[House Hearing, 109 Congress]
[From the U.S. Government Publishing Office]


 
  THE ADMINISTRATION'S STRENGTHENING AMERICA'S COMMUNITIES INITIATIVE 
                 AND ITS IMPACT ON ECONOMIC DEVELOPMENT

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

                                (109-8)

                                HEARING

                               BEFORE THE

                            SUBCOMMITTEE ON
    ECONOMIC DEVELOPMENT, PUBLIC BUILDINGS AND EMERGENCY MANAGEMENT

                                 OF THE

                              COMMITTEE ON
                   TRANSPORTATION AND INFRASTRUCTURE
                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED NINTH CONGRESS

                             FIRST SESSION

                               __________

                             MARCH 17, 2005

                               __________

                       Printed for the use of the
             Committee on Transportation and Infrastructure


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             COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE

                      DON YOUNG, Alaska, Chairman

THOMAS E. PETRI, Wisconsin, Vice-    JAMES L. OBERSTAR, Minnesota
Chair                                NICK J. RAHALL, II, West Virginia
SHERWOOD L. BOEHLERT, New York       PETER A. DeFAZIO, Oregon
HOWARD COBLE, North Carolina         JERRY F. COSTELLO, Illinois
JOHN J. DUNCAN, Jr., Tennessee       ELEANOR HOLMES NORTON, District of 
WAYNE T. GILCHREST, Maryland         Columbia
JOHN L. MICA, Florida                JERROLD NADLER, New York
PETER HOEKSTRA, Michigan             ROBERT MENENDEZ, New Jersey
VERNON J. EHLERS, Michigan           CORRINE BROWN, Florida
SPENCER BACHUS, Alabama              BOB FILNER, California
STEVEN C. LaTOURETTE, Ohio           EDDIE BERNICE JOHNSON, Texas
SUE W. KELLY, New York               GENE TAYLOR, Mississippi
RICHARD H. BAKER, Louisiana          JUANITA MILLENDER-McDONALD, 
ROBERT W. NEY, Ohio                  California
FRANK A. LoBIONDO, New Jersey        ELIJAH E. CUMMINGS, Maryland
JERRY MORAN, Kansas                  EARL BLUMENAUER, Oregon
GARY G. MILLER, California           ELLEN O. TAUSCHER, California
ROBIN HAYES, North Carolina          BILL PASCRELL, Jr., New Jersey
ROB SIMMONS, Connecticut             LEONARD L. BOSWELL, Iowa
HENRY E. BROWN, Jr., South Carolina  TIM HOLDEN, Pennsylvania
TIMOTHY V. JOHNSON, Illinois         BRIAN BAIRD, Washington
TODD RUSSELL PLATTS, Pennsylvania    SHELLEY BERKLEY, Nevada
SAM GRAVES, Missouri                 JIM MATHESON, Utah
MARK R. KENNEDY, Minnesota           MICHAEL M. HONDA, California
BILL SHUSTER, Pennsylvania           RICK LARSEN, Washington
JOHN BOOZMAN, Arkansas               MICHAEL E. CAPUANO, Massachusetts
JIM GERLACH, Pennsylvania            ANTHONY D. WEINER, New York
MARIO DIAZ-BALART, Florida           JULIA CARSON, Indiana
JON C. PORTER, Nevada                TIMOTHY H. BISHOP, New York
TOM OSBORNE, Nebraska                MICHAEL H. MICHAUD, Maine
KENNY MARCHANT, Texas                LINCOLN DAVIS, Tennessee
MICHAEL E. SODREL, Indiana           BEN CHANDLER, Kentucky
CHARLES W. DENT, Pennsylvania        BRIAN HIGGINS, New York
TED POE, Texas                       RUSS CARNAHAN, Missouri
DAVID G. REICHERT, Washington        ALLYSON Y. SCHWARTZ, Pennsylvania
CONNIE MACK, Florida                 JOHN T. SALAZAR, Colorado
JOHN R. `RANDY' KUHL, Jr., New York
LUIS G. FORTUNO, Puerto Rico
LYNN A. WESTMORELAND, Georgia
CHARLES W. BOUSTANY, Jr., Louisiana
VACANCY

                                  (ii)




 Subcommittee on Economic Development, Public Buildings and Emergency 
                               Management

                  BILL SHUSTER, Pennsylvania, Chairman

JIM GERLACH, Pennsylvania            ELEANOR HOLMES NORTON, District of 
KENNY MARCHANT, Texas, Vice-Chair    Columbia
CHARLES W. DENT, Pennsylvania        MICHAEL H. MICHAUD, Maine
JOHN R. `RANDY' KUHL, Jr., New York  LINCOLN DAVIS, Tennessee
DON YOUNG, Alaska                    JULIA CARSON, Indiana
  (Ex Officio)                       JAMES L. OBERSTAR, Minnesota
                                       (Ex Officio)

                                 (iii)




                                CONTENTS

                               TESTIMONY

                                                                   Page
 Anspach, Hon. Robert A., Mayor, Lebanon, Pennsylvania...........    18
 Fluharty, Charles, Director, Rural Policy Research Institute, 
  University of Missouri.........................................    18
 Jones, Ken, First Vice-President, National Association of 
  Development Organizations, Executive Director, Lower Rio Grande 
  Valley Development Council.....................................    18
 Sampson, Hon. David A., Assistant Secretary of Commerce for 
  Economic Development...........................................     5
 Silvetti, Edward M., Executive Director, Southern Alleghenies 
  Planning and Development Commission............................    18

          PREPARED STATEMENTS SUBMITTED BY MEMBERS OF CONGRESS

Blumenauer, Hon. Earl, of Oregon.................................    50
Kuhl, Hon. John R. "Randy", Jr., of New York.....................    81
LoBiondo, Hon. Frank A., of New Jersey...........................    83
Michaud, Hon. Michael H., of Maine...............................    85
Norton, Hon. Eleanor Holmes, of the District of Columbia.........    88
Oberstar, Hon. James L., of Minnesota............................    90

               PREPARED STATEMENTS SUBMITTED BY WITNESSES

 Anspach, Hon. Robert A..........................................    32
 Fluharty, Charles...............................................    52
 Jones, Ken......................................................    64
 Sampson, Hon. David A...........................................    94
 Silvetti, Edward M..............................................   118

                       SUBMISSIONS FOR THE RECORD

 Anspach, Hon. Robert A., Mayor, Lebanon, Pennsylvania, responses 
  to questions...................................................    40
 Jones, Ken, First Vice-President, National Association of 
  Development Organizations, Executive Director, Lower Rio Grande 
  Valley Development Council, responses to questions.............    77
 Sampson, Hon. David A., Assistant Secretary of Commerce for 
  Economic Development, responses to questions...................   109

                        ADDITIONS TO THE RECORD

American Planning Associaiton, letter, March 15, 2005............   124
City of Atlanta, Rhonda Dauphin Johnson, Atlanta Municipal Clerk.   125
National Association of Regional Councils, Robert Sokolowski, 
  Executive Director, statement..................................   129


THE ADMINISTRATION'S STRENGTHENING AMERICA'S COMMUNITIES INITIATIVE AND 
                   ITS IMPACT ON ECONOMIC DEVELOPMENT

                              ----------                              


                        Thursday, March 17, 2005

        House of Representatives, Committee on 
            Transportation and Infrastructure, Subcommittee 
            on Economic Development, Public Buildings and 
            Emergency Management, Washington, D.C.

    The subcommittee met, pursuant to call, at 2:03 p.m., in 
Room 2167, Rayburn House Office Building, Hon. Bill Shuster 
presiding.
    Mr. Shuster. The Subcommittee will come to order. I am glad 
to see we have a nice crowd here today. This is my first 
subcommittee hearing, and I didn't realize there would be so 
much media attention out in the hall. So I will be a little bit 
nervous when I walk out of here. I have been accused of being 
on steroids, but that is not the case.
    Before we begin today's hearing, I would like to take a 
moment to welcome the members of the Subcommittee, and the 
several freshman members welcome them to Congress. I expect 
this Congress to be very busy with several important issues 
having arisen and, of course, our normal workload that we have, 
and I hope we can be as productive in the coming Congress as 
the Subcommittee has been in the previous years.
    I would also like to say I look forward to working with the 
Ranking Member, Mrs. Norton. Together I believe we will be able 
to aggressively advance a bipartisan agenda that realizes the 
greatest benefits for the American people, while at the same 
time protecting this committee's jurisdiction.
    I would also like to welcome the chairman of our Coast 
Guard Committee. I thought I saw him in. Okay, I won't welcome 
him, then, until later.
    I would ask unanimous consent, if Mr. LoBiondo comes today, 
which we expect him to, that he be able to sit with the 
Committee and ask questions of our witnesses. Without 
objection, so ordered.
    This is a very important issue to our Committee, with far-
reaching impacts both in our jurisdiction and the substantive 
subject matter. As such, I would ask unanimous consent that the 
chairman and the ranking chairman of the full committee be 
allowed extend their opening remarks to 10 minutes if they so 
desire. Without objection, that is so ordered.
    With that, I would now like to turn to the topic of today's 
hearing, that being the Administration's Strengthening 
America's Communities initiative and its impact on economic 
development.
    In advance of its fiscal year 2006 budget, the 
Administration announced a sweeping reform of the Federal 
Government's economic and community development efforts 
entitled ``Strengthening America's Communities.'' This new 
program, which will be housed at the Department of Commerce, 
would consolidate programs from across five departments and 
agencies into a new grant program that includes block grants, 
incentive grants, and opportunity zones.
    The Administration has given four primary goals for this 
effort: first, to better focus resources on those communities 
most in need; second, to provide greater flexibility to 
recipients; third, to implement new performance and 
accountability measures; and, fourth, to eliminate under-
performing and duplicative programs.
    I applaud these goals, since it seems to me that the worst 
thing we can do is remained locked into an existing way of 
thinking that does not recognize the fact that since many of 
these programs were created, the economy and the world has 
changed, so our Federal programs would change with them. 
However, we must change the way we think about economic 
development to stay current with the economy and the world. 
That does not mean that we should abandon proven means of 
economic development.
    Since its creation, this committee has focused on improving 
the Nation's infrastructure. We do this not just because we 
like to build roads, bridges, airports, and water systems; we 
believe, and history has borne this out, that economic 
development will only occur in those places where there exists 
safe and stable infrastructure.
    If we were to look at satellite pictures of the United 
States at night, we would see, of course, bright lights 
emanating from our large population centers. But even more 
important and instructive for this debate is to look at what 
connects those bright spots. It is slightly less bright spots 
arranged in neat lines, crisscrossing the Country. These lines 
almost exactly track the interstate highway system. And if we 
were to zoom in on those bright spots, we would see development 
along State highways and rail lines and surrounding airports, 
because while we like to talk about being an interconnected 
global economy, that connection begins with access roads to an 
industrial or business park.
    While infrastructure is fundamental to economic 
development, that is, it is equally fundamental and is 
something that we must allow for in whatever proposal moves 
forward, is consistent funding for economic development 
planning. While I applaud the notion of awarding monies 
competitively and to reward success, we must ensure that we are 
not creating a permanent underclass of communities that cannot 
compete because they do not have the resources to develop 
integrated economic development plans.
    For this new program to succeed, it is going to have to be 
built on the basis of a successful model. If we are interested 
in finding out exactly what it takes to ensure a successful 
economic development program, we need to go no further than the 
Economic Development Administration, which has achieved success 
both programmatically and organizationally.
    In fiscal year 2003 alone, EDA's projects leveraged an 
average of $22 per every Federal dollar invested and created 
88,000 jobs. This is programmatic success. But EDA should also 
be the basis model for the administration of the new program. 
After all, according to the Office of Management and Budget's 
own performance ratings, EDA was one of only two agencies to 
receive a ``moderately effective'' rating, the second highest 
score. And the only thing that kept it from receiving the 
highest score was the duplicative activities of other agencies' 
programs.
    These are just a few of the very important issues I hope to 
address at today's hearing. I know that, as a committee, there 
has been a lot of interest expressed about this very 
significant program change, and as a committee with a 
significant role in economic development, we plan to remain 
actively involved as this proposal moves forward.
    I look forward to working with the Administration and all 
interested members in drafting legislation on this 
groundbreaking initiative.
    We have a wonderful lineup of witnesses that I hope we will 
be able to provide firsthand knowledge of the proposal itself, 
its basic rationale, as well as some perspective of the impact 
it would have, as well as factors that we should keep in mind 
as we go forward in discussing this proposal.
    I would especially like to welcome Assistant Secretary 
Sampson, who will be appearing on our first panel this 
afternoon. Secretary Sampson I believe has been a very 
productive leader at EDA, and I thank him for that leadership. 
The agency has reoriented itself to more effectively meet the 
challenges of the twenty-first century economy, while at the 
same time dealing with difficult budgetary limitations. 
Finally, during the 108th Congress, his efforts were an 
integral part of the reauthorization of EDA.
    With that, I would like to recognize our Ranking Member, 
Mrs. Norton, from the District of Columbia for her opening 
statement.
    Ms. Norton. Thank you very much, Chairman Shuster. I am 
delighted to join you today for our first meeting, and I am 
particularly pleased that you have focused the Subcommittee on 
the issue of economic development. As a member of this 
Subcommittee for 15 years, who knows you and your work in the 
House, I am especially pleased that you have become Chair of 
this Subcommittee. As you know, this committee and subcommittee 
have a rich history of bipartisanship. We have benefitted from 
a long line of chairs like yourself who have worked to ensure 
that all members and their ideas are included for consideration 
and dialogue, and that our policies and programs benefit all 
parts of the Country.
    Precisely because of our bipartisan tradition, I am 
concerned that in the President's budget proposal for fiscal 
year 2006 the Administration is proposing an approach that 
undercuts these productive roles. The Administration proposes 
to consolidate 18 economic development programs into one 
program to be housed in the Department of Commerce. Further, 
the Administration is proposing to reduce funding for these 
programs by almost $2 billion. My greatest concern is that the 
Office of Management and Budget apparently selected these 
programs without fully analyzing the impact on distressed and 
under-served communities.
    Of longstanding and special interest to this Subcommittee 
has been our jurisdiction over the programs of the Economic 
Development Administration, which is an agency inside the 
Department of Commerce. This subcommittee has played a pivotal 
role in making these programs what are regarded today as among 
the best and most productive in the Federal sector. Barely six 
months ago, this Subcommittee held hearings and worked with the 
Senate and the Administration to pass S. 1134 into law, which 
reauthorized appropriations for EDA for five years. Now it 
appears that the Administration wants to head off in a totally 
different direction and do away with an agency that it has just 
praised as particularly effective and efficient. I am eager to 
hear from Dr. Sampson to learn what accounts for this U-turn 
regarding EDA, and to hear the details of the Administration's 
plan.
    As always, I am pleased to have witnesses from across the 
Country who actually work with economic development districts 
and, according to the documented record of our hearings and the 
investigation of our Subcommittee, have done an exceptional 
job.
    Thank you, Chairman Shuster, for calling this hearing. I 
look forward to working with you as we work through this and 
other initiatives this session. Thank you, Mr. Chairman.
    Mr. Shuster. Thank you, Ms. Norton. I appreciate those kind 
words.
    I would now like to recognize Mr. Dent for a brief opening 
statement.
    Mr. Dent. Thank you, Mr. Chairman.
    Mr. Sampson, good afternoon.
    Mr. Sampson. Good to see you again.
    Mr. Dent. I have obviously met with you before on this 
issue, on the Government Reform Committee Subcommittee on 
Federalism and the Census, and I guess my message today is the 
same as it was the other day. It would have been helpful if 
some more of the stakeholders were engaged in this process, 
particularly in our urban area. As I mentioned before, you have 
made a strong case, I believe, perhaps to move some of these 
programs over into Commerce, particularly brownfields and 
enterprise zones. I think one can make a logical argument that 
they ought to be over in Commerce. But CDBGs, CSBG and some of 
the other programs I really believe it is incumbent for the 
Administration to come back to us at some point with some 
strong input from those stakeholders, try to engage them in 
this process.
    In my State, we had done something similar, where we had 
merged basically our community department--it is called Partner 
Community Affairs--with our Department of Commerce and made one 
big Department of Community and Economic Development. It worked 
out rather well, but we had engaged the stakeholders in this 
process. And at least with respect to some of these programs I 
don't think that case has yet been made, and I would just look 
forward to hearing some more from your department as we move 
along in this budget process.
    Thank you.
    Mr. Shuster. I would now like to recognize Mr. Michaud.
    Mr. Michaud. Thank you very much, Mr. Chairman. I want to, 
first of all, congratulate you on assuming the chairmanship of 
this committee, and I have great confidence in your leadership. 
You are working with an extraordinary ranking member, Ms. 
Norton, and I know that we will have a productive and valuable 
session together.
    I will close and would ask unanimous consent to have my 
opening remarks submitted for the record so we can proceed with 
the hearing.
    But I do want to say that I appreciate Dr. Sampson's 
presence here today. Dr. Sampson, actually earlier in the week, 
yesterday told me that the Administration wants to work with 
Congress to be a full partner in this effort to help shape the 
future of our economic development programs. I appreciate this 
cooperation and flexibility, and I personally value Dr. 
Sampson's candor and openness and willingness to work with the 
Committee to help craft a program that will truly help our 
communities all across the Country. So thank you for coming 
here today.
    And with that, Mr. Chairman, I would ask unanimous consent 
to have my remarks placed in the record.
    Mr. Shuster. Without objection, so ordered.
    I ask unanimous consent that all of our witnesses' full 
statements be included in the record today. Without objection, 
that is so ordered.
    And since your written testimony has been part of the 
record, the Subcommittee would request that you limit your 
opening statement to five minutes.
    I would also encourage members of the Committee--I am going 
to try to enforce the five minute rule. On so many committees 
on the Hill here we go over that, so I am going to be a 
stickler on it. That is one reason I wanted to give Mrs. Norton 
and Mr. Oberstar, and if Mr. Young were here, extra time to 
open up.
    We have two panels today of witnesses. Our first panel we 
have only one witness, Dr. David Sampson, the Assistant 
Secretary of Commerce for Economic Development, who will 
represent the Administration's perspective as the person 
leading this initiative.
    Dr. Sampson, thank you for being here, and proceed.

    STATEMENT OF THE HONORABLE DAVID A. SAMPSON, ASSISTANT 
         SECRETARY OF COMMERCE FOR ECONOMIC DEVELOPMENT

    Mr. Sampson. Mr. Chairman, thank you. Ranking Member 
Norton, good to be back with you again.
    Let me say I am pleased to have the opportunity to discuss 
the President's Strengthening America's Communities initiative 
with you, and what I want to do is briefly highlight the 
underlying principles behind the initiative, explain why we 
need substantial reform, and, finally, articulate the main 
points of the initiative.
    While America's economy is strong and getting stronger, 
everyone recognizes that that economic strength is not felt 
equally throughout the Nation. As members of this committee are 
certainly well aware, in low-income communities and in 
communities where traditional industries do not employ as many 
people as they did a generation ago, opportunity can appear to 
be far out of reach. And the President believes that these 
communities can make the transition to vibrant, strong 
economies and communities because of the entrepreneurial spirit 
of the people who live there, and he also believes that the 
Federal Government has an important role to play.
    He believes that the role of Federal Government in its 
economic and community development programs should be to create 
the fundamental conditions for economic growth and the creation 
of more and better jobs and viable communities, and thereby 
reduce a community's reliance on perpetual Federal assistance.
    In terms of why we need reform, in total, the Federal 
Government currently administers 35 different programs spread 
across seven different cabinet agencies. These programs have a 
high degree of overlap and duplication, little coordination 
among them. They have weak accountability measures and, 
according to the OMB PART analysis, many of them simply cannot 
demonstrate that after a history of 30 to 40 years, they have 
made a meaningful contribution to improving or achieving 
community and economic development goals.
    We seek to greatly simplify access to the Federal system by 
consolidating 18 of these programs into a single unified grant 
program budgeted at $3.71 billion in the President's budget 
request. The grant program will have two components. The first 
is a formula-based grant program, which would represent the 
bulk of the $3.71 billion. The formula would be based on 
factors such as levels of poverty, disinvestment, unemployment 
rates, to ensure that the most distressed communities in 
America have access to these funds. The second component is the 
Economic Development Challenge Fund, which is designed to be a 
bonus program modeled after the Millennium Challenge Account, 
that would reward those communities where there is strong 
business and elected leadership and community leadership to 
actually improve the economic performance and remove barriers 
to growth.
    Clearly, we recognize that there is a lot of work ahead of 
us with regard to implementing this initiative. The President 
very intentionally submitted this as a proposal in his budget. 
We are thankful to have the opportunity to work with Congress 
before the Administration submits specific legislation. We are 
also creating a Secretarial Advisory Committee to advise the 
Administration on critical components of the legislation before 
it is submitted to Congress.
    And with that, Mr. Chairman, I will conclude my summary 
remarks, and I would be happy to respond to your questions, as 
well as that of the Committee.
    Mr. Shuster. Thank you very much, Dr. Sampson. You and I 
have had the discussion and I have expressed my concern to you 
that setting up a new agency, for all intents and purposes 
brand new, although you are bringing in other agencies from 
different parts of the administration, my great concern is that 
we are setting up something that is brand new and that we have 
seen from Homeland Security, the TSA, that that brings with it 
problems, trying to bring these bureaucracies together. The one 
thing that I recommended to you is we use the EDA as the model 
and let everything fall into that.
    But another question I have is I know there is duplication 
and there is a lot of overlap in these programs. Did we think 
about, instead of consolidating to this huge new program, maybe 
looking at them individually smaller and taking out the 
duplication and streamlining them without bringing them all 
together?
    Mr. Sampson. Let me respond to that on several levels.
    While certainly there are lessons to be learned from the 
creation of the Homeland Security Department, there are 
critical and fundamental differences between this proposal and 
that. While that was putting together different agencies that 
maintained their own distinct identities, this proposal 
consolidates funding from 18 different agencies. It would 
remove the individual stovepipe of funding among these 
different agencies, and those statutory authorities will 
disappear and reside in the one new agency as a fundamentally 
new creation. That program will have broad flexibility, in 
fact, much more flexibility than EDA currently has under its 
statutory authority. It would be fundamentally a block grant 
program, where these funds are block-granted to States and 
communities, as opposed to communities and States having to 
approach EDA for individual approval of every single project. 
So we believe that that is a fundamental difference that calls 
for the creation of this new entity within Commerce.
    Now, in reality, we believe that trying to solve the 
systemic problems on a piecemeal or case-by-case basis is 
really not an optimal or a workable solution; it would require 
18 different legislative fixes and is, we believe, wholly 
inadequate to be able to solve the systemic problems that we 
currently face. At the end of the day, the Administration wants 
to work with Congress on the best strategy to fundamentally 
overhaul this current hodgepodge of programs and to pass 
legislation that fundamentally improves assistance to our 
neediest communities in America.
    Mr. Shuster. Again, I don't want to belabor the point, but 
as we move forward on this, I believe we will take close and 
pay close attention to what is set up, because I think we had 
the same idea with Homeland Security. And you bring the 
different cultures from the different departments together, and 
they tend to, at times, not merge or meld like they should. So 
we need to keep close look at that.
    It is my understanding also that you are convening an 
advisory committee. That is due to be set up shortly, but the 
committee report won't be due until May 31st. I think we are 
looking at you bringing something up some proposed legislation 
in a time frame shorter than that. How is the advisory 
committee going to work with you to get a report out but, yet, 
you are going to get legislation before they are able to advise 
you?
    Mr. Sampson. Great question. In the course of our meetings 
with Congress and committee members and staff, it has become 
clear to us that Congress wants a piece of legislation sooner 
rather than later. At the same time, we want there to be 
meaningful substantive advice and input from a broad range of 
community and economic development professionals, elected 
officials, researchers from around the country. What we are 
doing is working on several fronts simultaneously. It is our 
goal to have a basic structure of a bill delivered to Congress 
so that you can begin to hold hearings on a specific piece of 
legislation. There may be, in fact, some placeholders or holes 
within that legislation that we submit this spring while the 
advisory committee completes its work. Obviously, I am well 
aware that the legislative process is a fluid process. We 
believe that it is important to be responsive to you to get a 
piece of legislation up here, and if it has some placeholders 
in it, we all need to recognize those for what they are.
    Mr. Shuster. And when that legislation comes forward, we 
certainly want to work closely with you in crafting that as we 
set up and move forward, as I said before.
    Finally, a question that I have is your view of 
infrastructure in economic development. How important do you 
view that in this new organization and just in economic 
development terms?
    Mr. Sampson. Infrastructure is a critical component to 
building community viability and enhanced economic opportunity. 
One of the greatest challenges for our most distressed 
communities in the United States today is the infrastructure is 
simply outdated and it is not adequate to support the kind of 
twenty-first century private capital investment that is needed 
for these communities to regain their prosperity and to create 
more and better jobs for those communities.
    We envision the proposal that the President has submitted 
actually increasing the flexibility for the use of these funds 
for infrastructure. For example, the CDBG funds currently have 
a number of restrictions on the use of those funds for roadways 
and other components that could support the creation of 
industrial parks and business parks. So we believe this 
proposal will actually increase available funding for 
infrastructure.
    Mr. Shuster. Thank you.
    I see the ranking member of the full committee just 
arrived.
    Would you like to make an opening statement or would you--
    Ms. Norton. I would defer to the ranking member for a 
statement.
    Mr. Shuster. The ranking member who has been a leader on 
this issue and have told some people this is one of your 
babies. But we certainly would like to hear from you.
    Mr. Oberstar. Thank you very much, Mr. Chairman. It is good 
to see a Shuster-chairing committee again in this room.
    Indeed, EDA is a matter of long standing with me. I prize 
one of the green pens that Lyndon Johnson used to sign this 
bill into law on August 9, 1965, and EDA's record of 
accomplishment is unequaled, I would say unparalleled except 
for that of the Appalachian Regional Commission in the Federal 
Government as a success story.
    Just recently, earlier this week I spoke to the 
International Economic Development Council. As Dr. Sampson 
knows--he has done a splendid job of leadership at the EDA--EDA 
has invested perhaps a $1.5 billion over the years in 
community-based and initiated economic development initiatives, 
and every year the 1.5 million jobs created by those EDA 
projects are returning $6.5 billion in taxes to Federal, State, 
and local governments. We are getting four times as much back 
in tax dollars as we have invested in public revenues into EDA-
initiated projects.
    Furthermore, this a bottoms up program, grassroots up 
program. The Federal Government doesn't come to any State or 
any development committee or any regional development 
commission and say this is what you must do; they propose, and 
EDA evaluates and decides which of meritorious proposals to 
support.
    So now we come to yet another initiative to dismantle EDA. 
This document, Mr. Chairman,--about the time you were born, 
probably; hold on to these things--``Program for Economic 
Recovery, America's New Beginning.'' It was not a document for 
economic recovery, it was a document for abolishing a whole 
range of Federal economic development programs. It proposed to 
download, down-fund the FAA Airport Improvement Program, the 
Highway Construction Program, and the 1981 Reagan 
Administration proposes to eliminate funding for the Economic 
Development Administration and the regional development 
commissions of the Department of Commerce, and the non-highway 
programs of the Appalachian Regional Commission.
    Yogi Berra had a phrase for this: deja vu--he didn't 
pronounce it that way--all over again. Well, we are not going 
to stand for that. Now, this is a thinly disguised initiative. 
You have been sent here as a missionary with your staff and 
your rod to pronounce to the Congress something that I doubt 
that you fully believe in. But you have been sent up here to 
say we are going to bring together a whole panoply of Federal 
Government programs, put them all in one box, and then we are 
going to cut one-third of the funds. Then we are going to 
hamstring this, we are going to send them out with one arm tied 
behind their back and one foot tied to the other. Now, that is 
not right.
    This policy change will save more than $5 billion over the 
next four to five years, they said in 1981. Well, Democrats and 
Republicans in the Congress stood up, and by a vote of 375 to 
forty-something we said no. And we are going to say no again, 
because this is the wrong initiative and the wrong time. You 
don't reverse 150 years of economic decline, as we have seen in 
Appalachia, in 20 or 25 years or 30 years. You don't reverse 
the economic decline that occurred in the chairman's district 
and in the rest of Pennsylvania in the rust belt and the steel 
valley, 100 years of the industrial revolution building steel 
mills, and then 20 years they are gone; the jobs are gone, the 
people are gone. You don't restore that economy in another 10 
or 15 years. It takes time to reinvest in the infrastructure, 
in the physical infrastructure, in the intellectual capacity, 
in the capital formation in those areas.
    EDA has been the only effective tool that we have had to do 
this. Community Development Block Grants, fine. They ought to 
stay where they are. EDA has a very targeted mission, a very 
successful mission. Bring all those charts that you want up 
here; they are all concocted by some beaver in OMB, the same 
guy that probably wrote this language 25 years ago. I don't 
believe a word of it, I don't think any of that will work, I 
don't like the idea, and apart from that, I have an opinion.
    So, Dr. Sampson, I have sympathy for you coming up here 
with this mission, but I think we are better off with the 
structure as it is than trying to restructure everything 
according to this grand scheme.
    I would be glad to hear your response.
    Mr. Shuster. Mr. Chairman, we are not into the question and 
answer period yet.
    Mr. Oberstar. Oh, I am sorry.
    Mr. Shuster. That is all right. Mrs. Norton, you will be up 
first, but you are going to let the ranking member continue?
    Ms. Norton. I would certainly defer to hear a response, if 
that is what--
    Mr. Shuster. Sure. That is fine, because you were next, 
Mrs. Norton, but I just wanted to--
    Ms. Norton. Do you want to hear a response to that? I 
certainly would defer to get a response, before my questions.
    Mr. Shuster. Go ahead, Dr. Sampson.
    Mr. Sampson. Congressman Oberstar, you and I have worked 
closely together over the last several years, and I think you 
know I have always shot straight with you, I am a man of my 
word, and I very deeply and sincerely believe that the proposal 
that the President has included in the budget is one which 
builds on the success of EDA's past and takes the Department of 
Commerce's efforts to a new level of assistance and service to 
the most needy communities in America.
    The challenge in reducing poverty is that reliance on 
government and philanthropic resources to get that job done is 
inadequate; there is not enough money in the Federal budget, or 
State or local budgets or philanthropic foundations to do that. 
What we have to do is to deploy the Federal assistance in a way 
that it taps into and unlocks the market potential of private 
sector markets.
    I am proud of the work that EDA has done in the four years 
of my stewardship. That record is not consistent across all 18 
of these programs, however. The OMB cross-cutting analysis has 
indicated that most of these programs rate as some of the 
lowest performing programs within the Federal budget, and we 
believe by learning the lessons of the successful programs in 
the past, reducing the fragmentation and the lack of focus and 
the lack of coordination, that we can help our most vulnerable 
communities actually achieve greater economic performance in 
the future.
    And I just want to be very clear that I deeply and 
passionately believe in the direction of the proposal before 
you today.
    Mr. Oberstar. Well, I am sorry that you are.
    Mr. Shuster. Mrs. Norton.
    Let me just say something to the ranking member, just to 
let her know we had a unanimous consent. We expanded the five 
minute rule to ten minutes for yourself and ranking member of 
the Subcommittee and chairman for opening statements. I wanted 
to do that because I knew how passionate you are about EDA, and 
I am going to be a stickler about the five minute rule to run 
through efficiently. But, as I said, we extended that courtesy 
to both you and Mrs. Norton.
    Ms. Norton, go ahead with your questions.
    Ms. Norton. Thank you very much, Mr. Chairman. When you 
speak about passion, I know that Dr. Sampson is aware that this 
Congress is full of members with a lot of passion for the EDA 
programs, so you have to know what you are up against.
    Dr. Sampson, I would hate to see your own credibility 
undercut, because we work so closely and productively with you 
only a few months ago, about six months ago, there was no more 
adamant or passionate official for reauthorization. We depended 
very substantially on your evaluation of the program. Now, when 
you see a virtual U-turn six months ago, I have to ask you just 
in the spirit of candor--we understand that the Administration 
and the entire Congress is under a great deal of pressure 
because of the deficit. Because I am certainly not against 
reform, I ran a very troubled Federal agency myself, so I would 
be very open to reforms. This committee has been central to 
reforms. Is it the deficit, is it the OMB and its concerns, 
which means the Administration, that have caused you to take a 
very different position from the position you took just six 
months ago, urging us to reauthorize precisely the program you 
now are asking to be changed in fundamental ways?
    Mr. Sampson. We would be proposing this reform regardless 
of the budgetary and deficit situation. The reality is--
    Ms. Norton. Then why didn't you propose it six months ago? 
I mean, really, did you just get religion in the last few 
months?
    Mr. Sampson. No, ma'am, I have had religion for many, many 
years.
    This has been a year-long crosscutting analysis of 18 
different programs that was very thorough, conducted by OMB, 
conducted by Interagency Collaborative for Community and 
Economic Development efforts. When we proposed the 
reauthorization of EDA, that analysis and that work was not 
completed. It was not completed until the very first part of 
this year. This proposal was in dialogue and discussion in the 
first part of this year. We came to you in good faith with what 
we believed was our best recommendation for the management of 
EDA and positioning EDA to be an effective agency. We are 
committed to continuing to operate EDA in that manner until 
something changes. But we came to you in good faith. We believe 
that we got a strong bipartisan bill, and we believe that we 
can work with you in the same fashion to, now that we have the 
information about the performance of 18 other programs within 
the Federal Government--and I would say that it is the track 
record of EDA that led the President to make the decision to 
house this new program at the Department of Commerce.
    Ms. Norton. Dr. Sampson, let me just warn you the next time 
you come before this committee and ask us to do something the 
way you did on reauthorization, and there is a year-long study 
in progress, you have an obligation to tell this committee 
about such a study, which was never mentioned. No one here can 
remember the mention of any such study. And it is very 
disturbing to hear that there was a study going on about some 
of the programs that was never mentioned to us when we 
reauthorized. I just want to say that to you. This goes to the 
credibility with which your testimony will be accepted in the 
future, as far as I am concerned.
    Mr. Sampson. Well, may I respond to that?
    Ms. Norton. Yes, you certainly may.
    Mr. Sampson. I hope that you will recognize that I have a 
very specific portfolio that I am responsible for. I am not 
responsible for, nor do I know everything that is going on at 
the OMB in terms of all of the analysis. I came to you--
    Ms. Norton. Well, did you know about the analysis of these 
18 programs at the time you testified before us? Were you a 
part of that analysis? Were you asked your opinion on it during 
that period of time?
    Mr. Sampson. There are many different levels of review. We 
participated in the Interagency Collaborative on Community and 
Economic Development, which was a study group of a number of 
committees looking at areas of overlap and effectiveness. At 
that time there was not a specific proposal on the table for 
consolidation, it was a study group. That is the level that I 
participated in.
    Ms. Norton. All right, I understand. And, again, my word to 
you is that reauthorization is a very serious matter for us. If 
we are reauthorizing programs that are being studied, 
crosscutting studies or whatever, it is your obligation to 
inform the Congress so we can take that into consideration. You 
know, I look at your testimony, where you say many--
    Mr. Shuster. Five minutes are up, and what we will do is we 
can do another round of questions if Mr. Davis has a question. 
We have ten minutes then the vote.
    Mr. Davis. I don't--
    Mr. Shuster. Yes, Mr. Davis.
    Mr. Davis. I don't really have a question. I will later, if 
we continue the hearing. Are we going to do that when we get 
through voting?
    Mr. Shuster. Do you have further questions and want to 
continue? Do you have a question we can get through here in the 
next five or ten minutes? Because we are going to be leaving 
here for probably an hour.
    Mr. Davis. So we probably won't be back.
    Mr. Shuster. We probably won't be back for Mr. Sampson. We 
will be back to the second panel, though.
    Mr. Davis. First of all, I am from a small rural area. When 
you look at congressional districts in this Nation, of the 435, 
the fourth congressional district has the fourth largest rural 
residency of any congressional district in America. I have 
10,000 square miles. That is a huge area. When I get in my 
pickup truck at home and I drive to the other end of the 
district, I have to fill it with gas at least once before I 
come back. It is that huge of a distance. But, yet, it is in 
Tennessee, and you would assume that Tennessee, as small as it 
is, especially from the north to the south, you probably 
wouldn't have that type of an area. I have the third highest 
number of blue collar workers in the congressional district I 
represent of the 435. Now, what does that say? Lower income 
individuals in a rural area. Who helps them? Rural Development 
Agency, the old Farmer's Home Administration, EDA, ARC, CDBGs, 
community service block grants that go to our human resource 
agencies. All of these are part of the lifeblood that keeps 
rural America and the district I represent moving.
    So, to me, any proposal that would enhance the opportunity 
or that would bring to bear more dollars available and easier 
to obtain for rural areas, I am for it. If it doesn't, I'm 
against it. That is just the way it is. I don't have a choice, 
because there is only one person representing those folks in 
Congress; they only have one vote, and it is this fellow who is 
sitting here today.
    I have worked with Farmer's Home Administration for a 
little over a total--I worked USDA for 11 years, of which 10 of 
those were with an agency called Farmer's Home Administration. 
When I started to work in Picket County and Birds Town, which 
had less than 5,000 population, there was 212 individuals that 
had a treated potable water system. We now have over 2500. 
Where did those dollars come from? These agencies that are 
about to be cut and these agencies that may be dissolved as a 
result of some of the proposals here.
    You see how much of a head shot it is to rural areas when 
we start talking about retracting dollars from them? Let me 
read a letter from the Town of Ester Springs, which is a small 
county. It is really a large town, to be honest, it is 2200 
population.
    ``Congressman Davis, the Town of Ester Springs is strongly 
against the proposed elimination by President Bush of the Small 
Cities Community Development Block Grant and the Appalachian 
Regional Commission. These programs are vital to small 
communities to be able to provide much needed infrastructure to 
our residents. The Ester Springs water system was losing 56.2 
percent of the water that we produced because of leaking and 
broken water lines. We simply did not have the funds available 
to construct a comprehensive water rehabilitation project that 
would address the problem. In 2004, we received $300,000 in 
CDBG funds to replace those old braking waterlines. Esther 
Springs' population is 2294 at last count and growing. This 
population makes us the second largest municipality in Franklin 
County, but our homes and our business operate using septic 
tanks, and we do not have a public sewer system. A sanitary 
sewer system is critical for our future growth and development, 
and we had planned to apply for CDBG and ARC funds in the near 
future for construction of this. Without grant assistance, we 
have no hope of being able to afford a sewer system. The CDBG 
program is one of the very few grant programs available to 
local citizen candidates for much needed infrastructure. We 
hope you will consider our request and understand the 
importance of these grant funds for small rural communities.''
    If you live in a large area, EDA, CDBG, ARC, Rural 
Development Agency may not be important to you, but I can 
assure you one thing: economic development and the 
opportunities and options of life depend on such grant programs 
as this, and it is extremely difficult for me to be able to 
vote for anything or support any area that would make dramatic 
cuts in funding available to the least amongst us in our 
society, and most of those least amongst us are those with low 
incomes that live in rural areas.
    Mr. Shuster. Thank you, Mr. Davis.
    Now I know what a professional coach feels like when he has 
to manage the clock. This is what we are going to do, because I 
know Mrs. Norton and myself have a couple more questions. We 
are going to recess for 10 minutes, and then come back and 
finish up with Dr. Sampson.
    But before we do that, Congressman Holden would like to 
introduce one of the panelists from the next panel.
    Mr. Holden. Well, thank you, Mr. Chairman, and thank you 
and Ranking Member Norton for your indulgence here.
    Mr. Shuster. I did ask unanimous consent that you be 
allowed to introduce. Without any objection, so ordered.
    Mr. Holden. Thank you, Mr. Chairman. I will only take a 
moment; I know we have a vote coming up. But I would just like 
to take this opportunity to welcome one of the panelists for 
the second panel, and that is the mayor of Lebanon, 
Pennsylvania, Bob Anspach, who is the mayor of the second 
largest city in my congressional district.
    Mayor, I would like to take this opportunity to welcome you 
and thank you for your input. I read with interest your 
concerns about the proposal from the Administration the other 
day about the consolidation of the Community Development Block 
Grant program. I was particularly concerned about the police 
protection at 8th and Chestnut Street. Of course, you know that 
is where my congressional office is held, and I was very 
interested to read that in the article.
    But I do know that you have been doing an outstanding job 
as the mayor, and I know that you bring your military 
experience to being the chief executive, and I know that you 
are very concerned about the ability for the Federal Government 
to continue to be a partner with the City of Lebanon. So we 
welcome your testimony. I will try to be back to hear it, even 
though I have read it several times already. I am not sure I 
will be able to, but thank you very much for being here.
    And thank you, Mr. Chairman. Appreciate it.
    Mr. Shuster. Thank you, Mr. Holden.
    The committee will be in recess for approximately 10 
minutes.
    [Recess.]
    Mr. Shuster. The committee will come back to order, and we 
will start off with Ms. Norton for the second round of 
questions. We want to stay on the five minute rule to try to 
get through the questions and get through the next panel before 
we get called for another vote, which will be in about a half 
an hour from now.
    Ms. Norton. Thank you, Mr. Chairman.
    Dr. Sampson, in your testimony at page 4, you say that--and 
here I am quoting--``many communities with relatively low 
poverty rates receive Federal funding at the expense of 
distressed communities.'' That claim particularly interests me 
in light of the testimony that came before us at the time of 
reauthorization about the core bases of funding, beginning with 
employment or unemployment, poverty. I understand that there 
are other factors. For example, some communities may have been 
at getting private sector funding. If anything, we tried to 
encourage that kind of entrepreneurial use of the program.
    In light of the fact that you now say that many of the 
communities that received this money are not the most 
distressed communities, I would like to ask you about how you 
know that and how these programs were rated. You say that there 
was the Program Assessment Rating Tool. I would ask you to 
explain how it worked, whether you participated in the ratings, 
what were the elements that were rated, what kinds of 
categories that were used. Again, you have to understand I am 
trying to reconcile what we have done with now what we are 
being asked to do, so I need to know more about the ratings. I 
understand that you looked at 9 out of 18 programs, not every 
program, for example.
    Mr. Sampson. Sure. Congresswoman, let me make clear there 
are two separate issues here. When I spoke to you last summer 
and fall, or earlier on EDA's reauthorization, I was focused 
solely on the program that I managed at that point in time, 
which was EDA, and everything that I shared with you about EDA 
I stand behind. What I am now talking about is the portfolio or 
this suite of programs within the Federal Government, these 18 
programs that are proposed for consolidation. So the remarks 
that you identified in my testimony refer not just to EDA, but 
to the suite of 18 different programs.
    In answer to your question, I did not participate in the 
PART process, that is an OMB initiative. Mr. Robert Shay at OMB 
runs that initiative; that is outside of my portfolio. What I 
am providing you are the summary findings of that OMB analysis. 
And I am sure that we can get back to you in much greater 
detail. There are about, I think, five or six, seven, eight 
different components to that PART rating.
    With respect to parting 9 of the 18 programs, those 
represent 95 percent of the funding that is targeted for 
consolidation. So the bulk of funds targeted for consolidation 
have been rated by OMB.
    Ms. Norton. Don't you think it was at least relevant to ask 
you your view? I am all in favor of outside reviews. I also 
believe that those of us who are for Federal programs have to 
be in a constant mode of reform. So I hope you don't 
misunderstand my questions. But in trying to figure out what to 
do, whereas the outside evaluators are critical, don't you 
think it was a little strange that you were not asked for your 
opinion at all, so that there was some benchmark to compare 
with?
    Mr. Sampson. We participate, ma'am, in the PART process for 
EDA; I have had extensive involvement in EDA's PART analysis. 
As a matter of fact, in my quest for continuous improvement at 
EDA, I requested a second PART review analysis by OMB in a 
subsequent year, which is, I think, rather unheard of, because 
we initiated a number of improvement processes. So I have been 
involved in the PART analysis of EDA. What I mean is I have not 
been involved in the PART analysis of the other 95 percent of 
the funds that were parted by OMB.
    Ms. Norton. Are you aware that $18 billion, by our own 
calculations, will be lost in private investment if the 
President's cuts of $1.8 billion is affected?
    Mr. Sampson. I am not sure what the basis of that 
calculation is, ma'am. I would be happy to take a look at it.
    Ms. Norton. But you don't see any loss in private 
investment? You know that that has been a major part--
    Mr. Sampson. No, ma'am. As a matter of fact, I strongly 
believe that with the consolidation of these 18 programs into 
the Department of Commerce using more of the model that the 
Department of Commerce has pursued in recent years, we will 
actually see private sector leverage and investment in these 
communities increase above what it is now under the current 18 
programs.
    Ms. Norton. Of course, some of these programs that have the 
private investment will be gone, and apparently the private 
investment with it.
    Mr. Chairman, I will end my five minutes here, since you 
are going to dismiss this witness. But I have to say to you, 
Mr. Chairman, that I don't see how we will be able to make any 
decisions unless a whole set of questions are propounded in 
writing to this witness.
    You say in your testimony, for example, that the new 
program will track progress toward goals, including increasing 
job creation, new business formation, private sector 
investment. That is what we thought this was all about; that is 
what we ratified.
    And if I may, Mr. Chairman, I will need some clarification 
about how you are going to do that better with these new 
programs than you testified you were already doing it when we 
reauthorized this program the last time.
    Mr. Shuster. Well, I am sure that if the gentlelady submits 
questions, the secretary and his staff will be more than happy 
to submit back with the answers to her.
    I would ask unanimous consent that all members be allowed 
to submit statements and questions for the record.
    Mr. Sampson. Mr. Chairman, not only will I be happy to 
provide written answers to the ranking member, I am available 
to meet with her and with other members of the Committee to 
have extensive discussions on these items. And I welcome that 
opportunity, Congresswoman.
    Ms. Norton. Thank you.
    Mr. Shuster. And I know your reputation as a results-
oriented person and a strong leader and person with impeccable 
integrity. I know that we will be working closely with you as 
we move forward.
    I have two questions. Could you please tell the Committee 
how many jobs were created or retained by EDA as programs, as 
compared to CDBG? Do you happen to have that statistic?
    Mr. Sampson. I believe--let me make sure I am giving you 
the right numbers. In fiscal year 2004, EDA's $323 million in 
program funds led to the creation of 160,000 jobs and leveraged 
$10.4 billion in private sector investment. I believe, Mr. 
Chairman, that based on Deputy Secretary Bernardi's testimony 
before the Government Reform Committee on March the 1st, that 
he testified that CDBG, their economic development activities, 
which were funded at a level of $434 million in 2004, led to 
the creation or retention of 78,000 jobs. I believe those are 
the accurate numbers to be reported.
    Mr. Shuster. And those numbers came from the different 
departments, it wasn't done by the inspector general, from his 
departments or outside?
    Mr. Sampson. Not to my knowledge. For us, the numbers are 
the numbers reported by our grant recipients on their grant 
applications, and then those are evaluated at the three, five, 
and I believe the seven year marks, after the grant is awarded, 
to see whether they achieved their projected levels of job 
creation and private sector leverage.
    Mr. Shuster. That is twice as effective, EDA versus CDBG.
    Mr. Sampson. Well, I believe that is indicative of my 
response to the ranking member that I believe that in the 
consolidation at Commerce, because of mission alignment and 
because of the Commerce Department track record of working with 
these funds--and certainly the President believes that we will 
actually achieve greater results, which is what we all want, 
more results for the most vulnerable communities and the most 
impoverished of our citizens.
    Mr. Shuster. Without asking my second question, you have 
already answered. I was going to ask how do you respond to the 
criticism of taking these various economic development grant 
programs, putting them into Commerce, because your focus and 
expertise is economic development. Would you care to expand on 
that at all?
    Mr. Sampson. Yes, Mr. Chairman. Actually, EDA and the 
Department of Commerce have a very long historical and current 
record of assisting both community development initiatives as 
well economic development initiatives, including factors such 
as workforce training centers and other type of community 
facilities in both urban and rural settings. One of the very 
unique features of the Department of Commerce, is that our 
portfolio includes both urban and rural settings.
    And I was remiss, Mr .Chairman, if I might, in failing to 
respond to one of the ranking member's questions about how can 
I say that many of these funds no longer go to the communities 
most in need. That was based on the OMB crosscutting analysis, 
which found that 38 percent of the HUD CDBG funds, for example, 
go to communities on an entitlement basis that have rates of 
poverty far below the national average, such that we have 
communities in this country with poverty rates of two and three 
percent that on an annual basis receive these poverty 
alleviation dollars. The Administration and the President 
believe those are fundamentally the wrong priorities, that 
these funds need to be targeted to our communities that have 
the highest rates of poverty, the highest rates of 
unemployment. So that is the source of that statement in my 
testimony.
    Mr. Shuster. Well, thank you, Dr. Sampson. We are going to 
be working closely with you as we move forward. I know that the 
ranking member has concerns, as do I. I am one that believes 
that change is not bad as long as it is positive, and I think 
there can be some positive changes that need to be made, but we 
want to make sure that we don't compromise the great success 
that I think EDA has had over these last 30, 35 years or so.
    So, again, thank you for being here today. Appreciate it 
and appreciate your candor.
    Ms. Norton. Could I ask unanimous consent, Mr. Chairman, to 
put into the record the material from the City of Atlanta, the 
American Planning Association, and a member, Mr. Blumenauer, 
opposing the President's proposal for this program?
    Mr. Shuster. Without objection, so ordered.
    Again, thank you, Dr. Sampson. You are excused.
    Mr. Sampson. Thank you, Mr. Chairman.
    Mr. Shuster. The second panel, if you could move forward.
    Thank you all. Sorry for the delay there. We are going to 
try to get through all of your testimony. Hopefully, you will 
be able to do it in five minutes or less. I think the most 
important part is the questioning afterwards, and we are 
probably going to get interrupted by a vote, but we will go as 
far as we can before we have to stop.
    The second panel today is a much larger panel, which 
includes experts in the field of economic development and 
representatives of local government to offer their perspective 
on the Administration's proposal.
    Joining us today is the Honorable Robert Anspach, who 
Congressman Holden has introduced, the mayor of the City of 
Lebanon, Pennsylvania, he is here on behalf of the National 
League of Cities; Charles Fluharty, Director of Rural Policy 
Research Institute at the University of Missouri; and from my 
district, Ed Silvetti, the Executive Director of Southern 
Alleghenies Planning and Development Commission--Ed, it is good 
to see you here today--and Ken Jones, First Vice-President of 
the National Association of Development Organizations and 
Executive Director of the Lower Rio Grande Valley Development 
Council. That is a mouthful.
    Since your written testimony has been made part of the 
record, the Subcommittee will request that all witnesses limit 
your testimony to five minutes, and we will ask questions 
afterwards.
    With that, Mr. Mayor, I would like you to go ahead and 
start.

  STATEMENTS OF HONORABLE ROBERT A. ANSPACH, MAYOR, LEBANON, 
PENNSYLVANIA; CHARLES FLUHARTY, DIRECTOR, RURAL POLICY RESEARCH 
    INSTITUTE, UNIVERSITY OF MISSOURI; EDWARD M. SILVETTI, 
     EXECUTIVE DIRECTOR, SOUTHERN ALLEGHENIES PLANNING AND 
 DEVELOPMENT COMMISSION; AND KEN JONES, FIRST VICE-PRESIDENT, 
 NATIONAL ASSOCIATION OF DEVELOPMENT ORGANIZATIONS, EXECUTIVE 
     DIRECTOR, LOWER RIO GRANDE VALLEY DEVELOPMENT COUNCIL

    Mr. Anspach. Mr. Chairman and members of the Subcommittee, 
my name is Bob Anspach. I am mayor of Lebanon, Pennsylvania, 
and I am here today representing the National League of Cities 
and the Pennsylvania League of Cities and Municipalities.
    The NLC and the PLCM's concerns with the Administration's 
Strengthening America's Communities initiative is threefold: 
the proposal, first, would drastically reduce community 
development funding that cannot be replaced; the proposal would 
alter eligibility requirements to the disadvantaged of some low 
and moderate income communities; and, finally, the proposal 
would narrow the mission of the CDBG program, which would 
reduce its flexibility and its effectiveness.
    The Administration's proposal would consolidate 18 current 
programs with a combined fiscal year 2005 budget of $5.6 
billion into a new two-part grant program with only $3.7 
billion in funding. This is a drastic cut of nearly $2 billion. 
What is even more alarming is that the plan will raid the 
majority of its funding from the CDBG program.
    The Community Development Program has played a critical 
role in rejuvenating distressed neighborhoods and alleviating 
economic decline in all types of communities. It is one of the 
best and only tools currently available to spur on economic 
growth. However, CDBG is not just a jobs creator or economic 
development incubator. It is also a catalyst for affordable 
housing and new public infrastructure.
    For example, in Lebanon we dedicated $331,000 in block 
grant funds to demolish vacant and blighted buildings in 
certain neighborhoods throughout the city. These structures 
were havens for crime, targets for vandalism and fires, and an 
attractive nuisance to our children. The city used the vacant 
lots and created larger yards for some houses, off-street 
parking in high-density neighborhoods, and accepted proposals 
to develop owner-occupied housing at the site of an abandoned 
factory.
    The Administration, the Congress, and cities across the 
Country can all applaud many partnerships. Certainly, these 
projects are but a few and a small representation of many 
successes in the 30 years of the block grant. Yet, despite 
measurable successes, the Office of Management and Budget 
proposes to cut CDBG in favor of SAC. So what is their 
rationale?
    First, OMB claims that SAC will better fund communities 
most in need of assistance by creating new eligibility criteria 
around national job loss, unemployment, and poverty rates. Too 
many communities, it says, are receiving funding even though 
they no longer need assistance, an they have poverty rates that 
are below the national average. The details are still unclear 
as to which communities will be eligible for SAC grants, but it 
seems clear that they must, at the very least, have poverty and 
job loss rates above the national average. If this is so, then 
the Administration has made the mistaken assumption that 
impoverished neighborhoods no longer exist in communities 
ranking above the national average on the poverty and job loss 
index.
    We at the local level, however, know this is far from 
reality. Using national averages to measure assistance needs 
ignores the reality that our Nation is comprised of local 
economic regions that are unique. For example, the majority of 
families who earn below the regional median household income in 
the greater Washington-Baltimore metropolitan area may earn 
more than the national poverty rate, but they are just as much 
in need of assistance because the cost of living in this region 
is so much higher.
    Second, the OMB claims that programs like CDBG have no 
measurable results. The Administration's proposal suggests new 
performance standards like job creation, new business formation 
rates, commercial development, and private sector investment as 
tools to determine whether communities receiving SAC funds are 
achieving results and, thus, their eligibility to retain funds 
or to gain bonus grants.
    Unfortunately, measuring results by these criteria make 
little sense for communities that are chronically impoverished, 
have little to offer in the way of resources, and are unlikely 
to show significant progress over a relatively short period of 
time. In short, they are being set up for failure. It is very 
difficult to assess the impact of removing a drug den from a 
neighborhood using economic criteria alone. Moreover, it is 
difficult to assess economic impact in relation to this type of 
project over a short period. Yet, the Administration's proposal 
appears to try to do just that.
    Mr. Chairman, closing down a drug den may not immediately 
create job growth, spur new businesses, or encourage new 
commercial and residential development. However, it will 
immediately increase the neighborhood's quality of life. That 
is measurable and that is the foundational beginning of any 
plan to attract new commercial and residential development in 
the future.
    Throughout Pennsylvania you will find that in virtually 
every city there are places of poverty, and we have to 
understand that the Administration's one-size-fits-all approach 
will likely stifle the flexibility and effectiveness of the 
monies used. We therefore, through the NLC and the Pennsylvania 
League of Cities, will aggressively continue its campaign for 
the continued existence of a strong and distinct Community 
Development Block Grant program.
    Thank you, sir, for your time and look forward to your 
questions.
    Mr. Shuster. Thank you, Mayor Anspach.
    Mr. Fluharty? You may proceed.
    Mr. Fluharty. Mr. Chairman, I thank you for the opportunity 
to have a rural perspective placed in this discussion today. I 
would like to make three very brief remarks about the rural 
context for this proposal.
    First of all, if we fail to ignore the unique rural context 
in these decisions, that will result in a failure to optimize 
the opportunities for our Nation that exist in these rural 
areas. Secondly, acknowledging this context and paying specific 
and detailed attention to the rural context will, by necessity, 
alter the design and delivery of this program in rural America. 
Finally, if this is done, I believe we can craft the twenty-
first century rural regional innovation system that I lay out 
in my testimony; that is, a system that is sensitive to place, 
culture, and unique circumstance, operates in an asset-based 
development framework, and is centered around rural 
entrepreneurship and rural governance.
    A word about this rural context. Each year this Federal 
Government spends two to five times as much per capita on urban 
than rural community development. Two to five times. In the 
most recent rural data year, that is a $14 billion annual 
community capacity disadvantage in rural America.
    Now, of the $30 billion that is distributed annually by our 
nation's foundations, only $100 million gets committed to rural 
development. If we look at a recent study of the 124 Fortune 
500 companies, their corporate giving in this nation in the 
year 2000, they gave $12 billion to community and economic 
development, but only seven-tenths of one percent of that went 
to rural grants. These realities in rural community capacity 
disadvantage simply cannot be ignored, in the face of this 
challenge.
    Before we go any further, I believe, in this really serious 
discussion about this policy change, we really need to look at 
this immense structural regional capacity disadvantage in rural 
communities. And each year, Mr. Chairman, the Federal 
Government exacerbates that by its funding formulas.
    Finally, we can't divorce community and economic 
development in rural areas, as you know. The playing field is 
simply too inequitable right now, and the Federal Government 
must address the needs that rural areas have to get to a 
development-ready framework.
    I fully agree with Assistant Secretary Sampson, in his 
testimony, that sound investments in community development must 
lay the groundwork for sound economic development. That is 
essential in the rural context.
    In closing, small business is the backbone of this nation. 
This is particularly true in rural America. Rural job creation, 
rural new business formation, private sector investment, all 
very laudable, very appropriate goals. It is critical that we 
focus on these. Scaling that opportunity in rural America, 
however, Mr. Chairman, is going to require a vibrant rural 
entrepreneurship system, which will not develop unless we pay 
attention to, and give credibility to, the community capacity 
and intermediary organization support that my testimony lays 
out.
    I also agree with the Assistant Secretary that each 
community is different and that we need a different road to 
tackle each community's needs. I could not agree more. This is 
also particularly critical in rural America. There is an old 
saying: If you have seen one rural community, you have seen one 
rural community. That is very, very true. Commitment to that 
premise will result in a program design which ensures two 
things: local flexibility and locally based organizational 
capacity to support development and implementation of 
regionally appropriate strategies.
    So in closing, Mr. Chairman, there are many comments I 
could make. I have tried to make the three most critical rural 
policy issues clear. You know, we live in a society in love 
with the quick fix. Rarely do we commit to anything for the 
long haul. We have done that in economic development in this 
nation, and that is exactly what is required if we are going to 
build vibrant rural communities that can fully contribute to 
our national economy. Where these investments are made, there 
is a miraculous rural renaissance starting, so I would urge 
this Congress and this committee to sustain and nurture this 
unique competitive advantage, that is local; to recognize 
unique approaches are essential and to assure the community 
capacity for our under-resourced and challenged communities is 
not divorced from economic development.
    Thank you, Mr. Chairman.
    Mr. Shuster. Thank you, Mr. Fluharty.
    Next, Mr. Ed Silvetti, who is a good friend of mine from 
Blair County, Pennsylvania, and a long-time economic 
development planner and leader in our community.
    Ed, appreciate you being here. Go ahead.
    Mr. Silvetti. Good afternoon. Thank you, Chairman Shuster 
and members of the Subcommittee, for your invitation to testify 
today on behalf of Federally supported local economic 
development efforts in the sub-State region of Pennsylvania 
that is predominantly rural and one that has benefitted 
immensely from community and economic development programs 
promulgated by the Congress. I would like to acknowledge 
Chairman Shuster, in whose ninth congressional district of 
Pennsylvania I live and work on behalf of which my 
organization's efforts are directed.
    I have been, for the past 12 years, Executive Director of 
Southern Alleghenies Commission, headquartered in Altoona, 
Pennsylvania. Altoona is one of our two principal cities and 
along with our counties in South Central Pennsylvania, these 
being Blair, Bedford, Cambria, Fulton, Huntingdon, and 
Somerset. As a public nonprofit development agency, the 
Southern Alleghenies Commission has served the community and 
economic development interests of the region's citizens since 
1967. In recent years, I have served as President of 
Pennsylvania's association of regional councils, as well as 
President of the Development District Association of 
Appalachia. This organization comprising the 72 Local 
Development Districts designated through the Appalachian 
Regional Commission. My point is that I think this has given me 
a perspective well beyond where I live and work in the 
congressman's district.
    I would like to focus, if I may, on how economic 
development plays out in rural Pennsylvania and across this 
Country. My intent is not to discourage consideration of 
alternatives such as the President proposes, but to try to 
demonstrate in some small way the importance of the Economic 
Development Administration and other programs in meeting the 
need for economic stimulation and job creation.
    For the record, Southern Alleghenies Commission is a 
designated economic development district under the Public Works 
and Economic Development Act. This being said, Southern 
Alleghenies Commission does receive a small planning grant 
annually, as well as we administer a number of revolving loan 
funds, one of which is capitalized through the EDA.
    But from my professional vantage point, the necessity for 
public infrastructure and the identification of infrastructure 
as lacking in this Country really has waxed and waned for as 
long as I can remember. I am here today to tell you that 
inadequate public infrastructure and deteriorated 
infrastructure has never been off our agenda. A lack of 
broadband, water service, sewerage service, and highway access 
to business and industrial sites preempts our ability to 
respond immediately to major economic opportunities presented 
by larger businesses and manufacturers. What remains for those 
of us in rural Pennsylvania is oftentimes competing for lower 
tech, lower paying jobs.
    I would also like to state for the record that it is the 
belief of our board of directors, comprised of locally elected 
officials from our six counties, that the EDA has been the 
singular Federal program that has helped to support the 
establishment of business parks, industrial parks, and 
attendant infrastructure that has in turn supported a huge 
portion of economic growth and resulting new jobs in our small 
corner of this Country.
    Within our six county region, we have made the prudent 
decisions and recommended these for EDA consideration. Many of 
these investments have gone in our more urban counties, but our 
organization's proudest moments have been when we have brokered 
Federal investments in our most rural counties in response to 
economic opportunity to see jobs created in areas where, 
without public investment, no jobs or very few jobs would have 
been created at all.
    I wish that all members of this Subcommittee had the 
opportunity to attend the groundbreaking and ribbon cutting for 
the Fulton County Business Park. Fulton County has a population 
of barely 15,000 people, but this business park has already 
supported the expansion of several manufacturers and, with its 
recent tax-free designation, holds the promise of creating many 
more jobs onsite. Without EDA's investment, this project simply 
would not have happened.
    As I have stated, our organization was incorporated in 1967 
by a number of political and business leaders in our region who 
foresaw the necessity to plan and deliver economic and 
community development services on a broader geographic and 
political basis than at the sub-county, municipal, or even 
county level.
    Suffice it to say that for well over 35 years, Southern 
Alleghenies Commission has been working hard to make our region 
a better place in which to live, work, and do business. We have 
a solid reputation and are committed to continuing to promote 
progress through regional multi-county cooperation. Southern 
Alleghenies provides administrative, professional, and 
technical assistance that simply is not available within 
individual municipalities, and, likewise, many of our business 
services that we provide require expertise also not available 
in most of our small and medium sized businesses that comprise 
rural economies. We help our communities and we help our 
businesses to compete in an economy that stretches far beyond 
the geographic confines of Southern Alleghenies Pennsylvania. 
Federal programming, particularly like the EDA, support these 
efforts.
    I can summarize much of what we do as a regional council, 
Chairman Shuster and members of the Subcommittee, by stating 
simply that we prudently manage a sifting process. There has to 
be some entity that undertakes a cost-benefit analysis of 
projects and makes those recommendations to Federal agencies 
like EDA.
    And, again, thank you to the Committee for the opportunity 
to testify today.
    Mr. Shuster. Thank you.
    Mr. Jones, let me say we have a vote going on, but we will 
be able to get through your statement. Don't rush. I have got 
about 10 minutes until I have to be over there, but try to keep 
it under five would be greatly appreciated. Go ahead, Mr. 
Jones.
    Mr. Jones. Thank you, Mr. Chairman. Again, afternoon to 
all, and my thanks to you, sir, and the members of the 
Subcommittee for the opportunity to be here today. In my oral 
remarks I will summarize the four main points outlined in my 
full written statement.
    First, the current portfolio of 35 community and economic 
development programs offers vital resources for our Nation's 
distressed regions. While we agree with the Administration that 
every Federal program should be and must be reviewed on a 
continual basis, we feel the primary weakness in the current 
system is the lack of financial resources. At a time when 
nearly every American business and community is confronted with 
intense competition from emerging and developing nations, we 
should be expanding Federal investments in infrastructure and 
other community and economic development projects. Instead, we 
are facing nearly $2 billion in Federal cuts and elimination of 
18 valuable and proven programs, most notably the Economic 
Development Administration and HUD's CDBG program.
    Second, Mr. Chairman, the Economic Development 
Administration and its local partners have a proven and 
documented record of exceptional performance and 
accountability. This is evident in the fact that Congress has 
passed, with the leadership of this committee and the 
overwhelming bipartisan support from both chambers, two multi-
year reauthorization bills for the agency since 1998. As 
outlined in the President's 2006 budget, and as was mentioned 
earlier, EDA was ranked as the highest performing agency within 
the portfolio of 35 Federal community and economic development 
programs. This is high praise from the OMB. Most importantly, 
the value of EDA planning, economic adjustment and 
infrastructure investments have been positively experienced in 
hundreds of urban, small metropolitan, and rural communities 
across the Nation.
    My third main point is that inadequate public 
infrastructure remains the most significant roadblock to local 
economic development. This committee understands this point, as 
it constantly strives to secure additional investments in our 
Nation's roads, bridges, water infrastructure, and airports. 
When it comes to community and economic development, EDA is an 
instrumental and effective partner for local communities, 
especially in small towns and rural America. While it is true 
that the private sector creates jobs, it is equally true that 
the private sector relies, expects, and demands that public 
entities such as State and local governments provide and 
maintain essential public services and infrastructure. Without 
the industrial parks, business incubators, access roads, rail 
spurs, water and sewer facilities, and job skills training 
facilities build with EDA assistance, most of our Nation's 
distressed communities would be ill equipped to sustain, let 
alone attract, private sector industries.
    In my written statement I outline numerous real world 
examples of the impact of EDA and its infrastructure 
investments. The same can be said for programs such as HUD's 
CDBG program. In my home State of Texas, we use the CDBG small 
cities non-entitlement funds primarily for water and wastewater 
projects. According to the Texas Water Development Board, my 
State has over 3400 cities and unincorporated areas with 
inadequate water and wastewater facilities for residents and 
businesses. The cost to help these communities approaches the 
level of $5 billion.
    Finally, Mr. Chairman, the members of NADO adamantly oppose 
the elimination of the EDA planning program for economic 
development districts. This modestly funded, yet highly 
effective program serves as the lifeline for the Nation's 
under-served and distressed regions. As concluded by a recent 
Wayne State University study, these organizations provide the 
critical backbone for economic development planning at the 
regional level. The planning districts use the EDA planning 
grants for more than just developing strategic plans. More 
importantly, we have built the professional expertise and 
organizational capacity to bring key public and private 
stakeholders together within our region. We are involved in our 
region's progress from the planning and design phase, right 
through to the actual implementation of the specific projects.
    I must also note that the Administration is now introducing 
the concept of multi-year strategic growth plans. If the EDA 
district planning program was eliminated, our local communities 
would not have the capacity to craft, coordinate, and implement 
professional strategic plans.
    In closing, Mr. Chairman and members of the Subcommittee, I 
want to reinforce our strong support for the current portfolio 
of Federal community and economic development programs, 
especially the Economic Development Administration, HUD's CDBG 
program, and the USDA's rural development mission area. We are 
deeply concerned about the potential loss of nearly $2 billion 
in Federal grant assistance each year for distressed 
communities. We are also anxious to learn more about the 
details of the Administration's plan, since the current 
proposal is only in brief outline form.
    Finally, we are most troubled by the proposed elimination 
of EDA planning program for economic development districts. 
Without this essential program, our Nation's distressed and 
rural communities will be faced with severe burdens and 
obstacles in their pursuit of economic growth and prosperity.
    And I thank you again, Mr. Chairman, and welcome any 
questions at the appropriate time.
    Mr. Shuster. Thank you. Right as the red light went on.
    Again, I am going to have to leave for a vote. I wanted to 
ask, first of all--we are going to recess. It is probably going 
to be about 20 minutes, I would think, at the most. Does 
anybody have to catch a plane that they need to get out? Like I 
said, I should be back in 20 minutes, maybe a little less than 
that. So we will recess for 20 minutes. Thank you.
    [Recess.]
    Mr. Shuster. The meeting will come back to order. I am a 
little out of sorts going back and forth. I am prepared, I can 
go down and stand on the sidelines, this is not a pro football 
game, help them manage the clock. But there is not going to be 
any interruptions now, so we can proceed.
    Again, I want to thank all of you for your patience and for 
being here today.
    A question I guess for all of you to field, and that is if 
each of you could tell me what your thoughts are on the role of 
public infrastructure and economic development, how important 
it is, where it sort of ranks in the economic development 
field. Start with you, Mr. Mayor, and just go down.
    Mr. Anspach. Thank you, sir. I believe that infrastructure 
is important as you look at an economic development program, 
but I believe that economic programs have to be holistic. I was 
fortunate to go to a seminar where the Pella Company that makes 
windows did a presentation on what they were looking at when 
they were choosing a new site for their plant, and it was an 
eye-opening seminar for me because while certainly 
infrastructure was part of that, they also looked at the 
community as far as what recreation was available, what the 
safety was in the community, how the community looked, and 
there was a whole list of things.
    So while I agree that infrastructure is important--
obviously if there is no water there, they can't build a food 
plant that is going to process food--on the other hand, the 
first thing that a lot of companies do when they are coming is 
look at the entire community in a very holistic way. And that 
was, if I might say, that one of the reasons for urban areas 
that we look at CDBG as such an important thing, is that it 
allows us to develop a program over a number of years that 
addresses those issues with ultimately working also at the 
infrastructure. In my community we replaced water mains and 
streets regularly with CDBG monies. That works for our 
community.
    Mr. Shuster. Mr. Fluharty?
    Mr. Fluharty. I just would second all of that and say in a 
rural perspective, you know, Mr. Chairman, it is absolutely 
critical, if you look at my numbers, in terms of a 10-year 
period of Federal funding for community capacity, we are down--
you can pick the number, but it is real money--close to half a 
trillion dollars in community capacity. I would also agree, 
however, that it is necessary; it is certainly not sufficient.
    This was very intriguing to me. This year, I moderated a 
panel at the National Association of Development Organizations' 
annual conference in which they uniquely asked all the 
professionals in the room to do on-time polling of issues. It 
was a very fascinating conference. It remained their number one 
issue-infrastructure. It was very interesting. And in a rural 
perspective that is still absolutely critical.
    Mr. Silvetti. I will echo this gentleman's remarks with 
regard to infrastructure in rural areas. In rural areas with a 
dispersed population, putting in infrastructure becomes very 
expensive for individual users. In my written testimony I cite 
three recent EDA investments in our region, one in Huntington 
County, one in Southern Blair County, and one in Cambria 
County. The one in Blair County resulted in a $45 million 
investment by a regional corporation. The one in Huntington 
County resulted in investment of an electronics firm not that 
many years ago, and there was just an announcement within the 
last month for the industrial park supported with EDA grant of, 
I think, $600,000 where a company is going to build a $42 
million plan in support of wind energy. That investment and 
infrastructure by EDA simply would not have occurred was it not 
for EDA's assistance in rural infrastructure. Vitally 
important.
    Mr. Shuster. Mr. Jones?
    Mr. Jones. Ditto, Mr. Chairman, as well. Infrastructure 
remains a top priority within our region. We are talking water, 
sewer, drainage, and also the water conveyance system for our 
water supply system coming from the Rio Grande River. And also 
that has expanded on a national level, as mentioned earlier, in 
terms of the NADO E Form. That was the overlying priority of 
all the regions nationally, was the infrastructure component.
    Mr. Shuster. Mr. Mayor, if the funds currently being spent 
by CDBG were not being cut and were at current levels, would 
the League of Cities continue to oppose the President's plan?
    Mr. Anspach. I believe that our position is, and certainly 
my position would be that if the Community Development Block 
Grant program remains funded at the $4.35 billion and $4.7 
billion overall level, and it remains within HUD, that there 
would be no objection to the current program and no objection 
to the Commerce program.
    Mr. Shuster. Why should it remain in HUD? If the 
Administration is going to put something together that is going 
to have the same kind of focus and the funding level, the 
League of Cities is still going to oppose?
    Mr. Anspach. Let me answer for myself philosophically. I am 
philosophically a conservative, and I am against rearranging 
government just to rearrange government, because that 
rearrangement is going to cost money and it is going to be 
taxpayers' money. I would suggest that there is a program in 
place under CDBG that works. It is really, I believe, a poster 
child for a conservative philosophy in that it is a perfect 
Federal program that makes a block grant to the communities, 
and the local community makes the decision on how that money is 
used based on their five-year plan or their needs at that time. 
And that is what we, as conservatives, believe, is that the 
Federal Government should become smaller and that the power 
should be divested to the local governments. The CDBG program 
under HUD does exactly that. So I would suggest that in that 
particular program, rather than spend money to transfer and 
move all the systems to another department, I would suggest 
that the old saying that if it isn't broke, don't fix it 
belongs in that particular category, sir.
    Mr. Shuster. Mr. Fluharty, how would you respond to that?
    Mr. Fluharty. I would make one comment on CDBG from a rural 
policy perspective. I would also agree with everything that was 
just stated. The one additional thing I would say is as we look 
at CDBG in the future, wherever those programs end up, we now 
have 600 micropolitan areas in the United States that are now a 
rural "place", that is, a Federal "place" designation. Those 
600 regions are geographically dispersed across the United 
States and would create an interesting platform to alleviate 
the one disadvantage I see in CDBG, and that is the small 
cities program really doesn't allow multi-year capital or 
strategic financing to go forward. If we were to do something 
like that, it would improve the program for rural regions, if 
we were to create more of a regional focus. But beyond that, I 
think the real--
    Mr. Shuster. Could you explain that a little more in depth?
    Mr. Fluharty. Sure. As I say in my testimony, there are 
several states that have done really interesting things with 
their small cities CDBG, looking at what I talked about, which 
is to scale regionally to get advantaging for capacity, to 
compete in a global economy.
    Mr. Shuster. And how big is that region you are talking 
about?
    Mr. Fluharty. I would urge--
    Mr. Shuster. Based on population or geography?
    Mr. Fluharty. No. I would urge you look at the Rural 
Strategic Investment Program that I indicated was in the last 
Farm Bill. I think regions need to self-define, by the economic 
competitive niche they have. That is how the region should be 
defined. And then the question becomes to go to the 
conservative philosophy, "How do we move the funds to the 
lowest possible level to let that competitive advantage express 
itself, across the landscape in a logical economic capacity?" 
Right now, because of the small cities program dynamics, it is 
very hard for small communities to do multi-year planning; they 
just aren't sure it will be there.
    I would urge this committee, if we are serious about rural, 
to think about a modus vivendi that would let that open up a 
bit. It would truly advantage better regional entrepreneurship 
development.
    Mr. Shuster. We have tried very hard under Ed's leadership 
to work regionally.
    Mr. Fluharty. Right.
    Mr. Shuster. Ed, do you think the region that you have is 
broad enough? Do you think we should be expanding those regions 
or do you feel what we have with those--what is it, six 
counties, seven counties? Is that large enough?
    Mr. Silvetti. I think the area is large enough. I don't 
think it is too large. I think within our six counties, 
obviously, we have a couple of different sub-regional 
economies, and they look at some different things, although 
with the loss of transportation jobs with the railroad, with 
the loss of coal and steel jobs, all of us are kind of 
diversifying and moving toward the same end. With respect to 
Strengthening America's Communities, I think some of those 
programs you really have different constituencies. And even 
though I think we do a really good job as a regional council in 
doing multi-year planning, I would be a little concerned about 
our success if we could bring together quite divergent 
constituencies that are represented by some of these programs. 
Some of the programs I think do fit together pretty well, some 
of the USDA economic development programs, EDA, but some of the 
others it is a little confusing to me, frankly, without seeing 
more details of this proposal.
    Mr. Shuster. Right. And that is to be worked out if we are 
to move forward.
    Mr. Jones, in your part of the world, Texas, you are a 
regional developer. How big are your regions?
    Mr. Jones. We have one of the smallest in geographical 
area, a little over 3,000 square miles that is three counties. 
There are only two other three-county regions within the State. 
The balance could be as high as 15 to 18 counties, especially 
up in the panhandle region of West Texas. So it is quite large. 
But an interesting thing is that the boundaries, as they have 
developed from our creation back in the late 1960s, have been 
pretty much on target because there has only been very minimal 
county changes within the planning regions throughout the State 
in that length of time. So the development patterns are working 
well. Another reason for that, too, is I think our ability as 
individual development districts, councils of governments, to 
not only address the issues within our region, but also to work 
cooperatively with each other for those issues that may expand 
our immediate geographical planning boundary that affects the 
constituents that we serve as a whole.
    Mr. Shuster. And the area is rural where you live?
    Mr. Jones. Well, we are getting more urban. Right now our 
population is just a tad over a million, and it has grown 
enormously over the last 20 years in terms of development there 
on the border. But we have, even with that population base 
right outside immediate urbanized areas, it gets rural really 
quick. The majority of our municipalities are still well less 
than 10 to 15,000 in population.
    Mr. Shuster. Mr. Mayor, what is the population of Lebanon 
now?
    Mr. Anspach. Twenty-five thousand, sir,--
    Mr. Shuster. Twenty-five thousand?
    Mr. Anspach.--is the city population,
    Mr. Shuster. I didn't think it was that big.
    Mr. Anspach. It is a 50,000 person metropolitan area.
    Mr. Shuster. And it is growing, isn't it?
    Mr. Anspach. It is growing, yes, sir.
    Mr. Shuster. That is what I thought.
    Mr. Fluharty, you mentioned community capacity. Could you 
explain that a little more in depth for me?
    Mr. Fluharty. Sure. It is really what the planning 
districts do, and it can occur from different institutional 
settings. But it really is the glue, the ability to create a 
strategic sense of how organizations move forward to enable 
that to occur on the ground. It is really what these gentlemen 
do everyday. In some venues there is going to be an alternative 
intermediary come forward, but where these organizations are 
working, they are providing phenomenal glue to build where 
there is no capacity, unlike what exists in urban areas, as I 
indicated, with greater support from the Federal Government, 
the foundations, or corporate giving. That is the absolutely 
essential thing to understand about our rural competitive 
disadvantage. And that stewards public funds more effectively, 
because we need technical assistance and we need strategic 
thinking, to wisely spend the public's money. If that goes 
away, you lose the ability to do the right thing with public 
policy at the local level.
    Mr. Shuster. And I think we lose--and maybe you could 
comment on this, all of you. We have a difficulty attracting 
capital. I think urban areas aren't having those problems. Can 
you comment on that and maybe some of the solutions that you 
have?
    Ed, why don't you go ahead and start?
    Mr. Silvetti. I will say one thing. I listened to a 
presentation about a year ago through the Pennsylvania 
Governors Action Team, which manages the process of companies 
that are looking at Pennsylvania in which to locate, and there 
was a startling fact that I really hadn't considered before, 
and that is the vast, vast majority of prospects looking at 
Pennsylvania. We are looking at Southeastern Pennsylvania, an 
urban area, and the Pittsburgh Allegheny County area, which 
left, I think, something like 5 percent, at best, of prospects 
looking at the entirety of the remainder of Pennsylvania. 
Somebody, some entity, some agency, some public agency has to 
work on behalf of the rest of Pennsylvania, the rural area of 
Pennsylvania in developing projects and trying to attract 
capital that is going to create jobs, and I think that does 
happen within the framework of what we have. I think there is a 
decent process out there that the local elected officials and 
municipalities have been able to take advantage of 
successfully.
    Mr. Shuster. Mr. Jones?
    Mr. Jones. It gets back into the priority issue of 
infrastructure development I think in attracting business and 
industry within the respective regions, and that basic 
foundation is the key to attract folks. We had, less than 10 
years ago, almost a critical economic situation with water 
supply issue in terms of the lack of water, and in terms of the 
negative impact that that had on the perception and folks 
looking at locating and actually starting and expanding 
businesses within our region became a critical issue. But that 
is looking much better now through a lot of reasons, and one 
with some initial funding from EDA. And to get within a region 
within our district, to be able to get some normally, in some 
cases, competing stakeholders together on the same page, with a 
central focus to make things happen, and we are making some 
headway on that.
    Mr. Silvetti. Could I add one more thing?
    Mr. Shuster. Sure.
    Mr. Silvetti. I don't necessarily subscribe to the 
proposition that ``build it and they will come.'' They will 
come; however, when you look at the investments that have been 
made--and I will just talk about our region--the investments 
that have been made in infrastructure that supports business 
and industrial parks, the fact of the matter is we need that 
speculative investment, and where those investments have 
occurred we have had capital investment follow with the 
attendant jobs. It is that simple.
    Mr. Fluharty. Mr. Chairman, if I could add.
    Mr. Shuster. Sure.
    Mr. Fluharty. I think I would be remiss if I did not say we 
can improve. And it is going to be really critical to 
understand we are in a global market, and we are going to have 
to export outside of our regions, and we need serious 
institutional renaissance in a lot of our regional capacities. 
That is the glue that these gentlemen bring, and you can simply 
see it. It is palpable on the ground when you are in a region 
and a good intermediary organization exists, or it doesn't.
    But I will say there are issues in this Strengthening 
America's Communities initiative which I think must be re-
examined, and I believe--
    Mr. Shuster. Such as?
    Mr. Fluharty. I think it is really critical to reassess 
asset-based development. Regions have different capacity, and I 
think if we do away with the planning and strategic 
infrastructure support for these districts and their work, that 
is going to go away, and that has been critical in making good 
public choice. I would actually argue we should increase that 
funding. We have local officials making multimillion dollar 
decisions, very often needing additional public decision 
support monies. Those don't exist right now, and they don't 
need to be competing with one another. I would argue that 
funding should increase. That would not be a drain on the 
public sector, it would make wiser public choice.
    Mr. Shuster. And, Ed, I believe you use CDBG money for a 
planner or where is your funding stream coming from for a 
planner that you use?
    Mr. Silvetti. The funding that we receive to undertake 
planning principally comes from the Economic Development 
Administration in part, also some other Federal and State 
agencies. We do not receive directly CDBG funds; however, it is 
not unusual for us to interact with a city or a county which 
has CDBG funds and see those projects go into a project that we 
also are supporting by virtue of analyzing projects and making 
recommendations for other Federal investments with agencies 
such as EDA.
    Mr. Shuster. Mayor?
    Mr. Anspach. If I could, sir.
    Mr. Shuster. Sure.
    Mr. Anspach. Just to echo Mr. Silvetti, it is imperative 
that we do look across municipal boundaries when we are looking 
at how we address these things. I also sit on the Regional 
Economic Development Board, so I understand both sides of the 
equation, and it is very, very important, and we have in fact 
projects where we are using CDBG monies as part of the study in 
order to get something that is going to benefit multiple 
municipalities, and we are paying for our portion of it that 
way. And it is, I believe, a good thing, and we have to look 
bigger, larger away from just our community and look into the 
county and look into the next county.
    Mr. Shuster. How big is your region of the board you sit 
on?
    Mr. Anspach. It runs roughly from Lebanon County west to 
Chambersburg and Dolphin County, Lancaster, York, and that 
South Central Pennsylvania region.
    Mr. Shuster. Well, again, I want to thank you all for being 
here.
    Mayor, you had the first word and the last word, and that 
is appropriate being the elected official out there.
    And I just want to thank you all for being here. I 
appreciate your views. Your views are important as we move down 
the road to look at this proposal. I have great concern that 
when we set up--and that is virtually what we are doing; they 
are saying we are not, but we are setting up a new agency, and 
I think that there is peril out there, when you do that, to not 
get an organization that takes some things that--EDA I think 
has done a very good job, and I would hate to see that lose its 
effectiveness in a larger organization. So I know that the 
ranking member, as I said earlier, has concerns, as do I, and 
we are going to be working very closely with the Secretary, and 
we would like to be able to tap into you for your input as we 
move down the road to be able to really get where the rubber 
meets the road, how would it affect you and what we could do to 
improve the various ways that those 18 organizations or 
entities operate.
    I know that the ranking member has some questions that she 
would like to submit to you to have you answer, so we will do 
that.
    I would ask unanimous consent that the record of today's 
hearing remain open until such time as all the witnesses have 
provided answers to any questions that may be submitted to them 
in writing. Unanimous consent during such time as the record 
remains open, additional comments offered by individuals or 
groups may be included in the record of today's hearing. 
Without objection, so ordered.
    Once again, I can't thank you enough for coming here today. 
As I said, as we go through this process, it is imperative that 
we have people from outside the Beltway giving us their input, 
because you folks are going to be the ones impacted the most by 
a change in what we do here in Washington. So, again, thank you 
very much.
    The hearing is adjourned.
    [Whereupon, at 4:37 p.m., the subcommittee was adjourned.]

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