[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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