
several areas in Vermont are interested in securing designation as an 
economic development district because of economic conditions. However, 
the scarcity of planning funds has made this nearly impossible.
    Another provision in the House legislation would allow flexibility 
in the planning fund match requirements. There are years in which a 
district and its local government members are restricted in their 
abilities to meet the 50/50 match. We support provisions in the House 
bill that would allow a 65 federal/35 local match, allowing districts 
and their local government members the flexibility to add more to 
planning funds when tey have such funding available and less during 
times of local budget crunches.
    NARC and NACo also supports an expanded timeframe for the CEDS. As 
one small, rural Vermont region indicated, no other Federal program 
that the region deals with requires review and update as frequently as 
EDA. This is a particularly onerous burden on small and rural regional 
organizations with limited staff and resources, particularly given the 
current strain on planning funds.
    Our organizations support an extended timeframe for reporting on 
CEDS of at least 3 years and possibly as long as 5 years. This will 
reduce paperwork, thereby relieving staff burden and the additional 
costs of annual updates. We do not believe this expanded timeframe 
would in any way impact the quality of information EDA receives. We are 
aware that EDA has been experimenting with the expanded timeframe in at 
least one of its regions.

                             STATE PLANNING

    The House passed reauthorization of EDA allows state planning that 
may or may not take into consideration locally and regionally developed 
economic recovery strategies. The argument in support of this provision 
is that it would be too expensive for states to evaluate these local 
and regional plans and incorporate them into a state-wide strategy.
    We believe that it is important for states to consider at least 
regionally developed plans that have been signed off on by local 
governments. This would greatly reduce the number of plans that must be 
reviewed and it would provide locals with input into state-wide 
planning. In Oklahoma, for example, 10 of the 12 regional councils are 
designated economic development districts. A review of 10 regional 
plans that have been adopted by local governments, citizens and the 
business community should not constitute an onerous burden for states.
    Currently, few states utilize EDA planning funds. The new provision 
may well encourage more states to participate. Since planning funds are 
already inadequate, adding state planning funds to the mix could reduce 
the amount of funding that designated economic development districts 
receive and could prevent the establishment of new districts. Our 
organizations have no objections to state planning utilizing EDA money 
as long as additional funding resources are available.

                          REVOLVING LOAN FUNDS

    We support EDA's efforts to maintain proper operation and integrity 
of revolving loan funds. However, we would urge EDA to address in any 
new regulations the concerns of current revolving loan fund operators 
regarding requirements on percentage of funds that must be loaned out 
at all times and the maximum amount of a loan.
    The idea of a revolving loan fund is to keep a high percentage ``on 
the streets'' to benefit local business and industry owners. We support 
this concept, but during economic slowdowns, loan fund operators have 
difficulty finding new businesses that are a good financial risk or 
existing businesses that are interested in expanding. New regulations 
should consider the cyclical nature of economic development.
    New regulations should also allow a higher percentage of a 
revolving loan fund to be loaned out to a particularly good business 
prospect. It is not necessarily the quantity of loans that should be 
considered, but rather the quality and impact of loans that are made. 
We support the provision in the House legislation that would allow the 
Secretary to consolidate different revolving loan funds at the request 
of the grantee.

                               CONCLUSION

    The Economic Development Administration has proved itself as an 
effective Federal program that addresses bottom-up economic development 
strategies. It deserves the full support of Congress through 
reauthorization and through an increase in authorized funding levels.
    We feel it is imperative that EDA not be allowed to languish as an 
unauthorized agency. Our organizations are prepared to work with 
members of the committee to support legislation that can pass Congress 
this year.
                                 ______
                                 
                       Union County Board of Commissioners,
                                  La Grande, OR, February 20, 2004.

Senators Gordon Smith and Ron Wyden,
Representatives Greg Walden, David Wu, Peter DeFazio, Darlene Hooley 
    and Earl Blumenauer,
Washington, DC.

Oregon Congressional Delegation:

    We are writing to express deep concern regarding the new 2004 rule 
from the Economic Development regarding the 22:1 match for economic 
projects. Union County enjoys a wonderful working relationship with our 
federal partners regarding our economic efforts. As a very rural area, 
we have had to work double time to recover our once prosperous region. 
We consider Anne Berblinger, our EDA representative, a great ally, as 
she has always been there as a champion in our efforts to steer our 
economic ship away from the rocks. We see this new rule to be a 
considerable barrier to our partnership. We find that increasingly we 
no longer have the resources or capacity to be a player.
    As the attached document will show, the residents of Union County 
have seen a 20 percent drop in their comparative wages over the past 
two decades. This dissolution of our economic base has been due, in 
most part, to federal regulations impacting our once. thriving natural 
resources industry.
    To have the federal government be the architects of our collapse 
and then impose rules to recovery that will virtually guarantee our 
inability to participate seems another federal government blow to rural 
America.
    We ask your help in correcting this imbalance.
            Sincerely,
                                   John Lamoreau,
                                             Board Chairman.
                                   Colleen MacLeod,
                                             Commissioner.
                                   Steve McClure,
                                             Commissioner.
                                 ______
                                 
    State of Oregon, Employment Department, Labor Market Information

            A BRIEF COMPARISON OF EARNINGS TRENDS SINCE 1979

    As a general rule, rural areas of Oregon have consistently lagged 
the statewide and national averages in earnings and income. While it 
may be widely acknowledged that such a difference exists, perhaps the 
most troubling aspect of rural Oregon's experience over the past 20-25 
years is that this gap in earnings has widened significantly over time.
    This brief analysis compares average annual earnings per job 
between Union County, Oregon, and the United States, using Oregon 
Employment Department and U.S. Bureau of Labor Statistics data.
    As of 1979, average pay per job was:
     $13,155 in the United States
     $13,198 in Oregon
     $11,922 in Union County
    As of 2002 (the latest available annual data), average pay per job 
was:
     $36,764 in the United States
     $33,685 in Oregon
     $26,033 in Union County
    Therefore, since 1979, average earnings per job have increased 179 
percent nationally, 155 percent statewide, and only 118 percent in 
Union County.
    Put another way, average earnings per job in Union County have 
shifted from being 91 percent of the national average in 1979 to only 
71 percent by 2002.

EDA Match.doc: February 20, 2004

Oregon Employment Department: Yohannan
  

                                  
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