[House Hearing, 111 Congress]
[From the U.S. Government Publishing Office]
ECONOMIC DEVELOPMENT
ADMINISTRATION REAUTHORIZATION: RATING PAST
PERFORMANCE AND SETTING GOALS
DURING AN ECONOMIC CRISIS
=======================================================================
(111-12)
HEARING
BEFORE THE
SUBCOMMITTEE ON
ECONOMIC DEVELOPMENT, PUBLIC BUILDINGS, AND EMERGENCY MANAGEMENT
OF THE
COMMITTEE ON
TRANSPORTATION AND INFRASTRUCTURE
HOUSE OF REPRESENTATIVES
ONE HUNDRED ELEVENTH CONGRESS
FIRST SESSION
__________
MARCH 10, 2009
__________
Printed for the use of the
Committee on Transportation and Infrastructure
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COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE
JAMES L. OBERSTAR, Minnesota, Chairman
NICK J. RAHALL, II, West Virginia, JOHN L. MICA, Florida
Vice Chair DON YOUNG, Alaska
PETER A. DeFAZIO, Oregon THOMAS E. PETRI, Wisconsin
JERRY F. COSTELLO, Illinois HOWARD COBLE, North Carolina
ELEANOR HOLMES NORTON, District of JOHN J. DUNCAN, Jr., Tennessee
Columbia VERNON J. EHLERS, Michigan
JERROLD NADLER, New York FRANK A. LoBIONDO, New Jersey
CORRINE BROWN, Florida JERRY MORAN, Kansas
BOB FILNER, California GARY G. MILLER, California
EDDIE BERNICE JOHNSON, Texas HENRY E. BROWN, Jr., South
GENE TAYLOR, Mississippi Carolina
ELIJAH E. CUMMINGS, Maryland TIMOTHY V. JOHNSON, Illinois
ELLEN O. TAUSCHER, California TODD RUSSELL PLATTS, Pennsylvania
LEONARD L. BOSWELL, Iowa SAM GRAVES, Missouri
TIM HOLDEN, Pennsylvania BILL SHUSTER, Pennsylvania
BRIAN BAIRD, Washington JOHN BOOZMAN, Arkansas
RICK LARSEN, Washington SHELLEY MOORE CAPITO, West
MICHAEL E. CAPUANO, Massachusetts Virginia
TIMOTHY H. BISHOP, New York JIM GERLACH, Pennsylvania
MICHAEL H. MICHAUD, Maine MARIO DIAZ-BALART, Florida
RUSS CARNAHAN, Missouri CHARLES W. DENT, Pennsylvania
GRACE F. NAPOLITANO, California CONNIE MACK, Florida
DANIEL LIPINSKI, Illinois LYNN A WESTMORELAND, Georgia
MAZIE K. HIRONO, Hawaii JEAN SCHMIDT, Ohio
JASON ALTMIRE, Pennsylvania CANDICE S. MILLER, Michigan
TIMOTHY J. WALZ, Minnesota MARY FALLIN, Oklahoma
HEATH SHULER, North Carolina VERN BUCHANAN, Florida
MICHAEL A. ARCURI, New York ROBERT E. LATTA, Ohio
HARRY E. MITCHELL, Arizona BRETT GUTHRIE, Kentucky
CHRISTOPHER P. CARNEY, Pennsylvania ANH ``JOSEPH'' CAO, Louisiana
JOHN J. HALL, New York AARON SCHOCK, Illinois
STEVE KAGEN, Wisconsin PETE OLSON, Texas
STEVE COHEN, Tennessee
LAURA A. RICHARDSON, California
ALBIO SIRES, New Jersey
DONNA F. EDWARDS, Maryland
SOLOMON P. ORTIZ, Texas
PHIL HARE, Illinois
JOHN A. BOCCIERI, Ohio
MARK H. SCHAUER, Michigan
BETSY MARKEY, Colorado
PARKER GRIFFITH, Alabama
MICHAEL E. McMAHON, New York
THOMAS S. P. PERRIELLO, Virginia
DINA TITUS, Nevada
HARRY TEAGUE, New Mexico
(ii)
Subcommittee on Economic Development, Public Buildings, and Emergency
Management
ELEANOR HOLMES NORTON, District of Columbia, Chairwoman
BETSY MARKEY, Colorado MARIO DIAZ-BALART, Florida
MICHAEL H. MICHAUD, Maine TIMOTHY V. JOHNSON, Illinois
HEATH SHULER, North Carolina SAM GRAVES, Missouri
PARKER GRIFFITH, Alabama SHELLEY MOORE CAPITO, West
RUSS CARNAHAN, Missouri Virginia
TIMOTHY J. WALZ, Minnesota MARY FALLIN, Oklahoma
MICHAEL A. ARCURI, New York BRETT GUTHRIE, Kentucky
CHRISTOPHER P. CARNEY, ANH ``JOSEPH'' CAO, Louisiana
Pennsylvania, Vice Chair PETE OLSON, Texas
DONNA F. EDWARDS, Maryland
THOMAS S. P. PERRIELLO, Virginia
JAMES L. OBERSTAR, Minnesota
(Ex Officio)
(iii)
CONTENTS
Page
Summary of Subject Matter........................................ vi
TESTIMONY
Clark, Robert, Executive Director, Northern Maine Development
Commission..................................................... 42
Coleman, Denny, President and CEO, St. Louis County Economic
Council and Secretary-Treasurer of the Board, International
Economic Development Council................................... 31
Dekle, Carolyn, Executive Director, South Florida Regional
Planning Council............................................... 42
Juon, Sharon, Executive Director, Iowa Northland Regional Council
of Governments and President, National Association of
Development Organizations...................................... 31
Molnar, Lawrence A., Director, Economic Development
Administration University Program, University of Michigan...... 42
Sallet, Jonathan, Former Assistant to the Secretary and Director,
Office of Policy and Strategic Planning, U.S. Department of
Commerce....................................................... 42
Sastry, Srikant, Partner, Grant Thornton, LLP.................... 25
Walters, Sandra R., Acting Assistant Secretary of Commerce for
Economic Development, Economic Development Administration,
accompanied by Dennis Alvord, Acting Deputy Assistant Secretary
of Commerce for Economic Development, Economic Development
Administration................................................. 7
PREPARED STATEMENT SUBMITTED BY MEMBERS OF CONGRESS
Carnahan, Hon. Russ, of Missouri................................. 53
Norton, Hon. Eleanor Holmes, of the District of Columbia......... 54
Oberstar, Hon. James L., of Minnesota............................ 58
PREPARED STATEMENTS SUBMITTED BY WITNESSES
Clark, Robert.................................................... 61
Coleman, Denny................................................... 70
Dekle, Carolyn................................................... 85
Juon, Sharon..................................................... 89
Molnar, Lawrence A............................................... 112
Sallet, Jonathan................................................. 120
Sastry, Srikant.................................................. 132
Walters, Sandra R................................................ 137
SUBMISSIONS FOR THE RECORD
Clark, Robert, Executive Director, Northern Maine Development
Commission, responses to questions from the Subcommittee....... 66
Juon, Sharon, Executive Director, Iowa Northland Regional Council
of Governments and President, National Association of
Development Organizations, responses to questions from the
Subcommittee................................................... 102
Molnar, Lawrence A., Director, Economic Development
Administration University Program, University of Michigan,
responses to questions from the Subcommittee................... 116
Sallet, Jonathan, Former Assistant to the Secretary and Director,
Office of Policy and Strategic Planning, U.S. Department of
Commerce, responses to questions from the Subcommittee......... 128
Sastry, Srikant, Partner, Grant Thornton, LLP, responses to
questions from the Subcommittee................................ 134
Walters, Sandra R., Acting Assistant Secretary of Commerce for
Economic Development, Economic Development Administration,
accompanied by Dennis Alvord, Acting Deputy Assistant Secretary
of Commerce for Economic Development, Economic Development
Administration, responses to questions from the Subcommittee... 143
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
HEARING ON ECONOMIC DEVELOPMENT ADMINISTRATION REAUTHORIZATION: RATING
PAST PERFORMANCE AND SETTING GOALS DURING AN ECONOMIC CRISIS
----------
Tuesday, March 10, 2009,
House of Representatives,
Subcommittee on Economic Development, Public
Buildings and Emergency Management,
Committee on Transportation and Infrastructure,
Washington, DC.
The Subcommittee met, pursuant to call, at 10:17 a.m., in
Room 2167, Rayburn House Office Building, the Honorable Eleanor
Holmes Norton [Chair of the Subcommittee] presiding.
Ms. Norton. Welcome all, especially today's distinguished
witnesses. We look forward to their important testimony as we
consider the reauthorization of the Economic Development
Administration.
This Subcommittee has jurisdiction over the authorization
and oversight of programs promoting economic development in
communities suffering long-term economic distress, including
jurisdiction over the EDA which is part of the Department of
Commerce.
The Public Works and Economic Development Act of 1965,
which created EDA, authorizes partnerships between the federal
government and state and local development entities to
alleviate substantial and persistent unemployment in
economically distressed areas and regions.
One of the most important goals in national economic
development activities is to enhance community success in
attracting private capital investment and good job
opportunities. The work of the Economic Development
Administration is a small but highly visible part of Federal
efforts to enhance economic opportunity nationwide by
increasing the overall productivity of economically distressed
and poor communities and their share of the Country's general
prosperity.
EDA's primary operation is a public works grant program
designed to aid economically distressed communities by
developing infrastructure in order to attract new industry that
will create long-term private sector jobs. Projects funded
through the program include the construction of access roads,
port improvements, business incubator buildings and water and
sewer facilities.
It is no coincidence that President Barack Obama chose
economic development, that is to say not economic development
but infrastructure development as the primary engine for job
creation in the recently passed stimulus bill. Data from across
the spectrum of economists and the EDA's own work confirm that
public infrastructure building is more effective in stimulating
the economy than any form of public expenditure during economic
downturn.
EDA was created to address issues of poverty, high
unemployment, and geographic isolation by identifying
distressed counties and setting aside the bulk of investment
dollars to ameliorate these drastic conditions. Distressed
counties, generally, under the EDA standard definition, have an
unemployment rate of 1 percent greater than national average
for the most recent 24-month period or per capita income of 80
percent or less than the national average. The Federal
government, acting in partnership with States, private
businesses and localities, has shown that persistent and
substantial poverty can be reduced and eliminated.
An important part of EDA's efforts are grants for public
works and development facilities and access to technical
assistance and planning grants. The Subcommittee is
particularly interested in the revolving loan fund and its
ability to assist local development authorities. The revolving
loan fund finances investments that capitalize an intermediary
to make loans to local businesses that otherwise could not
access commercial credit.
Many regions across the Country continue to experience high
poverty, areas of significantly higher than average
unemployment rates, limited access to capital, low per capita
income, and high job loss regardless of the state of the
national economy. Consequently, in the 110th Congress, we
reauthorized two economic development commissions and created
three more. The five commissions are the Delta Regional
Commission, the Northern Great Plains Regional Commission, the
Southeast Crescent Regional Commission, the Southwest Border
Regional Commission and the Northern Border Regional
Commission.
These areas are among many which have expressed a desire to
create regional economic development commissions similar to the
structure of the Appalachian Regional Commission to provide
additional funding for projects that stimulate regional
economic development and to promote the character and
industries of the region without supplanting existing
institutions and programs that provide funding such as EDA,
State agencies and local development organizations.
In today's troubled and uncertain economic times for the
entire Country, the nuts and bolts of economic development for
undeveloped areas take on vast importance. Job deficiencies
reduce the tax base which, in turn, reduces the ability of
governments to provide public infrastructure, which then
reduces the ability to create and attract jobs and new
industries. Thus, the circle must be broken, and the Economic
Development Administration does indeed this cycle. It has a
solid track record in leveraging public investment into private
development.
A recent independent report by Grant Thornton and ASR
Analytics found the EDA's public works program generates up to
5 jobs per $10,000 of public investment. This metric covers a
wide variety of projects.
One of the more common investment examples was an EDA
investment of $560,000 to build sewer, water, transportation
and fiber optic/broadband infrastructure in an industrial park
in Okemah, Oklahoma in order to induce a private corporation to
locate there. This project has already created approximately
110 jobs and is expected to produce at least 40 more in private
investment.
An example from a big city was the EDA investment of $4.5
million in the Apollo Theater in Harlem, New York, the historic
cultural anchor of the Harlem community. Though the investment
produced only 28 jobs, less than 6/10th per $10,000, it played
an outsized role in the revival of Harlem's major commercial
strip, 125th Street.
Recently, EDA also provided funding to help preserve one of
the most historic structures in the District of Columbia when
the Eastern Market, one of the oldest markets in the United
States, was damaged by fire, causing significant loss of
economic activity and an institution that has defined the
entire Capitol Hill residential community for more than a
century.
EDA has approved funds for brownfields redeveloped as
industrial parks, funds for an upgrade of a city's wastewater
system to make it suitable for agricultural production
facilities and funds for buildings with the infrastructure to
support high-tech companies and many other types of cutting-
edge development.
With this hearing, and after four decades of EDA's work in
job creation, the Subcommittee is in a position to analyze the
Federal role, the extent of the building and sustaining of the
relationships at the State and local levels and, importantly,
with businesses, citizens and civic organizations as well and
to consider the increasing necessity of focusing on
metropolitan as well as rural areas and retaining the public
trust with special emphasis on economic development results.
We also will examine existing grant programs for economic
adjustment assistance, research and evaluation and technical
assistance. We will scrutinize how funding decisions are made
and how past funding decisions reflect the efficiency of the
agency.
This morning, we are very pleased to hear from experts with
deep experience with EDA, who can help the Subcommittee assure
that the agency performs at peak levels during this time of
economic uncertainty.
I am very pleased to ask the Ranking Member, Mr. Diaz-
Balart, if he has any opening remarks.
Mr. Diaz-Balart. Thank you. Let me first start by thanking
you, Madam Chairwoman, for holding this important hearing today
on the Economic Development Administration and its
reauthorization.
I also want to welcome all our witnesses that are here
today, including a couple dear friends of mine, Carolyn Dekle
who is the Executive Director of the South Florida Regional
Planning Council. We have known each other for a few years. We
would rather not talk about how long.
With her is Isabel Cosio Carballo, who I affectionately
know as Chintu. We won't go into why.
Anyway, thank you all for being here and all the witnesses.
In 2000, the EDA granted the South Florida Regional
Planning Council the authority to operate a revolving loan fund
to create jobs and to strengthen the economic base of South
Florida, and I look forward to hearing your testimony today. I
actually do know what you have been doing.
The EDA, as we all know, was established in 1965. At that
time, Congress recognized that there were areas in our Country
that were experiencing chronic high unemployment and out-
migration, low per capita incomes, et cetera.
In addition, Congress also recognized that there were
communities impacted by sudden and severe economic dislocations
because of closing plants and natural disasters, for example.
So the EDA was created to help spur jobs and growth in those
economically distressed areas of the Country in which Federal
funding could be a catalyst in attracting private sector
investment, and that is key, attracting private sector
investment.
Today, unfortunately, economically distressed communities
are still prevalent, and they continue to be there. Continuing
strategic investment is particularly important today when you
look at the economic climate that we are living in. So the EDA
programs obviously are intended to provide a balanced approach
in the use of Federal dollars.
These programs effectively leverage Federal dollars to
encourage investments by the private sector and to help local
communities. Often, EDA funds help a local community fill in
the gap needed for economic development projects become a
reality. Without that money, a lot of times, those projects
would not take place.
For example, in fiscal year 2007, EDA investments under its
public works assistance program, revolving loan fund program
and the construction and disaster recovery components of the
Economic Adjustment Assistance programs totaled $209 million
and were expected to create or retain 52,000, actually, 52,134
jobs, to be exact.
In addition, the EDA investments that year created or
retained American jobs on an average cost of $4,000 per job,
and the EDA leveraged over $26 in private sector capital
investment for every taxpayer dollar that was invested.
Now contrast those numbers that I just told you, that I
just read, with a return on investment expected from the
American Recovery and Reinvestment Act that Congress recently
passed. Taking the Administration's best estimates, their own
numbers, the $787 billion appropriated in the so-called
stimulus bill will create or save 3 to 4 million jobs. That is
a cost of nearly $200,000 per job as opposed to $4,000, which
is what we had talked about a little while ago.
The EDA grants, on the other hand, maximize each Federal
dollar spent and create lasting investment in communities. They
spark job growth and lay down the foundation for economic
investment in distressed communities.
EDA grants have assisted communities devastated by natural
disasters including, for example, the area of Homestead in
South Florida, which I have the privilege and the honor of
representing. Those grants facilitated private sector
investment and helped to create or retain more than 700 jobs,
and the results are there for everyone to see.
In 2004, President Bush signed into law the Economic
Development Administration Reauthorization Act of 2004 which
reauthorized the EDA's economic development assistance programs
through September of last year. Now legislation to reauthorize
these programs was not enacted last year, and the programs were
extended through a continuing resolution, a CR.
In addition, $150 million was included for EDA in the
American Recovery and Reinvestment Act of 2009.
EDA has managed to do much with very, very little, with
relatively little. As we move through these challenging times,
it will be crucial, absolutely crucial, that EDA has the
funding and authority it needs to help distressed communities
in our Nation.
I hope that we will be able to move forward on
reauthorization, and I thank the Chairwoman once again for this
hearing. I hope we can strengthen this important program, and I
look forward to working with the Chairwoman on this important
issue.
I thank the witnesses once again for coming here to speak
to us, and I am looking forward to this hearing.
I thank you again, Madam Chairwoman.
Ms. Norton. Thank you very much, Mr. Diaz-Balart.
Are there members who have statements?
Ms. Markey of Colorado.
Ms. Markey. Yes, thank you, Madam Chair.
As a Representative of rural Colorado, I have heard a lot
about the problems facing these communities in today's tough
economic times. Having said this, I am pleased to read that the
Grant Thornton study of the EDA concluded that when the EDA
invests in a rural area the investment has a strategically
significant impact on employment levels.
I know that the EDA has done a lot of work in Colorado and
that the City of Pueblo in my colleague, John Salazar's
district won the Excellence in Economic Development Award for
2006.
The EDA has an important and noble mission in assisting
both rural and urban economically distressed areas. I commend
the EDA for its work, especially in my own State, and look
forward to discussing its reauthorization and working with them
in Colorado's Fourth Congressional District.
Thank you.
Ms. Norton. If there is no one on the other side, Mr.
Arcuri.
Mr. Arcuri. Thank you, Madam Chair. I would like to thank
you for holding this hearing, and I look forward to working
with all my colleagues on both sides of the aisle to
reauthorize the EDA bill this year.
Specifically, I hope that this reauthorization will provide
assistance to counties and municipalities that want to study
ways to streamline local government, recapitalize EDA revolving
loan funds and maintain EDA's current bottom-up approach to
economic development.
I think what makes EDA programs so successful, and the
revolving loan fund in particular, is that the projects that
receive funding are conceived at the local level. This ensures
the projects that receive funding are the highest priority of
the local government.
Along those lines, local economic development must be
approached from the standpoint of getting the most out of
scarce funding resources, consolidation and shared services can
play a key role in making local governments more efficient and
should not be dirty words to local communities.
In some areas of my district that I represent, there are
village boards, town boards, county boards, water districts,
sewer districts, fire districts and nearly as many law
enforcement entities. This makes economic development very
difficult.
But consolidation can work, and there is a place for it,
but it must not be forced upon local communities. It should be
something that we in the Federal Government help local
communities implement if they so choose.
The fact of the matter is that there are communities that
could benefit from working together without reducing the
quality of services. But in order to be accepted, they need
money to conduct studies, and plans must originate at a local
level. The role for Congress in economic development
administration should be to provide funds for local governments
to study and, where necessary, implement consolidation if that
is what the local communities believe is in their best
interest. The Economic Development Agency could help in this
regard.
Another critical economic development initiative is
expanding our Nation's broadband infrastructure. Universal
high-speed internet access is critical to revitalizing the
economy in our Nation's rural and industrial cities. It is
essential to creating new jobs, extending tele-medicine
services to rural communities and ensuring our Nation's
children are equipped with the skills they need to compete in a
global economy.
Now, in the 21st Century, we face the challenge of
promoting construction of a new kind of infrastructure, one
that will guarantee every family in the United States high-
speed broadband internet access.
I am also committed to strengthening and recapitalizing
EDA's revolving loan fund. The previous administration seemed
to think the revolving loan fund model was outdated and should
be converted to a one-time grant program and liquidated. I
couldn't disagree more.
EDA's revolving loan funds are the perfect example of the
Federal Government providing the necessary funding to implement
locally initiated projects. Better still, as these loans are
repaid, additional funding is available for new initiatives. It
is critical that EDA have the necessary funding to recapitalize
the revolving loan funds in order to better assist growing
communities all across America with their economic needs.
The public works program and the revolving loan fund
provide countless examples of the positive impact EDA has on
local communities, and I want to talk today about just one
possible success story.
The district that I represent is home to two separate
military facilities that were realigned after completion of the
BRAC in 1993 and 1995. In Rome, New York, the closing of
Griffiths Air Force Base resulted in a loss of 5,000 military
and civilian jobs, greatly impacting the economy.
On the other side of my district lies the former Seneca
Army Depot which occupies more than 10,000 acres in Seneca
County. It was used as a munitions storage disposal facility
for the United States Army. The property has since been
transferred to the local industrial development agency.
The Office of Economic Adjustment was created to assist
base closure communities. OEA provides funding to base closure
communities for economic and community development, land use
planning, real estate redevelopment, Federal real property
programs and military programs and worker adjustment.
However, there is currently a 50 percent matching fund
requirement for EDA funding assistance. Many communities are
unable to raise the required matching funds.
As we look ahead to reauthorization, I believe the
Committee should consider allowing base closure communities to
apply for funding trough EDA with a less burdensome matching
requirement. This will truly help communities that have already
suffered job losses from base closures regain their economic
footing and redevelop these sites to attract new employers.
Thank you, Madam Chair, for holding this hearing today.
Again, I look forward to addressing these and many other
pressing issues facing our communities as we attempt to rebuild
and, hopefully, achieve economic success.
Thank you, and I yield back the balance of my time.
Ms. Norton. Thank you, Mr. Arcuri.
If there are no other members that wish to make remarks,
let us proceed to our first panel and ask Acting Assistant
Secretary of Commerce for Economic Development at the EDA,
Sandra Walters, to come forward. She is accompanied by the
Acting Deputy Assistant Secretary of Commerce for Economic
Development, Dennis Alvord.
Please take your seats, and we are pleased to receive a
summary of your testimony. Ms. Walters or Mr. Alvord, each, you
decide.
TESTIMONY OF SANDRA R. WALTERS, ACTING ASSISTANT SECRETARY OF
COMMERCE FOR ECONOMIC DEVELOPMENT, ECONOMIC DEVELOPMENT
ADMINISTRATION ACCOMPANIED BY DENNIS ALVORD, ACTING DEPUTY
ASSISTANT SECRETARY OF COMMERCE FOR ECONOMIC DEVELOPMENT,
ECONOMIC DEVELOPMENT ADMINISTRATION
Ms. Walters. Chairwoman Norton, Ranking Member Diaz-Balart
and members of the Subcommittee, thank you for this opportunity
to testify on behalf of the Economic Development
Administration.
EDA's mission is to lead the Federal economic development
agenda by promoting innovation and competitiveness, preparing
American regions for growth and success in the worldwide
economy. Through our grants, we help local governments create
jobs and generate private investment. Our investments create
the conditions in which jobs are created, often in the midst of
economic hardship or adjustment.
We are proud of the Agency's accomplishments and believe we
can assist American communities in the current economic
climate.
Our focus on planning is critical to the Agency's success.
While economic development planning is often overlooked, EDA's
work with our partners in the field, designated Economic
Development Districts, has proven invaluable in ensuring that
communities think holistically about their economic futures.
EDA has consistently found that projects which result from
effective planning and significant local support tend to have
more positive impacts on communities.
EDA currently has 378 EDDs designated nationwide.
EDA's expertise has proven to be extremely valuable in
responding to sudden and severe economic dislocations through
our Economic Adjustment Assistance program. Whether
dislocations result from a major employer closing a plant or a
defense facility or from a natural disaster, EDA is able to
assist communities in responding to the loss of jobs.
Last year, Congress allocated $500 million in 2
supplemental appropriations to EDA in response to the natural
disasters. With this additional funding, EDA has assumed the
role of secondary responder and is working closely with
disaster-affected communities to help rebuild their economic
bases. To date, EDA has invested in the redevelopment
strategies of 11 States severely impacted by last summer's
Midwest floods and continues to develop, review and fund
applications from communities affected by hurricanes, wildfires
and other natural disasters.
In addition, EDA received $150 million as part of the
American Recovery and Reinvestment Act of 2009. EDA is ahead of
the curve in its implementation of the Act and anticipates
publishing a Federal Funding Opportunity Notice this week and
will get the funds disbursed quickly to assist communities.
As EDA has celebrated its successes, it has also
aggressively confronted its challenges, most specifically the
administration of its revolving loan fund program.
In response to the Department of Commerce Office of
Inspector General's September, 2007 report, EDA developed an
action plan and published an interim final rule implementing
many of the plan's milestones. EDA has successfully implemented
six of the OIG's seven recommendations. EDA has made excellent
process towards implementing the final recommendation.
In an effort to evaluate the Agency's strengths and
weaknesses. EDA recently funded a study focused on assessing
the economic impacts and Federal costs of the Agency's
construction investments. The study showed that EDA investments
in rural areas had a statistically significant correlation with
increased employment levels in the communities in which they
were made. Moreover, the study supported EDA's strategic focus
on innovation and entrepreneurship by showing that EDA
investment in business incubators were more correlated with job
growth than other project types.
Chairwoman Norton, Ranking Member Diaz-Balart and members
of the Subcommittee, thank you for your time today and for
inviting me to give an overview of EDA's programs.
With me today is Dennis Alvord, the Acting Deputy Assistant
Secretary for Economic Development, who oversees EDA's six
regional offices.
We look forward to answering any questions you may have and
working with the Subcommittee on legislation to reauthorize the
Agency.
Ms. Norton. Thank you very much, Ms. Walters.
We recognize the Agency hasn't had the appointments that it
will get, but we are anxious to begin the reauthorization
process and are pleased to have your testimony.
Could I ask you or Mr. Alvord, you have received $150
million, not a bunch of cash, I must say, because some of us
recommended more than that. But you have gotten $150 million
under the new stimulus act. How do you intend? What kinds of
projects? What methodology are you going to use for choosing
how you will spend that money?
Mr. Alvord. Thank you, Madam Chair.
EDA is pleased to have received the $150 million in
Recovery Act appropriations.
Ms. Norton. By the way, has it come through yet?
Mr. Alvord. It has.
Ms. Norton. Just checking.
Mr. Alvord. And we have been working very closely with our
six regional offices to devise a strategy for the investment of
those dollars that will achieve the greatest possible economic
outcomes.
EDA intends to use its traditional process of allocating
that funding out to its regional offices to make investments
that will be consistent with the Bureau's established funding
priorities and policy guidelines.
Ms. Norton. Yes. But the bill had at its major focus for
the kinds of spending you concentrate on, which is public
infrastructure, creating jobs. So we are interested in how much
of a focus on job creation.
There are lots of things you can do with money,
particularly in these communities. But if the entire Country is
underwater in unemployment, I can't even imagine. I just can't
imagine if you are already distressed, what unemployment even
means.
I am trying to get an idea of how one goes about creating
jobs when a community doesn't have, didn't have jobs to begin
with. So it is not that the business has lost jobs. It doesn't
have as many businesses.
That is why your focus is on infrastructure because the
theory has been apparently proved out that if you focus there,
the link to jobs will come, and, importantly, you create jobs
on the ground. So jobs will come from the infrastructure
produced plus the people who in fact are building the
infrastructure from the local community, and the jobs are being
produced in that way.
So we are interested in this, in how this money. When you
say the usual process, I don't know if it will go to help an
incubator, which is one of the things that is always talked
about, or what direction the central EDA will give to people
who all of a sudden got some money.
Now, if you just say spend it in the usual way, how is the
Administration going to be assured that its target figure of
jobs is going to be met?
Mr. Alvord. Madam Chair, consistent with the Act, our FFO
will establish a funding priority to those areas in the Country
that have experienced some type of sudden and severe economic
dislocation or job loss that results from corporate
restructuring. We are certainly acutely aware and cognizant of
the very severe economic distress being confronted by many
areas around the Country.
When we design our investments, we are very fortunate that
we have a very robust network of multi-county economic
development districts that establish in an annual planning
process that helps to identify prospective investments for
their regions. So we are able to fairly readily piggyback off
the good work that has been done by those districts to identify
infrastructure projects that are ready to move forward in the
near term and create the very types of jobs that you are
talking about, both in terms of the near-term construction jobs
created by the infrastructure investment as well as the longer-
term jobs that we hope to realize.
And those come in a variety of formats. They may be in the
form of infrastructure to support science and technology parks
that will help the Country be a leading innovator in the
future. It could be infrastructure and support of business
incubators and other types of activities as well.
Ms. Norton. Well, I tell you what, Mr. Alvord, first of
all, I understand the great difference between EDA and some
other agencies. If you are doing infrastructure for a big city
or a State, you are working through an agency and just tell
them what to do. Therefore, it is harder. It is harder here
because the local community is in charge. This is the whole
wonderful concept.
On the other hand, this is not loose change.
So you have a much more difficult job, it seems to me. You
do not have a statutory mandate about the number of days to be
on the ground that all of our local jurisdictions have or the
money passes on.
But I tell you I believe that this Subcommittee has to
insist upon some comparable discipline consistent with the
local control, and I don't think that is impossible because at
the end of the day every Subcommittee is going to have to show
that jobs were created, and it they should have to show it.
We are working very closely with our other agencies under
our jurisdiction to be as specific as we can, and we recognize
the hurdle here. But I have to say that as responsive as the
local communities have been to EDA, I am not sure anybody had
funds that were given with a specific mandate. This is funds
you would not have but for national unemployment.
I am going to have to ask you to get within 30 days
something more specific about how you will inform the local
communities that this is job creation money and how you will
offer them guidance. I am very concerned that this is just
another $150 million, that it simply goes into whatever
programs are there. It should, but in choosing which ones
should get priority, there is an additional mandate here. We
have to show that some jobs were created.
As difficult as that is, I would like you to get us some
sense of what that methodology would look like, to sit down and
try to figure out because we certainly cannot. You know the
regions. You now the localities. You would have to work with
the regions. But I do not believe that an open-ended here is
$150 million, put this into your existing work, as important as
that is and as valuable as it is, would be sufficient to an
extra--and that is what this has to be seen as--an extra $150
million.
Mr. Alvord. We would certainly be happy to get you
additional detail on our plan for the expenditure of the
stimulus funds.
Just to clarify, you know EDA is very acutely focused on
the issue of job creation, and we have seen since originally
receiving these funds and expect that the vast majority of the
funding will go out in the form of infrastructure spending that
would be directly related to job creation. That is our intent
and our mandate, and I think all of our regional offices that
will be responsible for the oversight and administration and
project selection are also aware of that.
But we would certainly be happy to provide some additional
detail.
Ms. Norton. Well, again, I think people need directions
when they get extra money that they wouldn't have gotten anyway
with a mandate from on high.
Let me ask you one other question about money, and then I
am going to go to the Ranking Member.
You are getting funds in the omnibus as well as the 2010
budget. What will be your approach to those funds?
Mr. Alvord. Well, we anticipate that we are very pleased
with the funding levels that have been provided in the House
mark of the bill, and we expect to see in the omnibus.
Ms. Norton. Do you recall the amount?
Mr. Alvord. As I recall, it is approximately $240 million
for EDA's Economic Development Assistance programs and $32.8
million for salaries and expenses which represents a small
increase in EDA's salaries and expense account, allowing us to
at least keep up with our adjustment to base costs. The
Economic Development Assistance program funding level is down
slightly, but will certainly allow us to maintain all of our
core programs at a very robust level in the coming fiscal year.
We foresee establishing and putting on the street an FFO as
soon as the omnibus has been passed, a Federal Funding
Opportunity, so that we can get those funds out and working in
communities on various job creation activities right away.
Ms. Norton. Thank you.
Mr. Diaz-Balart.
Mr. Diaz-Balart. Thank you, Madam Chairwoman. I couldn't
agree with you more. I think you are right on target, as usual.
Again, thanks for being here, both of you.
There was a study completed by Grant Thornton in September,
2008, that provided a breakdown of the estimated number of jobs
created by cost per job and also provided a methodology for EDA
to measure performance. Has EDA been using this study and other
tools to measure the impact of its funding?
Mr. Alvord. EDA has been relying on a study that was done
by Rutgers University and a consortium of other academic
institutions in 1997. Now that the Grant Thornton study has
been released and is final, we will be converting over to the
Grant Thornton methodology for our future estimates. We are
very pleased with the Grant Thornton study and we believe that
it adds a new level of robustness to EDA's job targeting
methodology, and we are looking forward to utilizing that in
the future.
Mr. Diaz-Balart. Kind of following up on the Chairwoman's
question, that study also noted a range by project type of the
cost per job created. Interestingly, the lowest cost per job
related to business incubators, and the highest cost per job
related to community infrastructure. Do you agree with these
figures, and, if so, how might this impact your priorities,
your prioritization?
Mr. Alvord. Well, I think we do agree with the figures. I
think the methodology is very sound, and we will be hearing
more about that from the Grant Thornton witness later today.
I think we were pleased to see these results because we
found them to be very consistent with the EDA funding
priorities and methodologies that we have been pursuing. I
think that among EDA's funding priorities for the last several
years has been a focus on innovation and entrepreneurship and
encouraging that at a regional and local level. And what we
have seen most recently is a 2010 administration budget
blueprint which puts a focus on the support for business
incubators and those types of activities.
So we think that all of those things are very consistent
and will help EDA to achieve, hopefully, even more robust job
outcome figures and results in the future.
Mr. Diaz-Balart. Good, good. There have been some concerns
raised about the rules requiring that the revolving loan fund
be in compliance with Federal requirements even after there are
no Federal dollars involved, no Federal funding involved. Any
thoughts on that and would you propose any changes to deal with
that? Should we be changing anything to deal with that?
Mr. Alvord. Well, I think since we don't yet have our new
leadership on board, that would be an item that would be left
to their policy prerogatives when they arrive. These are issues
that have come up in the past with regards to EDA's revolving
Loan Program, and we certainly look forward to revisiting them
in the context of EDA's upcoming reauthorization.
Mr. Diaz-Balart. Last question, Madam Chairwoman.
Five hundred million dollars was appropriated to EDA in
response to hurricanes and floods and other natural disasters
that occurred in 2008. How is EDA managing these funds and how
will these funds be allocated? How much of them have been
allocated and how will they be allocated?
Mr. Alvord. That is correct. EDA received two supplemental
appropriations in 2008, $100 million on June 30th and $400
million on September 30th. Those funds were targeted to the
various natural disasters that occurred throughout the course
of the fiscal year.
I am very pleased to report that all of those funds have
been allocated out across EDA's six regional offices and that
EDA is doing quite well. In fact, we are about where I would
hope that we would be in developing projects, long-term
recovery projects to respond to those disasters.
EDA is not a first responder in the case of natural
disasters. We come in after the initial cleanup and repairs
have been done to help to lay the foundation for long-term
economic recovery.
As such, I would note that our Denver Regional Office has
done a very good job developing a very robust pipeline of
projects in response to the Midwest floods that occurred over
the summer and, in fact, has a pipeline that exceeds their
available allocation of funds for that disaster. Likewise, our
Austin Regional Office has also developed a very robust
pipeline in response to the hurricanes and other disasters that
occurred over the fall months. And we continue to solicit
applications for available funding across all six of EDA's
regional offices and are continuing to develop disaster
response projects on a daily basis.
Mr. Diaz-Balart. Great. Thank you.
No further questions, Madam Chairwoman.
Ms. Norton. Thank you, Mr. Diaz-Balart.
Mr. Michaud has questions.
Mr. Michaud. Thank you very much, Madam Chair and Ranking
Member for having this hearing, and I want to thank our two
panels for testifying this morning.
I have just one quick question. As you know, in the
Economic Recovery Act that was just passed, there was set aside
$50 million for regional commissions. I would like your
cooperation in ensuring that this funding would help support
the new regional commissions that this Committee has supported
and Congress passed to ensure that they get some funding
consistent with the economic stimulus package and Congress'
intent.
Mr. Alvord. Yes, Congressman. Good to see you again.
Thank you very much for the question. I think we are
certainly cognizant of your interest in this issue.
As you may expect, these matters are cleared through a
number of entities, and they are currently passing our spending
plan through the appropriate officials and the departmental and
OMB levels to get approval for the disposition of those funds.
But we certainly look forward with working with you in the
future on this issue.
Mr. Michaud. Thank you, Madam Chair. I yield back the
balance of my time.
Ms. Norton. Thank you, Mr. Michaud.
Mr. Arcuri.
Mr. Arcuri. Thank you, Madam Chair.
That was one of my questions, and I would like to closely
associate myself with the comments of Mr. Michaud in terms of
urging you to sub-allocate that funding to these commissions.
They are very important to development throughout the Country.
So I would strongly urge that and hope that you do it.
My second question is in some sense related to what Mr.
Diaz-Balart asked, and that is this. My experience in the last
two years with the EDA was that they didn't really like working
with revolving loan funds, and I always had a sense that there
was some desire to see to it that the revolving loan funds
somehow ended and the money that was disbursed throughout the
community.
I have had an opportunity over the years to work on a
revolving loan fund, and I have had the opportunity to see the
kind of money that a revolving loan fund can leverage, private
sector money, in helping some projects that sometimes people
would consider maybe marginal projects but end up being very
successful with the help of a good revolving loan fund.
I would just like to know what the sense is or what your
sense is of the future of the revolving loan program with the
EDA.
Mr. Alvord. Thank you, Congressman.
I think we see the revolving loan fund as a very important
tool in EDA's economic development toolbox, and it is a program
that I think is incredibly necessary in the times that we are
in where we are seeing a very severe contraction in the capital
markets and the need for greater levels of capital access in
economically distressed regions throughout the Country.
The program has been confronted by a variety of challenges.
EDA has stepped up and aggressively confronted those
challenges. I think we have come a long way towards setting the
program on the course that it needs to be so that we can again
proactively use the program in the manner for which it is
intended. In fact, we have seen a significant uptick in the
number of recapitalizations and new revolving loan fund
capitalizations, particularly as a result of EDA's disaster
response work over the last several months. In 2009 alone, EDA
has capitalized or established eight new revolving loan funds.
Mr. Arcuri. Just a point I would like to make is I think
very often in recent times we think of revolving loan funds as
helping in the time of distress, and they certainly do, but I
would just like to point out they are also very beneficial.
I think it is probably obvious, but I would like to state
the obvious for the record. It is so important. They so help to
generate private investments in projects, and that is, I think,
what we try to do on a local level. So I strongly urge that we
continue the revolving loan fund program and in fact
recapitalize some of the existing funds that are out there.
Thank you, and I yield back the balance of my time.
Ms. Norton. Thank you, Mr. Arcuri.
Mr. Perriello of Virginia.
Mr. Perriello. Thank you, Chairwoman Norton. Thank you,
Ranking Member. Thank you all for your time.
The statistics that I have seen suggest that for every
$10,000 of incremental funding to EDA in rural communities we
can see 2.2 to 5 jobs created. Is that consistent with the new
metrics that you are using, would you say?
Mr. Alvord. Yes, it is. Those are the results of the new
study that was performed for EDA by Grant Thornton, and those
are the ranges that were presented as a result of that study. I
should add that, anecdotally, we did some testing of urban
areas and found consistent results as well.
Mr. Perriello. What, if any limiting factors are there for
you with the additional funding to implement? In particular,
does the small increase for staff and salary allow you to move
these at the pace that you feel necessary and are there any
other barriers to that?
Mr. Alvord. Well, we are very pleased that Congress has
recognized the salary and expense needs of the Bureau, and I
think that it will go a long way towards helping us to achieve
robust outcomes in a timely manner. It is going to take us a
little time to focus and get ramped up, but we are well on the
way to doing that.
Mr. Perriello. Thank you. I yield back.
Ms. Norton. Thank you, Mr. Perriello.
Could I ask you about the status of funds you received in
two supplemental appropriations in 2008?
A $500 million appropriation to the EDA, as we understand
it, for the Midwest floods and after Hurricane Ike, what is the
status of those funds? Is there any unobligated balance? What
projects were funded?
Mr. Alvord. Madam Chair, EDA is well along in its
administration of those funds. The Bureau has obligated a small
portion. I could find out what the exact amount is for you. But
we are about where we hoped that we would be in terms of
developing.
Ms. Norton. What projects? I am trying to get a sense of
what your work.
We have jurisdiction over FEMA as well. We have been very
disappointed in the funds going quick enough to the communities
that need them.
You got some FEMA-type funds, and we need to know where
they went, what areas they went to, what the status of those
projects are. You say you have obligated only a small amount of
this money. Why is that?
Mr. Alvord. Well, the reason for the lag in obligations
really has to do with EDA's role. We pick up where FEMA and
other agencies leave off. So, after they have provided the
initial funds, EDA becomes a second responder and comes in and
helps to create an economic foundation for a robust economic
recovery in the affected areas.
Essentially, what we do is take a phased approach . The
initial awards that EDA has made, that small amount of
obligations that I referred to, is really focused on the front
end, at creating strategies for recovery and helping to get
disaster recovery coordinators on the ground, working with our
Economic Development Districts and the affected communities to
identify the larger construction and other investment projects
that will be necessary to help with the economic recovery.
That work is taking place and is progressing very well, and
both of our regional offices that received the largest amounts
of disaster supplemental appropriations have very robust
pipelines of infrastructure investments that are starting to
queue up and work their way through.
The next wave of assistance has come in the form of RLF
capitalizations and recapitalizations, so that for those
communities that were affected where there are needs to provide
either gap financing for businesses or individuals, we have
those RLFs in place that can provide that type of disaster
recovery gap financing.
Now the next wave will come in the form of the larger
infrastructure investments. Both our Denver regional office
which has been most active in responding to the Midwest floods
as well as our Austin regional office which has been very
active in the Gulf Coast have pipelines of projects that meet
or exceed their available allocations under those disasters.
Ms. Norton. First of all, I certainly endorse the approach
you are taking. As you told the Ranking Member, you are not the
first responder, and Congress means you to come in and help
with the more permanent rebuilding, but I am concerned what
happens to this money if it is not obligated.
I mean it was in a supplemental. It was not obligated. What
happens to it?
Mr. Alvord. I believe, and I will confirm this, that the
money was no-year money.
Ms. Norton. Oh, important. In light of our larger
jurisdiction over FEMA, we would like to be kept abreast of the
use of this money in particular and what areas, what projects
were funded.
Let me ask you about the revolving loan fund. What did the
IG report in 2007 say as to problems that were associated with
the revolving loan fund?
Mr. Alvord. The IG report outlined a number of management
issues over the revolving loan fund program and, in particular,
highlighted the need for EDA to be able to identify where cash
needed to be sequestered and whether that when cash was
sequestered, whether interest was then being remitted back to
the treasury. It highlighted the need to have an annual single
audit of revolving loan fund projects and a variety of other
factors.
EDA has made very good progress. We put in place an
extensive audit mitigation plan. We have achieved most of the
milestones of that plan.
Ms. Norton. I don't understand the audit mitigation. What
is that?
Mr. Alvord. Essentially, what we did is we went through the
recommendations from the IG on the RLF audit, and we identified
specific actions that EDA should take in order to mitigate the
issues that were identified.
There were seven specific recommendations in the IG audit.
EDA has now completed six of those, and the final one is the
creation of a revolving loan fund management system that will
allow EDA to better handle the reporting that occurs by the
revolving loan funds and oversee the status of each of the
different EDA revolving loan funds and the portfolio as a
whole.
The portfolio is quite large. It includes a capital base of
$826 million and 571 different reporting units. So it is a big
task for EDA to oversee this portfolio on an ongoing basis.
We believe that the balloon payment at the end of this
process will be the stand-up and creation of this revolving
loan fund automated reporting and management system and that
when we have that system fully in place--and we anticipate that
we will be using it before the end or we will have it ready to
stand up and start using it so that RLFs can report in an
automated fashion at the end of this fiscal year, beginning in
October--that we will be well on the way to setting this
program on course and again making it a very important and
vibrant investment tool in EDA's portfolio.
Ms. Norton. There was no fraud noted in this report, this
IG report, no problems of that kind found.
Mr. Alvord. That is correct.
Ms. Norton. That is remarkable and excellent when you
consider that this program runs these revolving loans in
communities through private banks. Isn't that for the most
part?
Mr. Alvord. They are primarily housed within nonprofit
organizations.
Ms. Norton. Like credit unions?
Mr. Alvord. Local governments.
Ms. Norton. Oh, local governments?
Mr. Alvord. Local governments and multi-county economic
development districts, quite often, oversee these funds and
then work with prospective applicants that have been rejected
by banks for loans.
Ms. Norton. What is the rate of repayment of the loans?
Mr. Alvord. I will have to confirm that number for you. I
don't know it off the top of my head.
Ms. Norton. Please get us that number. It had been low. We
would like to know, particularly during this period, what is
the rate of repayment. We might expect there would be some
issues today since there are issues with almost everyone in
this economy.
Now the State contributions. One of our members mentioned
in some circumstances he thought it should not be 50 percent.
What is your view of the 50 percent in light of whether States
seem readily to step up and match it?
Mr. Alvord. I am sorry. The 50 percent requirement for the
50 percent local share?
Ms. Norton. The State contribution percentage.
Mr. Alvord. EDA's authorizing statute provides the Bureau
with flexibility. Generally, we do start at a 50 percent
matching rate. Depending in the level of economic distress, EDA
has the ability to go up to an 80 percent matching rate. In
special circumstances where a special need can be established
or it can be demonstrated that taxing and borrowing authority
of the jurisdiction has been exhausted, EDA can even go, in
some instances based on Assistant Secretary approval, above 80
percent.
Ms. Norton. Now in our stimulus package, there is no match,
is there?
Mr. Alvord. Standing matching rates apply to the funds
provided through the stimulus.
Ms. Norton. Well, let me ask you whether you think States
are going to be able to match your 50 percent requirement or
will there be adjustments?
Should there be adjustments made so that perhaps during
this period the 80 percent or some such percentage, taking
account of the state of State finances, would be in order?
Mr. Alvord. This is something that we are certainly hearing
a lot about, the inability of local jurisdictions to meet
matching requirements. We are certainly acutely sensitive to
those local needs.
I think that, regrettably, given the dire economic
circumstances, many communities may qualify for more than a 50
percent share based on the economic metrics. For those that
don't, we do have the provision that will allow us on a case by
case basis to review those applications and consider whether
they have met the threshold of exhausting available taxing and
borrowing authority such that we can exceed even the 80 percent
grant rate in some cases.
Ms. Norton. This is my final question. Given the experience
since the last reauthorization, have you any recommendations to
this Subcommittee on changes we should make?
We depend upon the operating agency to know more about that
than anyone. Based on what you hear from your regions, what you
hear from the States, from private businesses who have been
involved, do you have any suggestions for changes you would
make, statutory changes, since this would be the opportunity
during this reauthorization period?
To add, delete, would you just maintain it as it is? What
would you do?
Mr. Alvord. I would say that I think that things are
operating fairly well at this time but that, given that EDA
does not have any leadership on board at this time, I would
defer to their policy prerogatives when that leadership
arrives. I certainly think it would be a worthwhile process to
engage in an open discussion about many of the ideas that have
been put forward regarding EDA reauthorization and that we
should solicit input when that leadership is on board from
EDA's regional offices and career staff that are involved in
the program.
We would certainly look forward to working with you on
those items, moving forward.
Ms. Norton. I will alert you of this. We have held this
reauthorization hearing, and I don't know when this bill will
be marked up or moved forward, and reauthorization occurs once
in a blue moon.
I understand your deferral to the absent Chair of EDA, but
if there are any urgent matters or any matters of some
importance I would urge to be in touch with staff while we are
considering changes of our own. We, obviously, would want you
to know about our own changes and comment on them, but we would
welcome your input.
I wonder if any other member has questions.
I would like to ask the Chairman who is responsible for the
EDA, so I am particularly pleased to see him here because you
are seeing the man who, if anyone can be said to have literally
created the Agency, there he is, sitting before. So I think I
should ask him if he has anything to say to you.
Mr. Chairman.
Mr. Oberstar. Thank you, Madam Chair, and thank you for
those kind words.
Senor Diaz-Balart, thank you, Mario, for being here and for
your interest and participation.
Yes, I was present at the creation of EDA. Actually, it
started under President John F. Kennedy as an experimental
program called the Area Redevelopment Act, ARA. It was limited
to a number of States. After it had a four-year run, it was
clear there was much more needed, and President Kennedy had
committed to expanding on the basis of additional reports.
That was about the same time that Franklin D. Roosevelt,
Jr. completed his assessment of the needs in Appalachia. So we
merged the two ideas.
We brought them out in separate bills, the Appalachian
Regional Development Act and the Public Works and Economic
Development Act of 1965, signed by President Johnson on August
9, 1965. I have one of the green pens that he used to sign that
bill into law.
And I have watched EDA over all the years. Then after I was
elected Chair of the Economic Development Subcommittee and the
Investigations and Oversight Subcommittee, I held extensive
hearings on the operation and effectiveness of the programs of
EDA.
What has been remarkable to me is that although various
administrations have proposed to cut back or even to repeal
EDA, it has survived all those assaults not because so much of
the astuteness of members of Congress but because of the people
in the communities served by EDA. The economic development
boards that consist of small businessmen and women, local
elected government leaders, county and city and township, all
who participate in shaping the projects that ultimately are
approved for funding by EDA, show that it is a grassroots
program. It works from the bottom-up. It doesn't get its
direction from the top-down.
That character has brought significant bipartisan support.
Democrats and Republicans alike, supported the Area
Redevelopment Act and the Public Works and Economic Development
Act in all of its subsequent iterations.
I was disappointed, frankly, over the last eight years that
there were so many political appointees in this very small
agency. It once was much larger than it is today, almost double
the personnel size.
But for an agency of roughly 400 people to have 9 political
appointees overseeing its operation, I thought was unnecessary.
It was wasteful. It was just a place to park political pals.
And they are gone, aren't they?
They are all gone, aren't they? Yes? Good.
It will start afresh, and I will insist with this incoming
Administration: You need an administrator. You need an
assistant administrator. Maybe you need a congressional
relations person but not much more than that.
We need to revitalize the economic development
representative staff. The EDRs have been cut back, and that has
not been by accident or neglect. The EDR is the person in the
field who is the filter, the filter between those who want to
do something good but it may not be the right thing and may not
be done in the right way and the EDA regional office and the
headquarters office and their congressional delegation.
If the EDR does his job right, members of Congress don't
get that last minute urgent appeal: save this project from the
clutches of these evil people, and the EDA don't understand our
needs.
Well, if the EDR is doing his or her job well, they do
understand the needs and what is being proposed is maybe not
always the right one. So, filtering out those projects and
guiding local interests on preparing their proposal in the
right way.
But various administrations, the Reagan Administration
starting, and then Bush I and Bush II realized that the way to
kill the EDA is to kill the EDR, and they cut back that staff
substantially.
Madam Chair and Mr. Diaz-Balart, when we do the
authorization, we need to rebuild that economic development
representative staff. They are skilled economic development
professionals. They are doing their job. They are out in the
community with the business community, with the bankers, with
the local government personnel, with local economic development
teams in communities, in regional settings. We need that to
reestablish that expertise in the program.
I think, frankly, if it had been up to me and Ms. Norton to
write the economic recovery bill, I think we would have had EDA
at the center of it. We would have had a lot of Republican
support for that. EDA actually had over $465 million in the
House version of the bill. It should have had a billion
dollars.
There are projects that are ready to go, industrial parks
that are ready to go to contract, to build, to develop. And if
the purpose of recovery is to create jobs, who does it better
than EDA?
I remember when Mr. Klinger, a Republican of Pennsylvania,
was the ranking Republican on our Committee. Previously to
being elected to Congress, he had been Chief Counsel at EDA.
Bill Klinger really knew the programs and the operation of EDA
very well.
We launched into a 6-month long inquiry into the operation
and effectiveness of the programs, the result of which was that
for the billion dollars that had been invested up to that time
in EDA projects, every year, $6.5 billion in taxes were being
paid to Federal, State and local governments from the jobs
created by EDA. Every year, six times the investment was being
repaid in taxes by businesses and individuals in jobs created
by EDA investments. You don't get that kind of a turnover in
the stock market, and that is a net national benefit.
So, reestablishing the EDRs and expanding their number,
strengthening the regional offices, I think, is important for
the future of EDA. I think we ought to also have a loan
program.
In the beginning, EDA was a full package operation. The
community would come in with their project for the industrial
park or a grant for the industrial park for water and sewer and
access road and electricity lines and so on.
And then, the business coming in and saying, well, this is
new to the area. We need to train people. So EDA could provide
training assistance.
The company didn't have working capital often. So EDA would
provide working capital assistance.
And it all would turn out to be a complete package.
Or technical assistance, which still survives, but
technical assistance not to do basic research but to take the
project or product to market operation.
I think we ought to bring back those basic effective
principles of EDA.
I don't think that EDA should create a new staffing for
loans, but I think that should be, in effect, outsourced to the
Small Business Administration but operating under different
principles, under ones that we will establish for EDA.
I think the job training, which is such an important
component of new economic development initiatives, could be
done by the Labor Department but again under EDA funding for
it.
A community doesn't have to go shop to SBA to get help for
one thing, go to the Labor Department for something else, go to
somebody else to get technical assistance but do it all within
EDA as we once did, but not creating new staffing to do this
except perhaps a handful to oversee the channeling of funds and
have the ability to command the resources of the Small Business
Administration, Department of Labor, technical assistance
funding and to cooperate with local and regional initiatives.
There are many university research and development, testing,
training centers whose resources can be brought to bear on the
needs of economic development.
We learned in the Appalachia program. We learned in Eastern
Kentucky and in Southwestern Virginia or like the Rust Belt of
Illinois, Northern Indiana, Ohio, the Pittsburgh area of
Pennsylvania that you have an area that has gone through 100
years of decline. You don't bring it back overnight.
And it takes more than just an industrial park. You also
have to have drinking water and wastewater treatment, and you
have to have advanced wastewater treatment, and you have to
have transportation access in many of these places.
I will never forget going into West Virginia on our
hearing, Mr. Klinger and I, Madam Chair. We went to a small
town in which the mayor was also the chair of the local
economic development committee, and he was a witness at the
hearing.
He brought us on a walking tour of the town, and we stopped
in his shop. He told a story:
Year after year, we would get prospects coming to our
community and want to locate a manufacturing facility or a
processing or an assembly plant. And they would ask, well, how
is your river access? Well, we don't really have access to a
river. We don't really have a river.
How about rail service? I tell you the railroad just
doesn't come up to our town. And how about your airport? How is
air service? Well, we don't have an airport, so we don't have
air service.
How is your truck service and your highways? Well, we got
this one-lane road in, and we got the one-lane road out. Then
you would see them wilt, and they would go away and never come
back.
But on the wall in back of the cash register was a little
sign that read: God never put nobody in a place too small to
grow. That should be the motto of EDA because it helped places
so small as that to grow. If we do it right, it will give a
helping hand, so people can pull their bootstraps, pull
themselves. That is what EDA is all about.
Thank you, Madam Chair.
Ms. Norton. Thank you very much, Mr. Chairman.
By the way, you heard the Chairman use the words, ready to
go.
Mr. Chairman, I cautioned our witnesses that while they
didn't have the same statutory mandate, that this was a job
creation bill and that some oversight of their own regions was
necessary for this $150 million.
And you heard it straight from the Chairman's mouth. It is
he who set the standard, and there is a tough standard for
States and localities in terms of numbers of days. You don't
have that problem. Instead, you have the discipline of this
Subcommittee that needs to know about what is the nature of
your discipline within 30 days.
The Chairman also mentioned States' revenue or States
benefitting which reminded me that I should have asked you
about how much tax revenue is added to local budgets for every
million dollars of EDA investment in, for example, a public
works project.
Mr. Oberstar. Before the witness responds, may I ask the
Chair a question? When is going to be the opening of the
Eastern Market EDA project?
Ms. Norton. Mr. Chairman, I prominently mentioned Eastern
Market as an example of a beneficial EDA project.
Mr. Oberstar. Good.
Ms. Norton. The Chairman brought to my attention the old O
Street Market and suggested that the Eastern Market might well
fit the guidelines, and, lo and behold, they did. I think 25
percent of the project is being paid for by an EDA grant, much
to the great joy and delight of the community.
This is a very interesting treasure because obviously it is
a local treasure, but it is also a tourist treasure. When you
have one of the oldest outdoor markets in the United States and
people come to Washington, D.C. to see the Monument, well, they
will also come to the Eastern Market.
Mr. Oberstar. Exactly. It is a national historic treasure.
It is being rebuilt. There is supposed to be a grand opening.
Ms. Norton. Coming this summer.
Mr. Oberstar. This summer. Good.
Ms. Norton. The Chairman actually went with me to inspect
the damage. The community was in mourning, and some of the
vendors were there. He spoke to the vendors and raised
everybody's hopes. It is taking shape. It is very important.
The EDA grant was very important, Mr. Chairman, because
when a historic structure burns you just can't slap some bricks
back up there. It has to be redone in the fashion that it was
before as nearly as possible, so the EDA grant.
Now, here we are in a big city. You don't think of us as an
EDA jurisdiction, but the fact is the grants can go and the
community did in fact meet the guidelines. And so, members have
to be alert, as I was not, but as the Chairman reminded me when
the burning occurred.
In any case, could you report on the tax revenues for every
million dollars invested?
Mr. Alvord. Tax revenues that result as a result of EDA's
investments are not a metric that we currently collect,
although I would be happy to go back and have a discussion with
some of my research staff and see whether we do have any data
available on that that we can share with you.
Ms. Norton. I think the Subcommittee is going to need to
look into how we can make sure. In a real sense, that is the
whole point. Jobs, yes. But, yes, the business begins to pay
taxes to the community. People pay taxes because they have
jobs, and it is all part of the same bundle.
The Chairman asked about these EDRs. The eyes and ears, as
I see them, the real links, field reps kind of personnel. How
many are there now at the EDA?
Mr. Alvord. We currently have 20 field-based economic
development representatives.
Ms. Norton. What has been the high point?
Mr. Alvord. I believe the high point was about 47 economic
development representatives.
Ms. Norton. My goodness, that is a cut of more than half.
Mr. Alvord. It is a significant decrease.
Ms. Norton. When was it at that high point? What year?
Mr. Alvord. I would have to find out. It goes back several
years now, probably a decade or more.
Ms. Norton. Have your appropriations been raised annually?
Mr. Alvord. The issue, Madam Chair, has been that during
that time period EDA's salary and expense appropriations have
stayed relatively static, which represented an erosion of
available resources due to increased costs. As a result, as
staff retired or moved on, EDA was unable to continue to
backfill behind in many of these positions. This occurred both
among the EDR staff as well as at the regional office level and
at headquarters.
Ms. Norton. Could you supply within 30 days to this
Subcommittee a personnel chart of everyone, every category on
the EDA payroll?
Mr. Alvord. We would be happy to do so.
Ms. Norton. Field, regional and, of course, headquarters.
I have no further questions.
Mr. Carnahan, do you have questions?
Mr. Carnahan. Yes. Thank you, Madam Chairwoman. Thank you
for holding this hearing and our Ranking Member.
I am new to this Subcommittee, although I have been on
Transportation since I came to Congress after the 2004
elections. So, looking forward to this.
I hail from St. Louis. So I am especially glad to see Denny
Coleman from back home here on the panel today.
We have very much benefitted in our communities in St.
Louis. In particular, after the floods in 1993 and 1995, EDA
was a critical partner in rebuilding. They have been critical
in funding some of our incubator projects there that have been
great for growing new businesses and new jobs and recently
funding a project in St. Louis for a Midwest hub for U.S. and
Chinese commerce.
So, again, we have had some very good successes working
with the EDA, and we look forward to continuing that work.
I guess to get into a few questions, one of the things as I
learn more and more about the EDA and its history--and
certainly it is great to have Chairman Oberstar here to educate
all of us on EDA's history--we also have some questions on how
maybe we can use the substantial funding that goes through EDA,
better and smarter, particularly in these tough economic times.
It has been there in economic downturns before to provide
targeted funding for areas that truly need it. We certainly
need that now more than we have in a long, long time. So, a
couple of questions in terms of how we can use that money
better and smarter and getting really the funding out to
communities that really need it and can put it to work quickly.
I like your thoughts in particular in terms of reducing or
waiving matching fund requirements, how much of an obstacle
that has been to get projects that may be ready to go in their
communities, but that has been an obstacle.
The other would be we have had substantial funding. I think
over $150 million in disaster funding for floods during the
Spring of 2008 and with Hurricane Ike. We have been told that
EDA funding can only be used for flood-related projects, but
that seems to be counter to what the EDA has done in the past,
which is using disaster funding for more long-term economic
adjustment.
Also, using funds, traditionally, they have been limited to
building construction and program planning grants. Has there
been any additional thought to expanding eligibility for the
use of funds, again, to give a little more local creativity in
terms of how we get those out there?
So I would like you to address the current limits that are
on getting funding out there and ways that maybe we can be
wiser about maybe knocking down some of those barriers,
especially given the times that we are in.
Mr. Alvord. Thank you, Congressman, for the question.
I think that with regards to general matching requirements,
we are certainly sensitive to the needs of local jurisdictions
in these very difficult and trying economic times. Generally,
EDA matching share starts at 50 percent Federal, 50 percent
local.
We do have discretion under our authorizing statute to go
up to a 80 percent Federal share in the case where the
community has higher levels of economic distress under the two
main criteria that we look at, which are unemployment and per
capita income.
We also, in dire circumstances, have the ability to go
beyond that and to look for a demonstration that the local
jurisdiction has exhausted its effective taxing and borrowing
authority, and therefore we can exceed those grant rates under
our special need criterion.
I think with regards to the disaster supplemental
assistance, we do have a little bit more flexibility in the
grant rate there. Where generally EDA has been providing a 75
percent Federal share to areas impacted by the natural
disasters, which is consistent with what some of the other
agencies that are responding to those disasters have been
doing, under statute, we have flexibility to go up to a 100
percent grant rate with those investments.
We do have a fair amount of flexibility in the
administration of those funds, but we can only work in areas
that have received a designation pursuant to a FEMA disaster
declaration pursuant to the Stafford Act. So, if you are
hearing that communities have to be in flood-impacted areas, it
is likely that what the regional office is conveying is that
the county must be designated, and that may be through flooding
or some type of other natural disaster that occurred in fiscal
year 2008.
We do try to make investments with an eye towards long-term
economic development outcomes and prospects. So, even in our
disaster recovery work, what we are trying to do is establish a
robust foundation for economic recovery with an eye towards
long-term economic development.
Mr. Carnahan. The third part of my question was about
expanding the eligibility for use of the funds.
Mr. Alvord. Were there particular areas that were found to
be ineligible that you were interested in?
As I said, we do have a fair amount of flexibility in the
administration of those funds. We are funding activities such
as technical assistance grants. We are funding disaster
recovery coordinators, the recapitalization of revolving loan
funds as well as infrastructure investments to try to bolster
the economies of the disaster-impacted areas.
We would certainly be open to exploring other types of
activities, provided that they are eligible under EDA's mother
statute.
Mr. Carnahan. I guess, finally, do you have any sort of
measurement or any way to quantify the funding that is out
there, allocated, but maybe being held up because of some of
the existing requirements that ought to be revisited?
Mr. Alvord. I can't think of anything that comes to mind
immediately that may be slowing funding and EDA's response.
I feel like we are about where we would expect to be, given
that EDA is not a first responder. We are really a secondary
responder to natural disasters, but we do have a very robust
pipeline of projects that is moving forward in a phased manner.
I think that our response has been quite timely, and we are
certainly doing everything that we can within the resources
that we have available to move that funding as quickly as
possible.
Mr. Carnahan. I appreciate your being here today, and I
will follow up with you and with our local folks, Denny Coleman
and others, in terms of existing projects and requests that are
out there to be sure that in our region, that if we have some
needs and we need to look at some of those barriers to getting
the funding out, that we are overcoming those.
So, thank you very much.
Mr. Alvord. Thank you. I would be happy to work with you on
that.
Ms. Norton. Thank you, Mr. Carnahan of Missouri.
Mr. Cao of Louisiana.
Mr. Cao. Thank you, Madam Chair.
I just have one quick question to ask of you. Are you
presently funding any projects in the New Orleans Metropolitan
Area, the Second Congressional District in Louisiana?
Mr. Alvord. I would be happy to look into exactly what
projects EDA is funding.
I know that EDA has had a very robust portfolio of projects
that we have moved forward in the Gulf Coast, really ever since
Katrina and Rita hit several years ago. In addition, we had a
very robust and I think timely response to Hurricane Gustav
when it struck the Gulf Coast, and pursuant to the September 30
disaster supplemental of $400 million we will be making a large
number of additional investments throughout the Gulf Coast.
I would be happy to provide additional information about
some of the projects that we are working on to you.
Mr. Cao. Okay. Thank you very much.
Ms. Norton. Thank you, Mr. Cao, and I thank both of you for
this important testimony.
We are ready for the next witness. We want to hear quickly
from Srikant Sastry, Partner, Grant Thornton.
TESTIMONY OF SRIKANT SASTRY, PARTNER, GRANT THORNTON, LLP
Mr. Sastry. Chairwoman Norton and members of the Committee,
it is an honor to appear to discuss Grant Thornton's work
assessing the impact of the EDA's construction program.
My name is Srikant Sastry, and I am a principal with Grant
Thornton's Global Public Sector practice in Alexandria,
Virginia. I was the principal in charge of Grant Thornton's
study for EDA, and sitting behind me and joining me today are
Mr. John Adams, who led the study for Grant Thornton, and Dr.
Peter Arena, founding principal of ASR Analytics. ASR was our
partner on this project, and Dr. Arena was the study's
principal investigator.
In April, 2007, EDA contracted with Grant Thornton to
develop a methodologically rigorous evaluation of the
effectiveness of EDA's construction program. We accomplished
this objective through application of econometric methods,
collaboration with EDA, consultation with key stakeholders such
as OMB and GAO, discussions with other Federal grant-making
agencies and independent review from a panel of academic
experts.
Our review focused on job creation that resulted from EDA's
construction grants. The complete history of our work is
documented in the study itself, copies of which are available
today for the members' inspection.
I would like to request that a copy of the study be
included in the official hearing record.
Ms. Norton. So granted. So ordered.
Mr. Sastry. Thank you.
One purpose of our study was to refresh the analysis
conducted for EDA in 1997 by a team from Rutgers University and
Princeton University known as the Rutgers Study. The Rutgers
team used direct observation of impacts of a sample of projects
completed in 1990 to estimate the impacts of EDA's construction
grants. The Rutgers Study found statistically significant
impacts related to EDA construction grants.
Given the age of the Rutgers Study and the data it was
based on, EDA asked us to review, validate and, where possible,
improve upon it.
Our approach differed from the Rutgers Study's approach. We
relied on public use data, specifically, jobs reports from the
Bureau of Labor Statistics. This provided an external and
unbiased source of data about employment levels.
We developed regression models that examined the
correlation between EDA construction grant dollars and changes
in employment at the county level. By design, we developed
multiple models and presented ranges of results in our report.
This was done to maximize the credibility of our estimates by
not tying them specifically and necessarily to a single model
reflecting a single theory of economic development.
The models we developed corroborated the results of the
Rutgers Study, showing that EDA grants have statistically
significant impacts in the non-urban communities in which they
are made. Specifically, EDA construction grants generate
between 2.2 and 5.0 jobs for every $10,000 of EDA investment.
To address urban impacts more directly, we supplemented our
models by conducting 24 direct observation visits to primarily
urban sites of completed projects funded in part by an EDA
construction grant. Based on data obtained during these site
visits, we developed jobs impacts estimates for each project.
As documented in our report, the site visits yielded indicative
results consistent with our non-urban area models and with the
Rutgers Study.
Our models also showed that project type makes a
difference. We classified EDA programs into one of five project
types: roads and other transportation projects, commercial
structures, industrial park infrastructure, community
infrastructure and business incubators. Our models showed that
each project type had its own unique range of impacts, each
resulting in job growth.
We believe the methods and tools we developed in this study
and adopted by EDA represent an effective and repeatable
approach to measure job growth.
Thank you for the opportunity to address the distinguished
members of this Subcommittee.
My full testimony has been submitted for the record. We
hope our participation is helpful, and I would be happy to
answer any questions you may have.
Ms. Norton. Thank you very much, Mr. Sastry.
I am not trying to work up any business for you or any
other consultant, but I was a little surprised to note that
Congress has gone almost a decade without any assessment or
evaluation of EDA.
Now try to give me your most objective to this question,
but I am trying to find out what time frame. Given the
resources, this is not the most expensive agency in the
government and given the nature of the beast, it is not all
centralized, how often do you think EDA's work should be
evaluated?
Mr. Sastry. That is a good question, Madam Chairwoman.
The way we set the model up, using public use data, makes
it very cost-effective to update the models. So the process of
doing so would not be an elaborate study, perhaps as was done
in the Rutgers Study or even in the study that we did.
Ms. Norton. Because you actually used a different
methodology? It was so long ago.
Mr. Sastry. That is right.
Ms. Norton. Should the studies all use the same
methodology? I note that you came to approximately the same
conclusion.
Mr. Sastry. Right.
Should they use it? We believe it is a very sound
methodology, and, in fact, given the use of Bureau of Labor
Statistics data, the models can be updated however often that
EDA deems necessary or the Subcommittee deems necessary for
purposes of reporting.
There is a risk of updating it too often. You have noise in
terms of too many data points. Certainly, annually or
biannually could be a target for update especially since it is
cost-effective to do so.
I would also suggest that as significant variances in
funding occur would be appropriate times to refresh the impacts
of the study because the study itself is nonlinear.
Ms. Norton. The variance here was going down.
Yes, I see what you are saying. For example, the Census is
to the point now that it will give you something every couple
years because they got a base from which to work.
Mr. Sastry. Right.
Ms. Norton. We will simply to evaluate that.
I know one thing, 10 years of funding right out of the
Federal Treasury, even for an agency with this reputation,
bothered me when I looked at it. You know we are not going to
tell the GAO to go in there every other year. So we are trying
to do something cost-effectively that gives us some feedback.
Now I think that feedback becomes, unless you think we are
going to rise up and resurrect ourselves out of this recession,
as we politely call it.
On reauthorization, I am looking very closely at EDA in a
wholly different way. I mean this Agency was reauthorized at
the height of the economy expanding, and we got used to what I
think will, I hate to say it, but I just think everybody has to
understand it will never happen again. That is to say there are
a whole bunch of structural changes happening in the world that
are dividing up lots of what has been centralized in this
Country.
And so, I am trying. As I have said earlier, I am trying to
imagine in my own district which has been, for example, more
protected from recessions than others because its major
employer can't move out of town. Yet, high unemployment.
So I have a hard time fathoming how areas like this go
through recessions except with horrible suffering--that is the
only word I can use for it--that doesn't even meet the eye
because they are in the byways and the parts that the media and
the whole world just don't cover.
Now you can help me understand something because it has
been used over and over again. I have looked at your chart,
Federal Cost per Job. If you look at it, Federal cost as
against the estimated local jobs generated, you will see
everyone's and one indeed you chose to evaluate,
infrastructure, roads and other transportation, falling.
Well, let me just give you the figure: 4.4 to 7.8 local
jobs generated per $10,000. That is for roads. Federal cost per
job, $1,291 to $2,293. Now explain what cost Federal cost per
job means?
This was thrown around all during the stimulus debate. What
is included in that figure and why is it, for example, so much
higher than estimates?
Let's look at business incubators: 46.3 jobs to 69.4. Cost,
is this $144 to $216 per job?
Mr. Sastry. Yes, ma'am. Yes, ma'am.
Ms. Norton. How do you explain?
Mr. Sastry. Right.
Ms. Norton. I am looking at those figures, and I don't
think anybody on the floor in another debate knew what they
were talking about. They just quoted these figures like this.
If you could disaggregate those numbers and why would
people engage in infrastructure if it costs so much more than,
I don't know, business incubators?
Mr. Sastry. Right. If I might, Madam Chairwoman, could I
ask that Dr. Arena address this question, specifically?
Ms. Norton. Please. It could really help me a lot on this
one.
Mr. Arena. Good morning.
Ms. Norton. Good morning.
Mr. Arena. The chart that you refer to that has the
variation in the different project types and the cost per job,
this was based on a methodology that we presented to EDA to be
able to disentangle some of the differences in the ways that
their expenditures were put out. This was something that helped
them align the methodology for measurement with their strategy
for releasing funds in this program.
While we did come up with the variation in the number of
jobs, it was outside the scope of our project to actually
investigate why those differences exist.
Ms. Norton. There has to be an explanation for this.
We continue to regard the same thing for industrial park
infrastructure. Let's just use rough figures: 5 to 7 local jobs
generated, $1.377 million to $1.999 million of Federal cost,
also high, consistent with roads and transportation.
Now included in that is something that somebody needs to
explain because members up here see those figures, and I know
we don't understand what we are talking about when we are
speaking from these. I know we do not understand what is
included.
Mr. Arena. Sure.
Ms. Norton. I don't know if it is the material. I don't
know what in the world is included, but unless there is some
explanation for this you are going to hear people demagogue
even something that has been accepted for generations as the
best way to make jobs, which is infrastructure building.
Mr. Arena. Right.
Ms. Norton. Outside the scope? Well, how? I mean how do you
know, therefore, that it is cost-effective since you looked at
public infrastructure to begin with? That is the main feature
of your study.
Mr. Arena. That is right.
Ms. Norton. How can you tell us that this is the right
thing to do, given what you found with business incubators? We
know you didn't study them as closely as you did
infrastructure, but you certainly studied them closely enough
to see these differences. I am bewildered.
But it didn't begin with you. It began with the
infrastructure stimulus bill which everybody, by the way, was
for except when specific costs came down. People threw these
out because we don't understand them.
Mr. Arena. Okay. I can explain the relationship of the jobs
that we estimated and the funding expenditures by EDA.
To simplify our models, what we did is we looked at the
total amount of spending by EDA in these categories in the
localities in which they made investments and then measured
that against the jobs created in a statistical model that
allowed us to look at the input, which is EDA dollars spent in
a community on a particular project type, and looking at what
the statistical outcomes were for the jobs that were created in
that community.
Ms. Norton. First of all, you are looking at the jobs
created in doing the roads and doing the other transportation.
I have a feeling that in understanding the value one would have
to get beyond the jobs created at that moment.
That is to say if the whole point of our stimulus and of
EDA's work is to do infrastructure which then enables all kinds
of other things to happen. Roads, bridges and so forth don't
just happen because we want them pretty.
There has to be something in this to make people understand
it. I tell you if you all got paid for this, you are going to
go back and find out for me what this is all about.
Yes, it was your model. But the fact is it is every model I
see. We paid for this model. Somebody has to make me understand
these figures.
These figures are consistent with the figures that were
thrown out for stimulus, high cost. It made it look like it
costs a gazillion dollars to build a highway in order to get a
few jobs relative to that gazillion dollars.
Now something else is involved in this calculation. We are
not equipped to make it, and I am not going to deal with a
program whose major focus is public infrastructure without
finding it out on my own. Here, you are dealing with, forgive
me, a former academic. So it is hard for me to deal with what I
don't understand.
But, for example, in writing my own statement, staff had
given me figures to show that the Apollo Theater. I am a native
Washingtonian who had the great joy of spending part of my
adult life as a New Yorker and living in Harlem. So, that
figure and they said it cost $4.5 million and it was like 0.6
jobs per whatever, $10,000, and produced 28 jobs. But, see, I
know the Apollo and I know 125th Street and what has happened
to it.
So I indicated what I happened to know, that when you keep
the Apollo from becoming a dead icon in the middle of your
major commercial strip, that is 125th Street, and it comes
alive again with all of that fabulous history, all of the great
entertainers of black America who passed through that. I know
why 125th Street looked the way it did.
I am not saying it was the sole generator, but if I had to
make a decision in New York about how do I go about
regenerating 125th Street to what it was at the height of its
center as an entertainment center, I would start with the
Apollo. There is nothing else on 125th Street that even begins
to have that stature.
Then, you know things of more stature begin. Shops of more
stature gradually begin to move up. Now a lot of this happened
during the Great Expansion. So I added that with no metric
simply out of personal experience.
Now I can't do the same for these differences.
If we are going to reauthorize what amounts to a public
works agency, we have to understand it. Be able to explain it.
Be able to understand rather than parrot people who say and
they tell us this time and again: You want to stimulate an
economy, you start with infrastructure. Then you go to other
things.
Tax cuts, all the rest of it, all the economists say that
pales beside provide infrastructure.
Then I see these costs, and I am mystified. So somebody has
to explain it to me.
Mr. Sastry. Madam Chairwoman, in the interest of giving you
a full answer to your very important question, we would like to
be able to submit a detailed written answer for the record.
Ms. Norton. I ask that you do that for me, please.
Mr. Sastry. Sure.
Ms. Norton. It is very important for me to be able to
respond. We are very pleased with this Agency. We know what it
has done. We know why we continue to focus on infrastructure.
I want to, finally, just ask you a question concerning you
limited this to construction jobs, essentially.
Mr. Arena. The construction projects.
Ms. Norton. Yes. I am sorry.
Mr. Arena. The jobs are jobs created in all industries.
Ms. Norton. I mean construction projects.
Mr. Sastry. But the jobs growth numbers reflect jobs
created across industries, not simply the construction
industry.
Mr. Arena. These are permanent jobs that are created in the
local economy due to the project that was undertaken by EDA.
Ms. Norton. It seems to me you went to the right thing
because that is what the Agency is all about.
Mr. Arena. Right.
Ms. Norton. But the jobs created from the infrastructure,
you say, went across the economy.
Mr. Arena. All industries, yes.
Ms. Norton. So, you were able to say that when you do
certain kinds of infrastructure you have an effect and to point
to that effect well beyond the jobs, the infrastructure jobs,
created?
Mr. Arena. Yes.
Ms. Norton. Well, I certainly wonder whether that has
something to do with this cost per job because if that is the
case I don't understand why the cost per job, the estimated
number of jobs generated and the Federal cost per job are what
they are. I just don't understand it.
So I ask you to do it and within 30 days. If you need more
time, that will be granted. But we are in a reauthorization. We
are not going to the floor and have these numbers flung around
without being able to respond to them.
I think I am going to let you go because that is really the
most important thing you could do for us. Thank you very much
for the study.
Mr. Sastry. Thank you very much.
Ms. Norton. Could I ask the other very important witnesses
to come?
The next witnesses really are, in a real sense, more
important to us than others, without trying to be invidious
here, because this gives us on the ground understanding of what
this work is all about, and I am pleased to welcome Sharon
Juon, Iowa Northland Regional Council of Governments and the
National Association of Development Organizations, and Denny
Coleman who is the President and CEO of the St. Louis County
Economic Council and also representing the International
Economic Development Council which are the two organizations
that represent the development organizations.
I ask you to proceed to summarize your testimony.
TESTIMONY OF SHARON JUON, EXECUTIVE DIRECTOR, IOWA NORTHLAND
REGIONAL COUNCIL OF GOVERNMENTS AND PRESIDENT, NATIONAL
ASSOCIATION OF DEVELOPMENT ORGANIZATIONS, AND DENNY COLEMAN,
PRESIDENT AND CEO, ST. LOUIS COUNTY ECONOMIC COUNCIL AND
SECRETARY-TREASURER OF THE BOARD, INTERNATIONAL ECONOMIC
DEVELOPMENT COUNCIL
Ms. Juon. Thank you. Good morning, Chairwoman Norton,
Ranking Member Cao and members of the Subcommittee.
Again, my name is Sharon Juon. I currently serve as
President of the National Association of Development
Organizations and Executive Director of the Iowa Northland
Regional Council of Governments, an EDA-designated Economic
Development District.
Thank you for the opportunity to testify today on issues
related to the performance and reauthorization of the Economic
Development Administration. I would like to make four main
points this morning.
First, Madam Chair, EDA has proven time and time again,
both in independent research evaluations and in real-world
situations, that it is a results-oriented, partnership-driven
agency that works. Whether it is through infrastructure grants,
strategy planning assistance or business development capital,
EDA investments are uniquely positioned to promote economic
development in impoverished areas.
Even in the best of times, our Nation has hundreds of
communities struggling to overcome chronic poverty or more
sudden and severe economic dislocations caused by global trade,
national disasters or corporate restructuring. Without EDA's
resources, it would be nearly impossible for many of these
distressed areas, especially in smaller urban and rural
regions, to rebound and pursue new opportunities.
Therefore, we urge this Committee and Congress to enact a
multi-year reauthorization bill for EDA that is aimed at
helping depressed areas of the Nation. This includes reducing
the local match rate for the most highly distressed areas. The
previous Administration had significantly increased the local
match as part of the 2005 rulemaking even though Congress had
not addressed the issue in the previous authorization bill.
Second, NADO urges Congress to incorporate the roles and
responsibilities of EDDs into law and to increase funding for
EDA's planning program from $27 million to $37 million. This
would provide the stability and resources needed for the
nationwide network of 381 Economic Development Districts to
thrive in today's new economy.
The EDA planning program is the only Federal program of its
kind that allows local governments along with private and
nonprofit sector leaders to collaborate on a region-wide basis
to proactively prepare for their economic future. Without the
assistance and expertise of Economic Development Districts,
most of our local communities, particularly those in small
metropolitan and rural regions, would not be able to package
infrastructure and development deals.
Increased funding would allow our EDDs to more aggressively
pursue regional job creation strategies, comply with EDA's
significantly expanded program mandates and ensure underserved
communities across the Nation are better positioned to overcome
a new generation of obstacles brought on by global economics.
Third, Madam Chair, we urge Congress to strengthen local
control of EDA's revolving loan fund program. The RLF program
is one of the most successful and powerful economic development
tools for addressing the credit needs in distressed and
underserved areas.
RLFs are managed by public and private nonprofit
organizations to further local economic development goals by
lending their capital and then re-lending funds as payments are
made on the initial loans. Locally managed RLFs have provided
business capital to thousands of new and existing companies
that have difficulty securing conventional financing. Over the
years, EDA has provided grants to more than 500 RLFs with net
assets approaching $850 million.
EDA's RLF program has a unique distinction of being the
only Federal grant program that never loses its Federal
identity. The initial RLF grant and any income or interest
derived from it is considered Federal property. RLF operators
are forced to continually comply with expensive and burdensome
reporting and audit requirements in perpetuity.
Ownership of EDA's RLFs should be fully transferred to the
local intermediary once all of the initial funds have been
loaned out, repaid and fully revolved. In some cases, RLF
intermediaries have been operating their EDA funds for more
than 30 years, yet they still need to comply with an ever
changing list of EDA requirements and paperwork.
Finally, Madam Chair, we believe there is a need to provide
stronger and broader incentives to foster regional
collaborations and partnerships among local governments,
private sector, educational, nonprofit and philanthropic
institutions through the national network of EDDs. While the
2004 reauthorization bill established 2 new performance award
programs, these initiatives are very limited in scope and have
demonstrated minimal impact. EDA would benefit from much
broader and more aggressive policy incentives and approaches
related to regional economic collaboration similar to the
Agency's former EDD bonus program.
In closing, Madam Chair, EDA is an agency with outstanding
performance, especially for its modest size. As clearly
demonstrated in the new Grant Thornton study, EDA is an
efficient and cost-effective agency that has earned its
reauthorization. As a regional economic development
professional, EDA is an important and unmatched partner in
resource for my region in Iowa.
Thank you again for the opportunity to testify, and I would
welcome any questions or comments. Thank you.
Ms. Norton. Thank you very much, Ms. Juon. That was brief
and to the point.
Mr. Coleman.
Mr. Coleman. Good afternoon. Chairwoman Norton, Ranking
Member Diaz-Balart and members of the Committee, thank you for
having me here today to testify.
My name is Denny Coleman. I am the President and CEO of the
St. Louis County Economic Council and also Secretary-Treasurer
of the Board of the International Economic Development Council.
I am speaking here today on behalf of IEDC, the world's
largest membership organization serving the economic
development profession. We are a not-for-profit organization on
the front lines of helping economic developers, from public to
private, rural to urban, local to regional and even
international, do their jobs more effectively.
Our members are currently faced with the greatest economic
challenge in decades, and they have communicated clearly to us
the urgent and necessary role that EDA plays in helping them
confront the local downturns in their economies, the
diminishing jobs, the struggling small businesses and the high
rate of foreclosures.
I am here to share with you the vital role the Economic
Development Administration plays in aiding distressed
communities rebuild and revitalize their local and regional
economies and to express the support of the International
Economic Development Council for the bill before you
reauthorizing EDA through 2013.
You have heard many statistics here today, and you know
them well, on EDA's national successes. What I would like to
do, if you will allow me just a moment, is talk about what EDA
has meant to my home town of St. Louis.
I have been in this profession for 34 years, at my current
job with the Economic Council of St. Louis County for 19, and
we have had extensive experience using EDA resources.
EDA has been a partner in helping us expand our
international trade capability through the World Trade Center,
St. Louis. It has helped us spawn entrepreneurship through our
St. Louis County Enterprise Centers, and it has helped develop
and commercialize technologies. It also helped us train
impoverished youth for careers in growth industries through our
Metropolitan Education and Training Center.
More recently, EDA has awarded $1.7 million to help St.
Louis develop as the Midwest hub for U.S. and Chinese commerce,
increasing our exports to China and creating new jobs in
communities throughout the Midwest.
Obviously, St. Louis County and our region are not the only
recipients and those receiving help from EDA. From Aurora,
Colorado to Albuquerque, New Mexico to New Orleans, Louisiana
and communities throughout our country, EDA has assisted in
making targeted discrete investments in projects that have
really helped communities attain creative economies for the
economies of the future.
I would like to finally share with you a few thoughts about
recommendations for EDA.
I would like to say that we think there is enough money in
the system. There isn't. Just in St. Louis County, we have
ready projects to be built that would utilize one-third of all
economic stimulus monies allocated for the Nation. These are
projects in international trade development, technology
commercialization, entrepreneurship and others. So, funding is
very important throughout the entire gamut of the programs
available through EDA.
And just a few other suggestions in addition to monetary:
EDA should revisit its criteria for distressed communities.
Virtually every State in the Union is in recession. We believe
that is distress criteria enough. EDA should lower or waive
matching requirements by communities, particularly during the
next three to five years as we rebuild out of this economic
crisis.
EDA needs to be reinvigorated with resources and staffing
sufficient to wisely invest and manage these crucial funds. As
Chairman Oberstar said before, just the EDRs that used to be
available to us in each and every State were tremendous
technical assistance.
And, finally, EDA needs to do more to support regional
initiatives. We recognize at the regional level that economies
do not respect local political jurisdictions, and therefore we
would like to see EDA support initiatives that foster regional
coalitions of economic developers around critical technology
clusters and new innovative business ideas.
In conclusion, on behalf of communities around the Country
working hard to stay competitive in this challenging global
economy, I urge you to reauthorize the Economic Development
Administration for another five years, and we look forward to
partnering with EDA to generate and retain jobs and stimulate
commercial and industrial growth.
Together, we build strong communities. Together, we build a
stronger America.
Thank you very much.
Ms. Norton. Thank you both very much.
Let me proceed first with the mention you just made, Mr.
Coleman, of decreasing the match. You heard me ask that
question about decreasing the match, the 50 percent match. You
heard me ask that question, and you heard the EDA
representatives respond that they, in fact, do this on a case
by case basis.
Is this being done today, and on a case by case basis what
would that mean in your region and in others?
Mr. Coleman. Well, EDA has been very responsive to our
needs to date, to be as flexible as possible within the laws
allowable.
Ms. Norton. So they are already doing it, you think?
Mr. Coleman. They are being very helpful to try to do that.
I would just suggest that in this particular economic
crisis we do that just across the board and increase that
flexibility.
Ms. Norton. So do you think case by case essentially means
when they look, they are going to see?
You know some of these are in very much richer States than
others, even though the part of the State has a very poor
region in which it has not chosen to invest. Because of the
great need, it would be plowing so much of its resources there.
Are you suggesting that, and this is what we really need to
know from you and Ms. Juon, is the case by case basis, which is
perhaps a standard of due diligence, producing the kind of
results you think it should in an economy like this?
Mr. Coleman. To date, we would have to say that the
responsiveness of EDA has been excellent in that regard. But,
as we move forward with a deepening recession and more job
cuts, we would like to make sure that flexibility remains.
Ms. Norton. So what has it been up until now, Mr. Coleman?
Mr. Coleman. Pardon me?
Ms. Norton. What has it been up until now? Do they
eliminate it? Do they reduce it from 50 to something else? Give
us some sense.
Mr. Coleman. What we have typically seen is they have made
sure that when we are eligible, that our projects are shifted
from grant matches of 50 percent to the 25 percent, from public
works to economic adjustment assistance, from flood recovery
matches to economic adjustment assistance. So they have had
some degree of flexibility, and they have done that.
Ms. Norton. Usually, when we see an agency, they know that
if they did something like across the board they would also
have to answer to us on what was the basis for that.
I must tell you I would have a hard time. I have a hard
time seeing how rich States come up with the match, but you see
we required it, and I am not sure there is any relaxation of
that in the States on the match in terms of the match, for
example, for the funds that we released. I am not sure that
there is that flexibility.
Now when you ask for an increase in funding and it is not
for jobs, I have to ask you about the increase. NADO wants an
increase in planning grants, pretty substantial, from $27
million to $34 million. What would be done with that increase?
What is being done now with the planning grants, Ms. Juon?
Ms. Juon. Yes. The planning grants are used to fund the
capacity, the staffing at the local level to work with the
businesses, with the communities, with the organizations to
help them package the program that works for them for the job
creation goals. Over the years, the requirements to have the
capacity to provide that staff assistance have increased, and
we have not been able to keep up with the staffing that we need
that has that expertise to provide the assistance to those
communities.
So, primarily, it is a staffing issue. While this may not
be appropriate, we have not had an increase in many years, and
so our ability to staff and provide the staffing and expertise
necessary has lagged behind. It is hard to keep up.
Ms. Norton. I will tell you why this doesn't fall on deaf
ears. We are going to put money out there without the staff to
do the necessary work to help communities who, after all, are
disempowered communities in the first place, who don't have the
expertise on the ground or else they wouldn't need us. If we
are going to put the money out there without the staff, I
wonder if that isn't penny-wise and real pound-foolish.
Everybody wants more staff, but I must say when we heard
that reduction in the EDRs we were flabbergasted. So we are
looking very closely at these agencies which have been bled of
the necessary staff precisely where you think they would be
most needed.
Mr. Coleman, when I hear the word, FEMA, you will always
catch my eye. You mentioned the difficulty your region has had
recovering from the 1993 floods and the 2008 floods. So I would
like to know what role FEMA played in your recovery and whether
the EDA programs fit with the FEMA role and what suggestions
you would have in that regard.
Mr. Coleman. Well, our agency had very little direct
relationship with FEMA. FEMA was obviously involved in
rebuilding levees, but EDA helped us rebuild our economy.
EDA was there to help with small business incubator
development in two of our flood-impacted communities.
They were also there to help us mitigate the effects of
sort of the manmade catastrophe that hit us with the defense
downsizing. We lost 27,000 jobs out of one company, McDonnell
Douglas, and 60,000 jobs in the defense industry, region-wide.
EDA was there to help us across a broad spectrum of programs
that helped us diversify and strengthen our regional economy.
So, FEMA obviously is there to help rebuild certain aspects
after a flood, but EDA really is the only agency we were able
to turn to from economic development perspective.
Ms. Norton. Well, of course, FEMA is not there for that
purpose.
Mr. Coleman. That is correct.
Ms. Norton. The baton handoff role, was it appropriate as
far as you are concerned, so that when FEMA got through it
seemed that you were ready to do with the EDA programs what was
necessary?
Mr. Coleman. Madam Chairwoman, from our perspective, we
dealt directly with EDA. Other elements of county and State
Government dealt with FEMA in terms of that piece of the
recovery, but we dealt directly with EDA in terms of the flood
recovery and also with a consortium of Federal agencies: EDA,
the Department of Labor and the Office of Economic Adjustment
in the Pentagon for the defense industry cutback conversion
projects.
Ms. Juon. Chairwoman Norton?
Ms. Norton. Please.
Ms. Juon. May I address that as well?
Again, I am from Northeast Iowa. We were hit severely in
the flood of 1993, floods of 1999 and, most recently, the
floods of 2008. Because we represent 60 cities in 6 counties,
we have worked very directly with FEMA on behalf of our cities
and counties. FEMA has been fantastic in coming in and
providing assistance, whether it is personal assistance in the
housing arena or whatever the assistance, infrastructure.
Right now, we are going through the process of determining
the buy-out. So it hasn't been completed. FEMA is very much
still present in our area, and we are working with them very
actively including in their long-term recovery planning
process.
What I will say, though, that has been so critical with
EDA's support, we received $300,000 from EDA to fund 2 full-
time staff positions for 2 years as flood coordinators. These
positions have been critical because there are so many
organizations coming in to help our cities and counties, and
yet no one is there to coordinate.
Even FEMA, whom we have enjoyed working with, has so many
contractors, and the contractors don't communicate to each
other. And so, we have provided through our EDA funding that
communication link that even FEMA appreciates.
So we have been that glue that kind of holds all the
different organizations, whether it be FEMA or SBA, whoever.
The EDA has definitely come in through these funding positions
to help bring all of those tasks together.
Now we have been awarded an RLF from the disaster recovery
program, and that will go that next step beyond what SBA has
done, beyond what HUD is doing. If we are going to have a focus
of helping the businesses recover that were most directly
impacted by the flood but then, beyond that, just building the
recovery, as Mr. Coleman talked about, EDA has been critical.
We have worked with FEMA. It has been a great opportunity.
But EDA has, again, been the one to bring all the resources to
the table and help everyone understand everyone's role.
Ms. Norton. We understand. I mean I don't want to leave the
impression that we believe FEMA should have. We are just trying
to meld our understanding of what FEMA does with our
understanding of what EDA does.
I want to ask Mr. Cao for any questions he may have.
Mr. Cao. Thank you, Madam Chair.
It seems to me that based on your testimony that Federal
agencies are not communicating with each other in order to work
with each other to rebuild a devastated area, and I can assure
you I can use New Orleans as an example.
It seems to me that there is very little EDA presence in
new Orleans, post-Katrina. The issues that we have dealt with
are more specifically FEMA-related issues.
When the Nation is faced with the devastation of the size
of Katrina, it seems to me that Federal agencies should
communicate and work with each other in a unified way in order
to address many issues in the rebuilding process. Three and a
half years after Katrina, most of the Second Congressional
District is still very much devastated and lacks the economic
development that the area requires.
Are there any conversations between your agencies--when I
am talking about your agency, I am talking about EDA and FEMA--
or maybe other Federal agencies to have a more concerted effort
to help these areas? Rather than, you doing your part and then
FEMA is doing their part and then at the end we don't really
have a comprehensive plan. There is really not a focus, a path
to direct and to lead these communities out of their problems.
It seems to me that the Federal agencies are just doing
patchwork, and the pieces aren't fitting together. There is a
lack of focus, a lack of direction, and oftentimes the
devastated communities they are left to themselves with respect
to where are we going to go from step one to step two.
Can either of you elaborate on that?
Mr. Coleman. Sure. Congressman, you make several good
points. I will respond to two of them at least.
One is in terms of EDA's response to the Gulf Coast, I was
privileged to be part of an IEDC team, the International
Economic Development Council, from across the Country that was
sent to New Orleans, post-Katrina, to actually aid in the
economic development planning to create a new agency, a public-
private agency in the City of New Orleans that would really
direct its economic recovery not only in the short term but the
long term. And I know EDA has made several grants both to the
State of Louisiana and New Orleans for some implementation
projects as well.
So I believe EDA has been responsive both in terms of
direct financial support and technical support through IEDC for
New Orleans and the entire Gulf coast.
I would add that, to your point about Federal agency
collaboration, as I alluded to before, OEA in the Defense
Department played that role during the defense adjustment era
of the early and mid-1990s for us.
As Chairman Oberstar mentioned, it appears to me that EDA
is primed to take that role on behalf of the Federal agencies,
dealing across a broad spectrum of issues facing the Country
right now, be it flood recovery in the Gulf Coast or through
the spring floods in the Midwest or just the overall economic
crisis that faces our country and our communities.
OEA played sort of a quarterbacking role for us, dealing
with the Department of Labor, SBA and other agencies that we
needed in a coordinated fashion in our regions. We dealt with
the issue of trying to get out of our silos at the local level
so that we could cooperate and really bring resources to bear
where they were most needed in our communities.
It would be extraordinarily helpful to the local
communities if the Federal Government agencies would also work
to get out of their silos, and I think that will only happen if
we have a strong agency with the full backing of Congress and
the Administration helping to lead that charge on our behalf.
Ms. Juon. I totally agree with Mr. Coleman's comments, and
I would like to add that, at least through our three
experiences with disasters, EDA has been the only agency that
has come in that totally recognizes the need for all of the
different responders to work together.
I would remiss if I didn't mention that not only this last
time, in response to the disaster of 2008, EDA funded our
agency personally for two full-time staff for two years. But
they also were the only one that had the foresight and perhaps
the vision to realize the State of Iowa needed the same type of
coordinating funds, and they awarded $3 million to the State of
Iowa to create what has now become the Rebuild Iowa Office. It
has staff people from all of the different State and Federal
agencies come in and work together and have joint meetings
where they try to address what each agency is doing, identify
the gaps, identify the needs. Again, that was through the
vision of the EDA.
Mr. Cao. Now I am thinking about a coordinating agency. Do
you think that we need an agency out there to coordinate EDA,
FEMA and all those other agencies in order to assist them in
working together to rebuild a devastated area because my
experience with the Federal agencies has not been a positive
experience?
It just seems like it is up to the Congressmen to push this
agency to do its part and then to go back and to try to address
these other agencies to do their part and get them to the table
and talk. So is it up to the Congressmen to be this coordinator
or should there be an agency to overlook this whole process?
Ms. Juon. I am sure we both have responses. I think it
depends perhaps on the agency. It depends on their mission.
What we found is that some agencies that come in to help
assist in the recovery from disaster, their mission isn't
disaster recovery, and so their programs are not necessarily
geared. I am thinking especially about HUD. It is real hard to
take a program that is not designed for disaster and try to
make it respond to a disaster. So that is a whole other issue.
But if you talk just about who should help coordinate all
the difference agencies? EDA is doing that to some extent,
whether by Federal directive or just the national vision.
Whether you need to have another agency created to do that?
I wouldn't address that, but I would say in the absence of that
EDA is attempting to do that.
Mr. Coleman. I would respond in two ways.
One is I don't think there is ever a substitute for an
informed, involved Congressman or woman dealing with helping
local communities deal with Federal agencies.
But in terms of a coordinating role, I don't think we need
a new agency so much as we need a lead agency, and I think that
can work as long as Congress and the Administration designate
that agency very clearly and that is accepted and understood by
the other Federal agencies involved in our recovery efforts.
Mr. Cao. Thank you very much.
Ms. Norton. Thank you very much, Mr. Cao. This is something
we will look at in the reauthorization.
The problem that Mr. Cao has is FEMA is still there. We are
looking at when FEMA is still there they are having trouble.
You were post-FEMA, but they are having trouble
coordinating, and we are now working on a way to break a
funding stall of over $3.4 billion that they can't agree on how
to spend. Imagine if EDA had that money.
Just two more questions. How do you think the stimulus
money that we provided EDA should be spent?
Have you been contacted to give any aid and assistance?
Ms. Juon. My understanding through our EDD is that the
money is going to be spent in the typical manner. It is going
to go out through the normal channels.
We have been asked and were asked several months ago to
submit to EDA projects that were at that time shovel-ready,
ones that we thought already had the design work ready, were
ready to go, and so we have already submitted projects to EDA,
region and on to headquarters.
Ms. Norton. To spend this money in particular?
Ms. Juon. Absolutely. My understanding is EDA has compiled
a list that is in excess of the $150 million that they have
available. We know in our area we have projects ready to go as
soon as we get the word and go through the process and get that
authorization.
Ms. Norton. That is very heartening to hear because we
didn't hear that specificity in prior answers.
I need to know whether you have looked at the job creation
element as well.
Ms. Juon. That is always a part of every submission.
Ms. Norton. Here, we are instructed to maximize job
creation.
Ms. Juon. Absolutely.
Ms. Norton. Everything you do is to create jobs. So that is
a given.
But I am sure the President has to calculate from each
agency. For example, I know in my own community I know
precisely how many jobs, the whole kit and kaboodle. I have a
huge economic development matter going on, precisely how many
jobs. They don't know if that will come to being.
I don't know why EDA should have any less of a standard.
Not, are there some jobs? There better be. But how are you
maximizing the number of jobs that will come out of this money?
Ms. Juon. I think that will be part of the EDA review
process, I am assuming, especially since they have had more
projects submitted than dollars available to fund. They will
take the most competitive, the ones that do have the highest
number per dollar of jobs created.
Ms. Norton. We have asked them to make sure they make us
understand that, and I would ask you to keep that in mind as
well.
Ms. Juon. Absolutely.
Ms. Norton. Let me ask you one more question, and this is
about regional collaboration. It is akin, I guess, to the whole
notion of coordination but particularly important.
One of you testified, I am not sure which one, about
incentives to reward regional collaboration, funding
incentives, et cetera. What do you have in mind? By regional
collaboration, what do you mean precisely?
Mr. Coleman. Well, regional collaboration from our
perspective, I will give two examples.
One is a recently funded EDA effort to help the St. Louis
area become the Midwest China air cargo hub for the Midwest and
for China. We have, with EDA's assistance, now organized a
bipartisan public-private across-the-board effort that has full
regional support to bring a new air cargo hub to the St. Louis
area but one that would not just serve St. Louis but would
serve the entire State of Missouri and the Midwest because of
the fact that we believe that China is ripe for exports from
the Midwest in particular to fill the need for products and
food sources to the Chinese people.
Through EDA's help, we were able to put together this
regional collaboration. We are the lead agency for the grant,
but that grant serves a much broader purpose.
What we have emerging is another proposal which we hope
will get funded to take advantage of the critical technologies
in plant and life sciences across a very broad spectrum of
users of existing EDA grants in facilities but to bring another
stool to that chair of money, facilities, science as well as
management that would help us commercialize these great
technologies that are coming out of our medical schools and out
of our Danforth Plant Science Center for jobs for the future.
By just one example, the Danforth Plant Science Center has
a focus on creating biofuels out of plants, a renewable energy.
If we can receive funding to help commercialize and expand that
technology, we will do the Country a great deal of good through
making ourselves more energy independent, but we will also
create jobs in our community--not just high-tech, high-paying
jobs but the technical assistance and technician jobs that we
plan to create through our community college system.
So those are the kinds of regional collaborations that we
plan.
Ms. Norton. Well, that is something that we intend to
endorse and encourage.
State lines don't mean anything. County lines don't mean
anything anymore. If you have a technology center in Fairfax,
it is going to help the District. If the District has a tourist
attraction, some of the hotels will be. Of course, it is the
great tourist monumental attraction in the Country, Virginia
and Maryland. So this notion about regional collaboration is
one that is of great interest to us.
On your biofuels, we quickly need somebody to help the
Midwest. We did this because we encouraged this in our own Farm
Bill. Get to some biofuels that don't have people driving on
corn and essentially putting the price of food now beyond much
of the rest of the world just because we now have found a
profitable way. It is a terrible thing, and we just didn't have
any foresight.
Let me thank you for your very important testimony to us.
Before I call the next witnesses, I want to make sure. We
have very important witnesses from particular commissions. Now
this is what hearings are all about.
I have a meeting with the Speaker at 1:00, and the
Committee is on the floor now with bills. So, at the moment, we
don't have anyone to hear the witnesses.
I am going to call a recess until we can get some of our
members off of the floor to come in because the testimony that
I, myself, frankly, have been particularly anxious to hear and
will probably miss some or all to come needs to go on, but you
need to have a member here who can guide the rest of the
hearing.
So this hearing is in recess.
[Recess.]
Ms. Markey. [Presiding.] The Subcommittee is reconvened.
I would like to introduce the next panel starting with
Lawrence Molnar, Director, Economic Development Administration
University Program, University of Michigan; Robert Clark,
Executive Director, Northern Maine Development Commission;
Carolyn Dekle, Executive Director, South Florida Regional
Planning Council; and Jonathan Sallet, Former Assistant to the
Secretary and Director, Office of Policy and Strategic
Planning, U.S. Department of Commerce.
We will start with Mr. Molnar.
TESTIMONY OF LAWRENCE A. MOLNAR, DIRECTOR, ECONOMIC DEVELOPMENT
ADMINISTRATION UNIVERSITY PROGRAM, UNIVERSITY OF MICHIGAN;
ROBERT CLARK, EXECUTIVE DIRECTOR, NORTHERN MAINE DEVELOPMENT
COMMISSION; CAROLYN DEKLE, EXECUTIVE DIRECTOR, SOUTH FLORIDA
REGIONAL PLANNING COUNCIL; AND JONATHAN SALLET, FORMER
ASSISTANT TO THE SECRETARY AND DIRECTOR, OFFICE OF POLICY AND
STRATEGIC PLANNING, U.S. DEPARTMENT OF COMMERCE
Mr. Molnar. Thank you.
I am speaking for the University Center Program funded by
EDA.
At a time of national economic stress we need all the tools
we can muster to help turn our businesses and communities
around. Across the Nation, the impact of the current crisis is
having a huge impact on families, jobs in cities, large and
small, nationwide.
One of the tools in our arsenal is the EDA University
Center Program. This nationwide network of 50 centers has
served our Nation well for over 30 years. Our goals are simple:
to work with local economic development organizations, local
units of government, private sector companies and regional
organizations to foster economic and business development.
It is the sole federally-funded system to support the U.S.
higher education system's role in economic development.
The diversity of the University Center Program is its
strength. By understanding the unique character of its region,
each University Center can respond directly with specific
assistance tailored to meet the needs of that region.
The National University Center has tremendous promise to
help achieve economic recovery, and the program would be
greatly enhanced and expanded with just four modest changes.
Number one, increase the number of centers so that each
State has at least one center. We would like to see one in each
State. There is one place that is not a State but would like
one too, and that is the District of Columbia.
We would like to increase the amount of funding for the
University Center program to $15 million annually.
We would like to reduce the local match from 50 percent to
respond to the unprecedented local fiscal stress and that of
universities.
And we would like to restore the peer review performance
evaluation that was established by Congress in 1998. Currently,
there is a competition every three years. So University Centers
aren't sure of their funding beyond that three-year funding.
None of the other federally-funded local assistance programs
such as trade adjustment assistance centers, small business
development centers, manufacturing extension partnerships,
Economic Development Districts face such frequent competitions.
I would like to add that the University Center programs
have a diverse range of projects. On my own campus back at the
University of Michigan, an example is that we are teaming with
several other university centers in Ohio and Indiana to help
communities in our region that are suffering from the loss of
automotive-related manufacturing plants.
When we learn of a plant closing, we immediately begin
working with local authorities to put together a plan to help
them organize their response. We help point local officials to
Federal and State resources to deal with the immediate fallout
from the lost jobs and help create its strategic plan for how
to begin looking for new jobs for that community, so they can
respond to the adverse economic and social effects of these
major plant closings.
I would like to close by saying the University Center
program, while small, has accomplished a tremendous amount over
the years. But now that the Nation faces the biggest economic
challenges it has seen since the Great Depression we would urge
you to keep the program strong, to enhance it by increasing
funding modestly to meet these increasing challenges.
There is tremendous potential in our system of higher
education to help this Country come back and to use the
research, the expertise, the experience and the tremendous
investment that this Country has made in the higher education
system and leverage that in this time of economic need.
We certainly support the reauthorization of EDA. They have
been an excellent partner over the years.
I thank you for the time and would answer any questions if
you have them.
Ms. Markey. Thank you very much.
Mr. Clark.
Mr. Clark. Thank you, Madam Chair pro tem and members of
the Subcommittee, for the opportunity to testify today in
support of a multi-year reauthorization bill for the U.S.
Economic Development Administration.
My name is Robert Clark. I serve as Executive Director of
the Northern Maine Development Commission, a multi-disciplinary
regional planning and development organization serving all 71
communities in Northern Maine. Our organization is the EDA
Economic Development District for the northern portions of our
State.
EDA has been an invaluable funding source for the Northern
Maine Development Commission and our local government,
business, education and nonprofit partners.
This morning, I would like to highlight a few recent
projects that demonstrate how we use EDA's comprehensive
economic development strategy process, facilitated by our
annual EDA planning grant of $54,000 to identify and implement
regional and local economic development projects.
In the Town of New Limerick, EDA played an instrumental
role in deploying the energy infrastructure, equipment and
power needed for a major employer to expand its current
operations while also launching a new innovative product line.
The Louisiana Pacific Corporation originally targeted at least
four manufacturing facilities around the world before deciding
to use its Northern Maine plant to maintain its existing
Oriented Strand brand product line as well as to introduce
SolidStart, a new laminated strand lumber building material
that is consistently straight, weather resistant and of higher
strength than conventional lumber.
There are many noteworthy outcomes to this one project.
First, our rural region needed EDA's matching funds to make
this project a reality. New Limerick is a small town located
near the Canadian province of New Brunswick. The town has only
523 residents with Houlton, a relative small town of about
5,000, serving as the closest economic hub about 10 miles away.
It would be almost impossible for this very rural town to
afford the cost of this infrastructure project without EDA's
gap financing.
Second, the project leveraged a $104 million investment by
LP Corp that was not guaranteed to occur within our region or
even within the United States. In fact, the company retained
and expanded its facility in New Limerick while closing three
other plants and moving part of its operations to a facility in
South America.
Third, EDA's investment of $1.1 million helped our region
keep 111 jobs at the existing LP Corp facility with an annual
payroll of $6.6 million. In addition, the company created 39
new jobs with pay rates significantly above the per capita wage
for the area. The company received more than 1,900 applications
for these vacancies, reinforcing the fact that these are high-
quality in-demand positions within our region.
In 1994, the Loring Air Force Base in Limestone, Maine was
closed, resulting in the loss of 1,100 civilian personnel,
4,500 military personnel and countless other dependents of the
base. Despite this major setback and the impending skyrocketing
of the area's unemployment rate to as high 15 percent, the
people of Aroostook County refused to give up.
With help from EDA and other partners, the Air Force base
was envisioned as a vibrant and successful economic hub. Today,
the former base serves as a vital commercial, industrial and
aviation park with over 20 new employers and more than 1,300
employees. Most importantly, many of the companies located on
the campus are pursuing cutting-edge products in aerospace,
agriculture, energy, finance, health care and technology
industries.
Like many of my EDD counterparts, the Northern Maine
Development Commission also manages a portfolio of business
lending programs including EDA's RLF program. Our EDA revolving
loan fund targets new and existing industrial, manufacturing
and tourism businesses as well as agricultural businesses
involved in manufacturing activities.
Today, we have more than $1.3 million in our EDA RLF
program. Over the years, this program has created 1,619 new
positions and saved 1,917 jobs in our region. We have closed
loans totaling more than $12 million and leveraged more than
$69 million in private and public sector financing.
As we move forward to recover from flooding in 2008, we are
now working to secure additional EDA assistance for vital water
and wastewater infrastructure needed to support local
businesses.
The business district in Fort Kent, for example, was
devastated by the floodwaters with over 75 percent of local
downtown businesses forced to close their doors for up to 3
weeks. According to local town records, over 600 jobs are
temporarily affected by the flood. While many employees have
returned to work, the future of some local jobs remains
uncertain.
What remains is for the town's infrastructure to be
repaired and upgraded to a condition that would minimize or
hopefully prevent a similar flooding event in the future.
In closing, Madam Chair pro tem, EDA is an agency with a
proven track record, and it has the program tools, the
partnerships with regional and local practitioners and targeted
mission to succeed.
The agency has earned its reauthorization, and the
communities served by the Northern Maine Development Commission
can attest to its importance and value. We believe it is a
Federal agency that is incredibly cost-effective, performance-
driven and tested over time.
Thank you again for your time and consideration.
Ms. Markey. Thank you, Mr. Clark.
Ms. Dekle.
Ms. Dekle. Thank you, Madam Chair pro temp and members of
the Subcommittee. We appreciate the opportunity to speak today
on the performance and the results of the United States
Economic Development Administration.
I am very pleased to express our organization's support for
a multi-year Economic Development Administration
reauthorization bill. We hope it maintains the agency's current
mission and program focus with perhaps only modest program
reforms and updates as needed.
My name is Carolyn Dekle. I serve as Executive Director of
the South Florida Regional Planning Council.
We are a multipurpose regional planning organization
governed by a 19-member board of directors comprised of local
elected officials, governor's appointees and ex-officio members
representing Broward, Miami-Dade and Monroe Counties. Our
organization has served as an EDA-funded Economic Development
District since 1993.
In addition to our involvement in EDA's planning, business
development finance and infrastructure programs, the Regional
Planning Council is involved in a broad range of issues such as
reviewing and approving regional impact review projects,
looking at brownfields redevelopment and cleanup, coordinating
emergency preparedness plans and assisting local governments
with a variety of regional and local comprehensive planning
issues, and we are pleased to manage a development revolving
loan fund program for local entrepreneurs and businesses.
The Economic Development Administration is an invaluable
partner for our three-county region. While our region has had
and does have many areas of great wealth, we also have large
pockets of poverty and distress both in our major urban
centers, which many of you are familiar with, but also our
surrounding rural and agricultural areas. In fact, Miami-Dade
County has the highest unemployment and poverty rates,
historically, than the Florida and many national averages.
We very much encourage Congress to develop and adopt a
multi-year reauthorization measure for EDA which maintains the
agency's core mission and program tools. While expanding its
funding base, we also hope to see flexibility and strengthening
of its partnership with its national network of Economic
Development Districts, which, as I said, we are one.
We also hope restoring the local cost-share requirements
for projects to a minimum, to the pre-2005 distress rates, that
there will also be greater financial flexibility for many of
our organizations.
I would like to focus my remarks primarily on an innovative
project that the South Florida Regional Council has undertaken
along with our EDA partner in the Atlantic Regional Office, and
this is one that revolves around managing operations for a
regional revolving loan fund program.
Our project offers timely case study on how the agency can
work with RLF intermediaries, obviously, including the Economic
Development Districts, to dramatically improve the results for
the RLF programs that exist today. This program has become an
invaluable economic development tool for our local firms and
entrepreneurs who are struggling to access traditional credit
markets.
The Economic Development Administration program requires
significant organizational capacity and professional knowledge
which we have been able to bring to the table and have helped
invigorate this program and in fact have realized great gains.
Today, the combined funding for the four RLFs in our region
is $8.2 million. We are actively using these funds to create
new jobs and to retain jobs within our region, and we believe
that this is important particularly in this time of economic
challenge.
In recent years, we have helped retain and create more than
1,200 new jobs while assisting more than 54 small businesses
with seed capital and gap financing, and we have loaned out
more than $9.4 million at this point which has leveraged more
than $17 million in additional public and private sector
investments.
One of the big success stories within our region is an
industry called Leasa which is one of the largest manufacturers
in the Country of beans and alfalfa sprouts, and their products
are sold throughout our region and around the Country. These
monies have been primarily been made possible through the
Economic Development Administration's participation.
Again, we support continued expansion of EDA's abilities
and resources for small businesses.
And, in closing, I would just like to thank you again for
supporting the Economic Development Administration. The
planning dollars are critical, the training which has been
provided is essential, and we have been proud to be a part of
both of those initiatives.
Green industries and businesses will continue to be one of
the primary areas we look to as we move forward in the future.
Again, we thank you for your support, and I welcome any
questions or comments you might have.
Ms. Markey. Thank you, Ms. Dekle.
Mr. Sallet.
Mr. Sallet. Thank you, Madam Chair.
The testimony I give today derives out of work I am doing
with Silicon Flatirons, which is the think tank at the
University of Colorado Law School on innovation policy. I want
to take a minute to focus not on what EDA is, but what we think
it can become. In other words, I think it is time for EDA to
become an Economic Renewal Administration that focuses on the
creation and support of regional innovation clusters.
We know what has to be achieved--innovation, business
growth, economic prosperity--and, of course, we need to focus
on the future of U.S. competitiveness. But how do we do that?
Well, there is considerable literature that has been
created over the last two decades, pioneered really by
Professor Michael Porter of the Harvard Business School, and
what it tells us is this:
When we look at national competitiveness, the key unit of
competitiveness is not really the Nation. It is not a
particular sector. It is not a specific firm. It is really
regional geographies that have clustered together a set of
advantages, shared among firms, colleges, universities,
research facilities, and other non-profits, that can spur
innovation and growth.
We know this: Silicon Valley, movies in Hollywood, life
sciences in Massachusetts, the now stressed clusters of
automobile manufacturing in Detroit or financial services in
New York or Boston.
What we know now is that successful clusters can drive
productivity, create knowledge and innovation, and--it is very
important--help develop pools of employees with the specialized
talents that local businesses need.
What does that do? It lowers the cost of capital to
businesses, it increases the ability of new business to begin,
and of course, it gives workers a trajectory to success.
Really, one could think of a successful cluster as somebody
operating with this slogan: ``Innovation, Collaboration, Value
Creation,'' and, of course, more jobs.
So the advantages that are shared: You might have
specialized workers like the boat builders in Maine. You could
have research facilities, such as biotech hospitals, that work
with firms as in Massachusetts. You could have manufacturing,
as in the Midwest where community colleges train their workers
for the advanced manufacturing jobs of the future--anything,
really, that creates what an economist would call: a positive
externality, which is just a benefit not accruing to a single
firm but to a community at large.
Now what is interesting, and I think a little dismaying, is
that although State Governments around the United States have
been working on cluster initiatives and although our foreign
competitors, nations around the globe, are adopting cluster
initiatives in Europe, Asia, and Canada, the one entity that
has not done this is the United States government.
At a time of unparalleled economic need, my suggestion is,
and this is in concert with the President's fiscal 2010 budget
which makes a similar recommendation, that the authorization
bill that you are authoring should, for the very first time,
give a Federal agency, the EDA, a specific task of working with
regional clusters which are bottom-up, which are industry-led
and which therefore can be very effective.
EDA ought to do that by setting a set of criteria to
provide matching funds to the very best of the clusters.
What might that be? We want clusters that will move fast
with significant job creation, that will rely on public-private
partnerships, and that have a proven track record, very
importantly, that integrate distressed areas into regional
economies. Instead of just looking at distressed areas as if
they were standalone_how can they join with their neighbors,
their geographic neighbors to build economic strength?
Also, we ought to look to see how clusters can help us
achieve great national challenges: energy independence, health
care, revival of manufacturing, and life sciences.
In this way, the Federal Government can facilitate regional
leadership in a way that I believe would be very effective and,
I should say, can help make other Federal programs in the
Department of Commerce and throughout the Executive Branch much
more effective by aligning them not in stovepipe fashion_
isolation_but directly to the regional needs for a
competitiveness strategy.
This is why I believe regional clusters should be a
cornerstone of turning the EDA into an Economic Renewal
Administration for the 21st Century.
Thank you.
Ms. Markey. Thank you all very much.
I would like to start with some questions right now.
Mr. Molnar, if the Committee were to consider the peer
review suggestion you offered in your testimony, how would that
system work, how would you appoint the peers and then, third,
are you advocating that University Centers never again have to
compete for the designation of University Center?
Mr. Molnar. The way it would work, which is how it
previously worked before the competition was instituted about
six years ago, is representative from the regional office of
EDA would part of the team, often somebody was sent in from
Washington to be part of the team, a university Center director
from a successful center outside of the region participated,
and then a University Center director from within the region
participated.
So it was a three to four-person team that went in with a
fairly consistent, set agenda, over a three-day period. The
first day was spent interviewing the staff and the director of
the EDA University Center program. The second day was spent on
site visits to clients of University Center. And the third day
was spent meeting with senior administration of the university
up to and including the president with the second part of that
third day a debriefing, recommendations and that type of thing
that were given verbally with a written follow-up.
In all of my experience, both when I was reviewed and when
I was on peer review teams, there were always things that could
be improved. So there were always suggestions about what could
be improved.
For centers that weren't meeting performance objectives and
were deficient in some areas that were serious enough, then
recommendations would be made. A time line would be imposed
upon that. If they didn't take corrective action successfully,
then the agency had the option to terminate their funding.
We think that this process is superior and more productive
than forcing every three years all the universities in the
Country to essentially have no knowledge of whether they will
have continued funding and then have to put in new proposals
and then hope that they are successful.
It is not unlike an accreditation process that a business
school or a medical school would go through to ensure that it
is meeting best practices and conforming with industry
standards, and if so then they get accredited, and they
continue to operate.
Ms. Markey. Okay. Thank you.
Another question having to do with Mr. Sallet's testimony,
how would University Centers, do you think, fit into a cluster
model, Mr. Molnar?
Mr. Molnar. Well, one of the things that universities are
very good at is exploring and doing analysis to determine where
clusters either are occurring or that could successfully be
operating. We can do analyses to see emerging clusters that
might not be apparent, to find like groups of companies or even
companies that aren't in the same industry sector that have
common procurement patterns or common material handling or
shipping where economies of scale could be gained.
So many universities do cluster analysis and look at
geographic and industry-wide analyses to identify where
clusters either exist and could be grown or have the potential
to be created.
Ms. Markey. Mr. Sallet, can you answer the same question?
How would University Centers in your opinion fit into a cluster
model?
Mr. Sallet. I think they are fundamental to it. I think if
we look at successful clusters around the Country, oftentimes
research centers and universities are tied very directly to the
local business community.
Indeed, tech transfer as a topic is very important to the
success of clusters. Too often, I think we run technology
programs at the Federal level that have not connected to the
local communities at large and particularly not enough to the
local universities. So I feel like one of the things EDA should
look at in assessing a cluster initiative is the extent to
which this is industry-led but very much created with the input
of local academic institutions, which of course are the source
of the very kind of basic research that businesses will later
be able to use.
Ms. Markey. Good. Thank you very much.
Mr. Clark, what are your suggestions for strengthening
local control over the revolving loan funds?
Mr. Clark. Good question. We have been in the revolving
loan fund business and particularly EDA for over 35 years, and
during those 35 years we have obviously filed all kinds of
reports, that sort of thing. We maintain the program in
accordance with our application, but if we could have local
control and build in more flexibility it would be of great
benefit particularly to the rural regions.
As I can speak to my rural regions, we have a very, very
many small businesses that create five, six, seven jobs at a
time. Oftentimes, they don't fit into the underwriting criteria
that is dictated. So we have to look at other forms of capital
for them, which is really pretty much nonexistent oftentimes.
So, if we could have the local control of the fund, it would
help greatly.
Ms. Markey. Thank you.
Ms. Dekle, can you answer the same question? What are your
suggestions for strengthening local control over the revolving
loan fund?
Ms. Dekle. Certainly, and I would echo the comments that
were just made. I think devolving the control of the revolving
loan fund dollars to the local, closer to the local level is
important, and I believe that could be done after the monies
had revolved one time and had met the criteria that EDA
outlines but then allowing them to reflect the more regional
issues within a particular community.
One of our what we consider big successes of our programs
has been taking ones that were in existence for prior issues.
For example, after Hurricane Andrew and then after some of the
civil disobedience issues that happened in the City of Miami,
those funds were created.
Well, time has moved forward. Those issues have changed.
Those monies now are being able to be utilized across the
region because of some of the flexibility EDA has, but some
still have some pretty firm controls around them.
I think as we go forward it would be useful in all the
revolving loan fund situations to kind of strip out the Federal
bureaucratic requirements and allow them to respond to the
needs within a region, within an area.
Ms. Markey. Thank you.
Mr. Clark, since EDA has been so successful in Maine in
creating and saving jobs, what recommendations would you make
to the Committee that would enhance the operations of EDA?
Mr. Clark. Certainly, more staff at the Economic
Development Representative level. We found particularly in New
England that one EDR could have as many as four States.
Therefore, the flow of projects going into the regional office
and then on to Washington has slowed down tremendously. So I
would think that that would be one of the first
recommendations.
The second one is always money. If we had more planning
money, we could do actually a better job. We could involve more
people, not necessarily staff, but we would have the
opportunity to involve more people from the private sector,
from other non-profits, from health care to really craft a well
thought out economic development strategy for the region.
Ms. Markey. Thank you.
Ms. Dekle, you talked a little bit about brownfields. What
examples do you have regarding brownfields redevelopment?
Ms. Dekle. We have two or three really strong examples. We
were very fortunate.
In fact, one of the people who is with me today, Isabel
Cosio Carballo on our staff, was successful in crafting the
Brownfields Economic Development Partnership that was
recognized by EPA. We have been able to work with that
partnership which includes Palm Beach County, Broward and
Miami-Dade County, to engage those communities but,
specifically, an affordable housing project that is up in Palm
Beach County.
The Leasa project that I spoke about before is a
brownfields area and has been able to utilize the expertise of
the local brownfields group in Miami-Dade County.
Broward County has been looking at a lot smaller kinds of
issues on our more infill areas. The parts of our county that
are on the East have often been where there were gas stations,
perhaps dry cleaners, other small industry types. But now we
are looking at how do we accommodate our larger population
growth, so how can we work with those areas to get them
reclaimed, so that they can accommodate population as well as
new economic enhancement.
I think the brownfields issue and just looking at all of
the range of green industry issues is a real important link for
EDA in our revolving loan programs as we go forward.
Ms. Markey. Okay. And just to follow up on that, what
incentives would you offer to grow green businesses?
Ms. Dekle. We are still in the thought process on that, but
I believe that we might want to look at giving. We have a
limited amount of resources available for our loan program, and
we might want to give additional recognition for those programs
that can meet criteria related to green industries.
We are fortunate. We have a climate change committee that
Miami-Dade County has convened as well as Broward County has a
climate change committee. I have been asked to be the chair of
both of the intergovernmental coordination committees of each
of those. So what we are going to do is work together to find
out, okay, within our region, what are the things that we want
to recognize from the business sector that are industries that
move us forward in terms of making a better footprint as we
look at the environment, as it goes forward.
I think we ought to take our revolving loan funds and try
to market them and orient them towards businesses that would be
compatible with those things, and that would be a small
example.
Ms. Markey. Thank you.
Mr. Sallet, several witnesses today have talked about basic
infrastructure as still being a top priority for EDA grants.
How do you square that need with your ideas for innovation and
incubators?
Mr. Sallet. Infrastructure is critical to competitiveness,
but it is not the only thing we need for competitiveness. So
what I would suggest is that we do a better job at the Federal
level of making sure that infrastructure investments are
connected to local competitiveness strategies. That is the way
to make sure that the right infrastructure is getting built and
will really turn into jobs and economic growth.
One way to do that, which I didn't mention in my oral
testimony, is, there may be some parts of the Country that
don't really have vibrant clusters. Planning grants for them to
start to organize collaboration can yield really important
recommendation from the regions about what kind of
infrastructure is most important to them.
And so, I think the real phrase here is that we need
integrated systems, not isolated stovepipes.
Ms. Markey. Just one more question, and then we have to go
vote. But based on that, what Mr. Sallet said, Mr. Molnar, if
there were two centers in each State as you advocate, how would
the second one be chosen?
Mr. Molnar. We think that you would have two centers that
would have different roles and responsibilities based on their
core competencies.
I know that in Michigan we had two centers for a long time,
one at the University of Michigan and one at Michigan State
University. The one at the University of Michigan, as we still
do, is very involved in due diligence and economic impact
analyses and helping with technical assistance with companies.
The one at Michigan State University was very much organized
for capacity-building, working with inter-urban areas, urban
development. We complemented each other, but we were not
duplicating roles. So I think that.
The other factor might be a geographic service area where
the one in Michigan, for me to drive to the Upper Peninsula, it
is almost 950 miles one way. And where States do have more than
one, and there are some that do, the geography determines their
service area.
Ms. Markey. All right. Thank you all very much for
appearing with us today.
That concludes the rest of this hearing. Thank you.
[Whereupon, at 1:45 p.m., the Subcommittee was adjourned.]
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