[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]
THE ECONOMIC DEVELOPMENT ADMINISTRATION:
HOW TO IMPROVE EFFECTIVENESS THROUGH
REFORMS AND CONSOLIDATIONS
=======================================================================
(112-50)
HEARING
BEFORE THE
SUBCOMMITTEE ON
ECONOMIC DEVELOPMENT, PUBLIC BUILDINGS, AND EMERGENCY MANAGEMENT
OF THE
COMMITTEE ON
TRANSPORTATION AND INFRASTRUCTURE
HOUSE OF REPRESENTATIVES
ONE HUNDRED TWELFTH CONGRESS
FIRST SESSION
__________
JULY 27, 2011
__________
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COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE
JOHN L. MICA, Florida, Chairman
DON YOUNG, Alaska NICK J. RAHALL II, West Virginia
THOMAS E. PETRI, Wisconsin PETER A. DeFAZIO, Oregon
HOWARD COBLE, North Carolina JERRY F. COSTELLO, Illinois
JOHN J. DUNCAN, Jr., Tennessee ELEANOR HOLMES NORTON, District of
FRANK A. LoBIONDO, New Jersey Columbia
GARY G. MILLER, California JERROLD NADLER, New York
TIMOTHY V. JOHNSON, Illinois CORRINE BROWN, Florida
SAM GRAVES, Missouri BOB FILNER, California
BILL SHUSTER, Pennsylvania EDDIE BERNICE JOHNSON, Texas
SHELLEY MOORE CAPITO, West Virginia ELIJAH E. CUMMINGS, Maryland
JEAN SCHMIDT, Ohio LEONARD L. BOSWELL, Iowa
CANDICE S. MILLER, Michigan TIM HOLDEN, Pennsylvania
DUNCAN HUNTER, California RICK LARSEN, Washington
ANDY HARRIS, Maryland MICHAEL E. CAPUANO, Massachusetts
ERIC A. ``RICK'' CRAWFORD, Arkansas TIMOTHY H. BISHOP, New York
JAIME HERRERA BEUTLER, Washington MICHAEL H. MICHAUD, Maine
FRANK C. GUINTA, New Hampshire RUSS CARNAHAN, Missouri
RANDY HULTGREN, Illinois GRACE F. NAPOLITANO, California
LOU BARLETTA, Pennsylvania DANIEL LIPINSKI, Illinois
CHIP CRAVAACK, Minnesota MAZIE K. HIRONO, Hawaii
BLAKE FARENTHOLD, Texas JASON ALTMIRE, Pennsylvania
LARRY BUCSHON, Indiana TIMOTHY J. WALZ, Minnesota
BILLY LONG, Missouri HEATH SHULER, North Carolina
BOB GIBBS, Ohio STEVE COHEN, Tennessee
PATRICK MEEHAN, Pennsylvania LAURA RICHARDSON, California
RICHARD L. HANNA, New York ALBIO SIRES, New Jersey
JEFFREY M. LANDRY, Louisiana DONNA F. EDWARDS, Maryland
STEVE SOUTHERLAND II, Florida
JEFF DENHAM, California
JAMES LANKFORD, Oklahoma
REID J. RIBBLE, Wisconsin
CHARLES J. ``CHUCK'' FLEISCHMANN,
Tennessee
(ii)
?
Subcommittee on Economic Development, Public Buildings, and Emergency
Management
JEFF DENHAM, California, Chairman
TIMOTHY V. JOHNSON, Illinois ELEANOR HOLMES NORTON, District of
ERIC A. ``RICK'' CRAWFORD, Columbia
Arkansas, HEATH SHULER, North Carolina
Vice Chair MICHAEL H. MICHAUD, Maine
RANDY HULTGREN, Illinois RUSS CARNAHAN, Missouri
LOU BARLETTA, Pennsylvania TIMOTHY J. WALZ, Minnesota
BOB GIBBS, Ohio DONNA F. EDWARDS, Maryland
PATRICK MEEHAN, Pennsylvania BOB FILNER, California
RICHARD L. HANNA, New York NICK J. RAHALL II, West Virginia
CHARLES J. ``CHUCK'' FLEISCHMANN, (Ex Officio)
Tennessee
JOHN L. MICA, Florida (Ex Officio)
(iii)
CONTENTS
Page
Summary of Subject Matter........................................ vi
TESTIMONY
Panel One
John R. Fernandez, Assistant Secretary of Commerce for Economic
Development, U.S. Department of Commerce....................... 4
William B. Shear, Director, Financial Markets and Community
Investment, U.S. Government Accountability Office.............. 4
Panel Two
David Baker, Senior Vice President, FutureFuel Chemical Company.. 13
Steve Etcher, Executive Director, Boonslick Regional Planning
Commission, and Executive Committee Member, National
Association of Development Organizations....................... 13
David Spaur, President and CEO, Merced County Economic
Development Corporation........................................ 13
PREPARED STATEMENTS SUBMITTED BY MEMBERS OF CONGRESS
Carnahan, Hon. Russ, of Missouri................................. 24
Michaud, Hon. Michael H., of Maine............................... 27
PREPARED STATEMENTS SUBMITTED BY WITNESSES
David Baker...................................................... 28
Steve Etcher..................................................... 31
John R. Fernandez................................................ 41
William B. Shear................................................. 49
David Spaur...................................................... 64
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THE ECONOMIC DEVELOPMENT
ADMINISTRATION: HOW TO IMPROVE
EFFECTIVENESS THROUGH REFORMS
AND CONSOLIDATIONS
----------
WEDNESDAY, JULY 27, 2011
House of Representatives,
Subcommittee on Economic Development,
Public Buildings, and Emergency Management,
Committee on Transportation and Infrastructure,
Washington, DC.
The subcommittee met, pursuant to notice, at 10:43 a.m. in
Room 2253, Rayburn House Office Building, Hon. Jeff Denham
(Chairman of the subcommittee) presiding.
Mr. Denham. The subcommittee will come to order. Today's
hearing is on the Economic Development Administration, and how
we can improve its effectiveness and maximize job creation. I
appreciate Assistant Secretary Fernandez and Mr. Shear for
being here today. I would also like to welcome our local and
private sector witnesses who will testify later on this
important topic.
In particular, I am thankful for the participation of Mr.
Spaur, who is president of Merced County Economic Development
Corporation, which serves many of my constituents and the
interest of the Central Valley. Mr. Spaur and the other
witnesses have firsthand knowledge of the impact that this
economy has had on many communities around our Nation.
With high unemployment rates, large deficits, and an out-
of-control debt that we are trying to get a handle on, we must
ensure Federal economic development programs that are targeted,
streamlined, and effective. My home State of California has an
unemployment rate over 11 percent, and parts of my district
have rates exceeding 17 percent. Finding real ways to generate
job growth, support the expansion of private industry into
distressed areas, and ensure long-term economic development is
critical in this economy.
We hear talk about creating jobs through Federal spending.
But all too often, these jobs never materialize, or they are
short-lived. When EDA was created in 1965, its fundamental
mission was to create jobs and generate economic growth in
distressed areas of our Nation. Today EDA carries out that
mission through a number of different grant programs. These
programs leverage non-Federal and private sector dollars,
recognizing that it is the private sector and, in particular,
small businesses that are the engine of our economy. Studies
have shown EDA's programs create jobs. For example, a study
completed in 2008 by Grant Thornton indicates that EDA programs
create jobs at an average cost of $4,000 per job.
However, even given these studies, the GAO has raised key
questions for consideration. In its March 2011 report, the GAO
identified 80 programs and 4 different departments that did
some form of economic development, including 8 EDA programs.
The GAO found that these programs could be working better
together to improve their service to their customers. The GAO
also questioned EDA's process of auditing and accounting for
the number of jobs created under its programs.
It is critical, particularly in this economy, that we
ensure Federal programs are as efficient as possible. It is
also critical in programs like EDA's to ensure processes are
streamlined. With many Federal programs focusing on economic
development, Congress must look at each program and find ways
to streamline reform and, where necessary, consolidate.
With that said, EDA is the only Federal agency whose sole
mission is to create jobs and spur economic growth nationally.
While other agencies may have similar goals, those goals are
typically tied to other policy objectives. And EDA tends to
have the greatest flexibility in ensuring its dollars are spent
to maximize job growth. That's why I am pleased to know EDA has
been taking steps to enter into agreements with other agencies
to improve coordination among some of the programs.
However, these partnerships take significant time and
effort, because of inconsistencies in regulations and policies.
We must find a way to either consolidate programs or cut the
bureaucratic hurdles to better and efficient coordination.
I look forward to hearing from our witnesses today on these
important issues. I would now like to recognize Ranking Member
Norton from the District of Columbia for 5 minutes to make any
opening statements she may have.
Ms. Norton. Thank you very much, Chairman Denham. I
particularly appreciate this hearing that you have called on
the reauthorization of the Economic Development Administration,
and I welcome today's witnesses.
Created over 45 years ago to alleviate substantial and
persistent unemployment in economically distressed areas, EDA
has helped retain and create jobs, reduce poverty, increase
personal income, and improve the livelihoods of local
communities, mostly from funds from private and other non-
Federal sources. From funding research to business incubators,
to workforce development, to small business development, and
basic infrastructure, EDA assists local communities in
developing the skills and infrastructure necessary to compete
in today's global economy.
The EDA is the only Federal agency focused exclusively on
economic development. Its proven track record was verified by
an independent consultant, who concluded that the Federal
Government receives a high return for the dollars invested in
EDA. Specifically, it was confirmed that EDA's construction
grant program generates 2.2 to 5 jobs per $10,000, resulting in
a cost per job of $2,001 to $4,611.
In fiscal year 2010, EDA saw a return on investment of
$6.90 in private-public investment for every Federal dollar
invested. Of the $285 million EDA awarded in fiscal year 2010,
approximately $191.5 million funded construction projects that
are expected to help create or retain approximately 48,500 jobs
and generate nearly $6 billion in private investment.
EDA's effectiveness stems from its use of a bottom-up
approach, by partnering with communities that can determine
their own needs to develop long-term sustainable economies.
Last Congress this subcommittee held hearings on the need
to reauthorize EDA. And in July 2010, the full committee
reported by voice vote a bill to reauthorize EDA. It is clear
that a bill to reauthorize EDA is a bill to create jobs at
little cost to the Federal Government. And we know that EDA is
vital to reducing unemployment in areas that would otherwise
wait much longer than other areas for recovery.
Last month the national unemployment rate was 9.2 percent,
while the District of Columbia unemployment rate was 10.4
percent, while some areas of the District are experiencing an
unemployment rate of over 20 percent.
In a time of high unemployment, and with the economy
struggling to recover from the recession, Congress cannot
afford to let another opportunity to reauthorize EDA go by.
Even though EDA is valuable to our Nation's economy--I would
say invaluable, and singularly so, because there is no agency
like it--there is, of course, room for improvement.
The General Accounting Office has identified EDA as an
agency providing economic development programs similar to those
of other Federal agencies, and believes that more collaboration
among agencies is necessary. It is, however, important to note
that even GAO agrees that its own conclusions are tentative,
and that more work would need to be done before it could
conclude that there is actual duplication and related waste or
inefficiencies when it comes to EDA. Our own work over the
years has found just the opposite, I must say.
I look forward to learning more about EDA's collaboration
with other agencies to develop regional innovation clusters and
any preliminary outcomes from this initiative, or from the work
it has been doing and not reported thus far.
Once again, I would like to thank the witnesses for
appearing today; the chairman, for calling this hearing. And I
look forward to today's testimony. Thank you, Mr. Chairman.
Mr. Denham. Our witnesses here today on our first panel, we
have the Honorable John R. Fernandez, Assistant Secretary for
Economic Development, U.S. Department of Commerce, and Mr.
William Shear, director of financial markets and community
investment, U.S. Government Accountability Office.
I ask unanimous consent that our witnesses' full statements
be included in the record. Without objection, so ordered. Since
your written testimony has been made part of the record, the
subcommittee would request that you limit your oral testimony
to 5 minutes.
Assistant Secretary Fernandez, you may proceed.
TESTIMONY OF JOHN R. FERNANDEZ, ASSISTANT SECRETARY OF COMMERCE
FOR ECONOMIC DEVELOPMENT, U.S. DEPARTMENT OF COMMERCE; AND
WILLIAM B. SHEAR, DIRECTOR, FINANCIAL MARKETS AND COMMUNITY
INVESTMENT, U.S. GOVERNMENT ACCOUNTABILITY OFFICE
Mr. Fernandez. Thank you very much, Chairman Denham and
Ranking Member Norton and members of the subcommittee. I
certainly want to thank you for the opportunity to testify
today on behalf of the Economic Development Administration.
Now, there is no denying that this is a tough economy. The
country is recovering from the deepest recession since the
Great Depression. And while there has been progress, economic
and job growth has not been strong enough nor fast enough. We
clearly have more work to do.
And while we acknowledge the work at hand, we must also
operate in a constrained fiscal environment. One of the most
important urgent things that we can do for the economy is to
get our fiscal house in order, and reduce our Nation's deficit.
In this context, the focus of today's hearing is particularly
timely and very important.
When we look closely at thriving economies, we see at their
core a business climate that supports innovation, industry
clusters, the development and growth of entrepreneurs and small
businesses. EDA's investments--public-private partnerships to
create jobs and encourage business expansion. Importantly, the
investments that we make support bottom-up strategies developed
by the local and regional leaders. This orientation, that the
best ideas bubble out from the regional and small business
leaders, is a critical element of EDA's success.
Rather than pursuing a one-size-fits-all approach, EDA's
funds customize solutions. EDA's unique portfolio of flexible
programs allows us to respond to the changing regional
conditions. We are able to do this, because EDA is the only
Federal agency with economic development as its sole purpose.
I recently visited Fresno, California, an area particularly
hard hit during the economic downturn. EDA funds helped
construct the Claude Laval Water and Energy Technology
Incubator. At WET, as they call it, start-up companies and
entrepreneurs are doing cutting-edge research in the use of
water, supporting the agricultural sector while helping small
new businesses grow. WET reports that, since opening their
doors in 2007, it has launched 15 businesses, leveraged $17
million in private capital, and created 95 jobs.
This incubator is also a good example of how EDA has been
successful linking programmatic support across Federal agencies
in a highly complementary way. At WET, the USDA, Rural
Development, and the SBA provide programmatic support in a
facility constructed with EDA funds. There are other examples
in my written testimony of this kind of collaboration.
EDA is also using its knowledge of best practices to
further advance regional economic growth strategies through
coordinated Federal investments. For example, we recently
announced the Jobs and Innovation Accelerator Challenge. The
Jobs Accelerator, through a single competitive process, offers
$33 million in funding from 3 different Federal agencies, as
well as technical assistance from another 13, so that we can
support 20 competitively selected industry clusters with high-
growth potential.
This initiative represents the Administration's policy
priority to accelerate bottom-up innovation, while bringing
together siloed Federal programs and promoting more coordinated
Federal investment opportunities.
Now, every region across the country has unique economic
challenges, opportunities, and assets. The diversity of these
regional economies also reflects the complexity that often
makes up an economic development ecosystem. Working with the
regions to develop local economic development strategies, we
can leverage these opportunities for the central purpose of
increasing productivity and job growth.
EDA's bottom-up approach to economic development is the
ability to customize our solutions that address what the
communities want. And the distinct authority and focus we have
with this mix of flexible tools really allows us to customize
our activities. Our tools include planning, we have economic
development technical assistance, we support innovation
infrastructure. While all of these programs may have a distinct
focus and authority together, they bring flexible tools that
address the critical economic needs of distressed communities.
I want to also make a point that, you know, we are
constantly looking for opportunities to improve how we operate.
When I joined EDA it took, on average, 128 business days to get
a decision on a grant. Today it is less than 20. We recently
completed a public comment period on our regulations. Later
this summer, we expect to publish streamlined regulations that
are even more flexible, responsive, and improve accountability
for the agency.
Mr. Chairman and Ranking Member Norton and other members of
the committee, EDA is proud of our performance, and firmly
believes that the agency will continue to be a catalyst for job
growth throughout the country.
And I certainly look forward to answering any questions you
may have today.
Mr. Denham. Thank you, Mr. Fernandez.
Mr. Shear, you may proceed.
Mr. Shear. Thank you. Chairman Denham, Ranking Member
Norton, and members of the subcommittee. I am pleased to be
here this morning to discuss the potential for overlap,
duplication, and fragmentation in economic development
programs. In March, and then more recently in May, we reported
on this issue. My statement is based on this work.
Absent a common definition for economic development, we had
previously developed a list of nine activities most often
associated with economic development. Our recent work includes
information on economic development programs at four agencies:
Agriculture, Commerce, HUD, and SBA. Commerce administers 11 of
the 80 programs we have included, with EDA representing 8 of
the 11. According to the agencies, funding provided for these
80 programs in fiscal year 2010 amounted to $6.2 billion, of
which about $2.9 billion was for economic development efforts.
Here I want to stress that our focus to date has been on
the design of these programs. In other words, we have evaluated
the permitted uses of funds and have not, as of yet, drilled
down to see how each program's funds are actually distributed
among various uses.
In summary, based on our work to date, we have found that
the design of each of these economic development programs
appears to overlap with that of at least one other program, in
terms of the economic development activities that they are
authorized to fund.
Commerce, HUD, SBA, and USDA appear to have taken actions
to implement some collaborative practices, but have offered
little evidence to us so far that they have taken steps to
develop compatible policies or procedures with other Federal
agencies, or to search for opportunities to leverage physical
and administrative resources with their Federal partners. And
the agencies--and here I mean the four agencies across the
board--appear to collect only limited information on program
outcomes, information that is necessary to determine whether
this potential for overlap and fragmentation is resulting in
ineffective or inefficient programs.
Building on our past work, we are in the planning phase of
a more indepth review that will focus on a subset of these 80
programs. Just last week we met with EDA to discuss the current
engagement. At this time we think that we may have a focus on
the programs that fund entrepreneurial efforts.
Based on the classification scheme we have used to date,
six of the eight EDA programs can fund entrepreneurial efforts.
Excluding community trade adjustment assistance, a program that
did not receive any appropriation in fiscal year 2010, the
remaining five programs are: grants for public works and
economic development facilities; economic adjustment
assistance; global climate change mitigation incentive fund;
economic development technical assistance; and research and
evaluation. The two remaining EDA programs, economic
development support for planning organization and trade
adjustment assistance, are classified as supporting one
activity: plans and strategies.
In our May 2011 report, we compared the 80 programs by
identifying the primary targeted recipient for each program.
And in our work going forward we plan to further differentiate
the programs.
In this work we plan to: identify the services that each
program provides; explore alternative definitions for economic
development and update, if necessary, the economic activities
that are generally accepted as being directly related to
economic development; evaluate the efficacy of collaborative
relationships that have been established by the agencies and
identify additional opportunities for collaboration; determine
and apply criteria for program consolidation; and assess how
program performance is measured.
Chairman Denham and Ranking Member Norton, this concludes
my prepared statement. I would be happy to answer any
questions.
Mr. Denham. Thank you for your testimony. Mr. Fernandez,
you highlighted the WET incubator program on the campus of Cal
State Fresno. Can you elaborate on how the EDA funds were used
to create this incubator, and what was EDA's investment, and
what are some of the key outcomes that you have seen already?
Mr. Fernandez. Thank you, Mr. Chairman. Yes. The WET
project came--you know, you have to back up. Before there was a
proposal to fund WET, EDA was engaged with some of our partners
there to develop strategies. And WET was an investment that was
built on the strategies that they developed on how to diversify
the economy and how to build on the assets they had.
So it was tied to that initial strategy, which is an
important distinction about how we make our investments. All of
our competitive applications have to be tied to a clear
economic development strategy that is sustainable. And that is
why I think you see the sustained impact of these investments.
WET itself was in--we invested $1.8 million to help with
the construction. Those funds were matched by local sources.
And as I noted in my testimony, since 2007 we have seen the
results of the 15 new companies, $17 million--there is several
companies that are already becoming market leaders in their
industry sector, 95 new jobs.
But, most importantly, it has been a catalyst to bring
together private and public support for this industry sector
that they are trying to grow. So you see companies like Amazon
and Microsoft providing programmatic support to the tenant
companies. You see not just USDA's Rural Development and SBA
providing program support, but also the city of Fresno, other
cities in the area, and the workforce investment board.
So, together, you know, we funded to help fund the
facility, but other agencies, public and private, are bringing
the programmatic support to support those entrepreneurs and
help them grow their businesses.
Mr. Denham. And the GAO has raised concerns about the self-
reported nature of EDA's job creation figures. Can you talk
about how EDA arrives at some of the job creation numbers, and
what steps you are taking to ensure that those numbers are
correct?
Mr. Fernandez. Yes. I think this is a very important
question that GAO has reported and brought up. And you know, as
they note, our applications require that the various applicants
submit estimates, estimates on projected job growth, as well as
potential private sector leverage. They are self-reported, and
that has been one of the areas that folks have brought up from
time to time, in terms of the accuracy.
But it is important to note that, you know, in addition to
the Grant Thornton study that essentially validated the
methodology that EDA uses to generate the projected impact of
these investments, that our GPR reports, which include the job
numbers and the private sector leverage, have been
consistently, you know, on target. And I think there is only 1
year in recent reporting where the projected estimates were
less--or the actual job creation numbers were less than
projected, and that was from the 6-year count off of
investments made in 2001.
But what we do is that, in addition to the self reporting,
there is a vigorous process at the front end, where people on
the ground with the agency do due diligence. And they
understand what is happening in the community and the regions,
they know who the players are, and there is a little bit of art
that goes along with the science of evaluating projects.
We also do annual reporting from the recipients. They
report back on the outcomes. We do these what we call----
Mr. Denham. Does that annual reporting also include a 6-
month, a 1-year, 2-year, 5-year review on----
Mr. Fernandez. It is the----
Mr. Denham [continuing]. The sustainablity of those jobs?
Mr. Fernandez. Yes, it's 3-, 6-, and 9-year increments.
Mr. Denham. Three, six, nine.
Mr. Fernandez. Because, I mean, most of economic
development is really--in our work, it's really about building
assets that communities can use to leverage production activity
and growth of businesses. And they tend to have a long-term or
medium-term impact. So we use a 3-, 6-, 9-year reporting.
But we do--we call them A123 audits, where we look at the
reporting, look for anomalies, look if it's consistent with our
own studies and analysis over the years. We do a sampling of
site visits. We can only do a limited number, based on
resources we have. But that's another mechanism that we use to
go validate the numbers.
But again, I mean, the Grant Thornton study essentially
said that, while there are limitations to self-reporting, in
the main the numbers that we are using to estimate impacts are
pretty consistent with their findings.
Mr. Denham. Thank you. My time has expired. Ms. Norton?
Ms. Norton. Thank you, Mr. Chairman. I wish you would
discuss the stimulus funds that the EDA got, how they were
used, and what the results thus far are.
Mr. Fernandez. Well, the--thank you. The Stimulus Act
allocated about $150 million to EDA for our programs. $147
million of that went directly into our projects. We were able
to obligate 100 percent of those funds within the first year of
the program. And to date we have dispersed about 63 percent of
the funds. So all but one of the projects are actually in
progress.
You know, it was a limited amount of money, but the vast
majority of our dollars went into construction projects,
infrastructure projects. So, you know, we have not been to
the--we are not to the point where we are getting the 3-year
reporting on outcomes, but we anticipate that the lift from
those dollars are going to be significant, and consistent with
our other programs.
Ms. Norton. I wonder if both of you could comment on the
real effects--the effects on the ground--if there is no
reauthorization this year. Does it matter that there is no
reauthorization? What is the effect?
Mr. Fernandez. Well, I mean, you know, there is real
effects and perceived effects. I think that as long as the
budget includes funding for EDA, it certainly enables us to
continue----
Ms. Norton. Well, what does the budget include now? What--
how much cut in 2011 was proposed? I suppose you don't know yet
for 2012. How much down or up, or whatever it turns out to be
in 2012?
Mr. Fernandez. The continuing resolution for fiscal year
2011 maintained our program support at the same level as the
previous fiscal year. We did have a cap on our salary and
expenses, which has created some challenges for us. We don't
know what is going to happen in 2012. The proposal the
President made actually increased funding for EDA in a modest
way, but that was in the context of a discretionary, non-
defense spending freeze. And I think the statement of the
prioritization of economic development--you know, we look
forward to seeing the outcome of the budget process.
Ms. Norton. Yes, do you have a comment on that?
Mr. Shear. Our focus tends to be on the programs that are
in place, the expenditures that are made, and we don't focus on
reauthorization. But one of the things that we'll be looking
for with reauthorization, as well as the appropriations process
in EDA's plans, is what resources EDA has in place to evaluate
the investments that they are deciding to make, and how they
evaluate those investments after they are made.
Ms. Norton. Yes. Indeed I have a question on that. I must
say that the leveraging effect of EDA argues very strongly for
funding it. It's not as if this agency gets any money. What
this agency does is to give the functional equivalent of the
seal of approval that work that the community wants to do, and
then they come in. They see the government thinks this is
worthwhile, and then the private sector--if you will forgive
me--piles on, and sometimes the State and local governments, as
well.
I don't think there is anything else like it, so it would
be pretty penny unwise and pound foolish to cut this leveraging
effect.
Finally, this notion of what the impact is that both Mr.
Shear and Mr. Fernandez comment on, I noted that there was
something I find very interesting used, because it's very
difficult, I understand, to estimate impacts and to discuss
them intelligently. The--one of your consultants, Grant
Thornton, apparently installed something called an ``impact
estimation tool'' on the EDA computer system.
So, one, I would like to know how this works, whether you
are using it, and I would like to ask Mr. Shear, in light of
the GAO report that says that estimate impacts are sometimes
unreliable, whether you think this kind of a tool will be
effective.
So first let's hear from Mr. Fernandez.
Mr. Fernandez. Yes, I think your question----
Mr. Denham. Very quick response, please.
Mr. Fernandez. We use a version of the tool that uses the
same methodologies. But I can't say with certainty we actually
use the specific computer program--or at least the algorithms--
that they created. Ours are very conservative, I would note.
But I would note, if I could, Mr. Chairman, quickly,
another thing that Grant Thornton noted is that while we have
focused on job creation and private sector leverage, arguably
we underestimate and under-report the full economic benefit and
community benefit of the investments we make, because we are
not looking at induced impacts, we are not looking at the
broader community impacts.
Many agencies at the State and local level use things like
implant that have input-output models that can really tell much
more robust economic impact from investments we make.
We are taking a very narrow sliver here. But for us, the
jobs and the leverage are really important, but we got to get
back to what are our investments really designed to do. And
they are to create assets, economic development assets in
communities that they can use to help advance their economic
development strategy. And it is hard to completely evaluate the
full economic benefit of increasing the asset base in the
community.
Mr. Denham. Thank you, Mr. Shear. Anything to add very
briefly?
Mr. Shear. Yes. I will start out by saying we think the
Grant Thornton study is useful. The tool itself I can't speak
to, and so I defer to Mr. Fernandez.
But the point you made--which is an excellent one--this is
difficult to estimate. It is a very difficult exercise. And, to
some degree, we are going to be looking not just at what Grant
Thornton addressed, but where and how EDA has implemented Grant
Thornton recommendations for improvement. We are also going to
look more generally at the metrics that are used to evaluate
EDA investments.
Mr. Denham. Thank you. Mr. Crawford?
Mr. Crawford. Thank you, Mr. Chairman. I have just a real
quick question for Mr. Shear. Thank you for your time today.
Do you believe more jobs will be created with less cost, if
some programs were consolidated? And if so, talk about some of
those programs, what they would be.
Mr. Shear. Many times, outside of the committee setting, I
have gotten that question. And I really have to revert back to
the idea that we have identified areas of potential overlap. We
will look for areas where consolidation could be helpful and
where collaboration could be helpful. But it is difficult to
put our finger on it at this point.
I will just mention some of the programs. There are some
programs that address counseling and training for
entrepreneurs. Some of those programs have been a focus of the
small business committees. There is also some focus as far as
some programs, such as community development block grants,
which are many times used for economic development purposes, is
a way to provide funding where the locality has more control,
in contrast to EDA.
So, there are different approaches for economic
development, but we really can't yet identify any where
consolidation or different types of coordination and
collaboration could really improve. We are trying to get to
that point.
Mr. Crawford. I yield back.
Mr. Denham. Thank you. Ms. Edwards?
Ms. Edwards. Thank you, Mr. Chairman, and thank you very
much, gentlemen, for your testimony.
I have a couple of questions for you, Secretary Fernandez.
You mentioned in your testimony that the grant cycle had been
significantly reduced. And it does strike me that that is one
of those areas where, if you look at the comparable--the
agencies that were compared in the GAO report, where there have
been significant issues raised about the length of time that it
takes to proceed through a grant cycle, and then that distance
in time creating some differences in terms of what was
originally planned versus what can be accomplished, and I guess
I wonder, in a coordination role, whether there are some things
that you have learned, in terms of tightening up that process,
that actually could be useful to some of the other agencies
that are also doing similar economic development activity.
Mr. Fernandez. Well, thank you. I guess I would put this in
context. I mean I spent nearly 20 years doing economic
development, primarily at a local level. I was a mayor for 8
years, worked in real estate and investment. And, you know,
that experience kind of colors my perspective.
And when you're the customer, the bottom line is you need a
decision. Even if it's a decision that says no, if I can't get
my deal financed I need to know so I can move on to Plan B. So
that was kind of the perspective that I bring to EDA. And when
you look at a process that was taking, on average, over 128
days, that is very difficult for folks to make informed
decisions, particularly in these economic times, and where
money is tight.
So, I guess what--the lesson learned would be that we did a
pretty deep dive into every step of the process. We did, like,
a fishbone analysis and said, ``Here is all the different
things that happen. Where are their opportunities to
consolidate activities? Where are their activities that aren't
really value-added into the decisionmaking process,'' and got
rid of them.
But most importantly--and this was a substantial change for
EDA--we went to a quarterly tranche system with firm deadlines.
Prior to this new process, we didn't have a firm deadline. So
we would have rolling applications, which--you know, there is
an upside to that, as well. But when you're competing for
limited money, you never know where you're at in the cycle, and
you never know who you're competing with. And, as an agency, it
is hard for us to tell the story from an accountability and
transparency perspective.
So, we were able to come--you know, do this new process. We
had a lot of stakeholder input. And we did this in a way that
hasn't diminished the consultive role that EDA plays.
So, when you submit an application today, within 15
business days we will do a quick merit review and tell you
where there are strengths and weaknesses in your application,
and give you an opportunity to fine-tune it, make it stronger.
And then, when we go into the competition, we know that we are
getting projects that have been really well put together, and
it is highly competitive.
And, you know, when we look at how we measure impacts, and
whether or not it is a good program or not, I mean, one of the
things we have to bake into our thinking is that there is a lot
of due diligence that goes in at the front end for EDA
selecting projects, because we are so oversubscribed that we
can't justify not selecting highly competitive projects.
The other thing I would just note, though, is that--really,
based on my own experience--is that in many instances it is not
a matter of whether you consolidate programs. But are you
coordinating them? And so you have different kinds of Federal
resources that are really more complementary than duplicative.
But the trick is that if you are trying to do a
multidisciplinary solution to a problem on the ground, you
still got to have a streamlined, synchronized decisionmaking
process.
The way it is today is that you may have to go to three
different Federal agencies that have three different
grantmaking processes, three different timelines, and when you
add it all up together you really have increased my transaction
costs, and the decision cycle is unpredictable, and usually way
too long.
So, what we have tried to do is take the lead in these
coordinated efforts, where we bring multiple agencies together
to complement our investments, do it in a seamless system that
has a set deadline, where all of the decisions are made. And
that is something that our customers desperately want, and I
think that is where there is a tremendous opportunity to
enhance the performance of all these programs, not necessarily
by consolidating, but enhancing the collaboration and
coordination.
Ms. Edwards. Thank you. And just as my time closes, I
wonder if Mr. Shear could comment on this. Because I think when
you look at the other programs that you evaluated, this is a
huge complaint that we get, both from the local level--about
the process of getting those grants. And is that something that
you actually looked at?
Mr. Shear. In our work over the years--which has taken us
to EDA a number of times--we are aware of the problem. It has
been a while since we did audit work to focus in on them. But
we are certainly aware of the problem. And when there are
different ways that localities can make use of Federal funds to
try to affect economic development, different types of
community development, or to build up its small businesses, it
does become a problem when it is hard to get decisions from any
one agency, or when you find yourself having to meet the
requirements of agencies that don't have compatible policies.
Ms. Edwards. I strongly suggest a really deep look at the
grant cycle process, and where that crosses over these
agencies, because I think that there are some real lessons to
be learned there.
Anyway, my time has run out. Thank you.
Mr. Shear. Thank you.
Mr. Denham. Thank you. And thank you for your testimony.
Your comments have been very helpful today. I know that there
are a number of other questions that we have; we will submit
those to you in writing.
I will now call our second panel of witnesses: Mr. Steve
Etcher, executive director of Boonslick Regional Planning
Commission; Mr. David Spaur, president, Merced County Economic
Development Corporation; and Mr. David Baker, senior vice
president, FutureFuel Corporation.
I ask unanimous consent that our witnesses' full statements
be included in the record. Without objection, so ordered.
Since your written testimony has been made part of the
record, the subcommittee would request that you limit your oral
testimony to less than 5 minutes.
And at this time I would like to recognize first Mr.
Crawford for a short statement.
Mr. Crawford. Thank you, Mr. Chairman. I am privileged to
introduce one of our witnesses today, Mr. David Baker, the
senior vice president of operations support for FutureFuel
Chemical Company located near Batesville, Arkansas, in the
district that I am privileged to represent. FutureFuel has a
30-year history in developing and manufacturing complex
specialty chemicals. Today FutureFuel is an active participant
in the U.S. biodiesel industry.
Additionally, FutureFuel is engaged in the evaluation of
technologies used to manufacture cellulose-derived fuels and
other bio-based products that have the potential to reduce our
dependence on foreign oil.
Shortly after the November election I had the privilege to
visit with David and the leadership at FutureFuel. I was
extremely impressed by their team and their facilities, located
on the banks of the White River. They are a leader in Arkansas,
as well as the Nation, by investing in research and development
that is led by well-qualified doctorate-level researchers.
Their company is a prime example of the manufacturing process
being driven by high-tech research and development.
It is my honor and privilege to introduce before the
committee Mr. David Baker. Thank you for being here.
Mr. Denham. Thank you. And Mr. Etcher, you may proceed.
TESTIMONY OF STEVE ETCHER, EXECUTIVE DIRECTOR, BOONSLICK
REGIONAL PLANNING COMMISSION, AND EXECUTIVE COMMITTEE MEMBER,
NATIONAL ASSOCIATION OF DEVELOPMENT ORGANIZATIONS; DAVID SPAUR,
PRESIDENT AND CEO, MERCED COUNTY ECONOMIC DEVELOPMENT
CORPORATION; AND DAVID BAKER, SENIOR VICE PRESIDENT, FUTUREFUEL
CHEMICAL COMPANY
Mr. Etcher. Thank you, Chairman Denham, Ranking Member
Norton, and members of the subcommittee, for the opportunity to
testify today about Federal economic development programs,
including the U.S. Economic Development Administration, or EDA.
My name is Steve Etcher. I am the executive director of the
Boonslick Regional Planning Commission, located in Warrenton,
Missouri. I also currently serve on the executive committee of
NADO, which is a national membership organization for the
Nation's 540 regional planning and development organizations,
including the EDA's 380-plus economic development districts.
I would like to respectfully make three core points this
morning.
First, Mr. Chairman, I would like to stress that EDA is
unique among the portfolio of Federal economic development
programs. The agency's program flexibility, partnership
structure, and performance results are exceptional within the
Federal system. As GAO noted earlier, there are currently more
than 80 Federal programs related to domestic, community, and
economic development. While many of these line item programs
are housed within larger departments and agencies, EDA is the
only Federal agency with the sole mission of creating high-
quality jobs in the United States.
Our second main point, Mr. Chairman, is that many of the
programs outlined in the recent GAO reports support broader
community development activities, rather than focusing strictly
on job creation and economic growth, like EDA. While both of
these related activities are necessary, especially for
distressed communities, it is important to note how EDA
supports regional and local economic development partners.
By Federal law, EDA typically requires a 50 percent local
cost share, and significant private sector investment. This
helps to ensure local officials are committed to a project's
success. EDA's investments are focused on high-quality, long-
term jobs. And, by Federal law, EDA's investments must be tied
into a regional, comprehensive economic development strategy
developed and vetted by local officials, including the economic
development districts.
EDA is uniquely designed to address almost any economic
development activity, both from areas suffering from chronic
distress, as well as more sudden and severe dislocation, such
as plant closures and natural disasters.
Our third main point, Mr. Chairman, is that there are many
opportunities for reform within Federal community and economic
development programs. This includes elevating EDA's role as the
lead Federal economic development agency. This is important for
better coordination and consistency. Rather than focus solely
on opportunities across the four major Departments of Commerce,
HUD, USDA, and SBA, as outlined in GAO's May 2011 report, we
see greater opportunities for agencies and programs within each
of these departments to be streamlined, better coordinated, and
reformed.
Another option is to focus on coordinating and prioritizing
Federal community and economic development investments based
upon regionally based, locally driven, comprehensive
development strategies, known as the CEDS. While an area must
have a CEDS to qualify for EDA funds, these regional strategies
should be used more aggressively to inform, coordinate, and
prioritize investments by other related Federal agencies.
Finally, today's modern economy requires that distressed
and underserved regions be prepared for the innovation and
knowledge economy. Therefore, it is essential that EDA, as the
lead Federal economic development agency, be more closely
aligned with programs for workforce development, research and
development, and science and technology, not just the
traditional infrastructure partners.
Mr. Chairman, please allow me to close by giving you a
specific example of how our EDD, which is part of EDA's network
of economic development districts, has helped prepare our
region for the future. Our region was drastically impacted by
major flooding in 1993, 1995, and again in 2008. Entire
communities were destroyed. Businesses, infrastructure, homes,
and jobs were completely washed away. EDA provided matching
resources for our organizations to assist these flood-ravished
communities.
Our efforts were not focused on the immediate emergency
response, like those efforts of our local responders and FEMA.
Instead, our role is to work with our local communities and
develop long-term economic recovery strategies, and to take
strategic actions that will make our region more resilient
during future natural or economic crisis. With support from
EDA, we decided to tackle these challenges differently. We
innovated, we collaborated, and we helped our local communities
envision a life without the constant threat of flooding.
In three separate communities during the past 20 years we
physically relocated these flood-ravaged communities out of the
flood plain, obtaining local buy-in, planning the logistics,
and leveraging this change into new economic opportunities.
We agree that Federal development programs can be better
integrated, streamlined, and updated. We also feel that EDA and
its EDD partnership network should serve as the backbone for
these efforts at the regional level.
Thank you again, Mr. Chairman, and members of the
subcommittee for the opportunity to appear before you today. We
appreciate your interest in this timely and important issue,
and we look forward to continuing this dialogue.
Mr. Denham. Thank you, Mr. Etcher.
Mr. Spaur?
Mr. Spaur. Thank you, Chairman, members of the committee.
Congresswoman Edwards, I heard your comments, take those to
heart, and Mr. Crawford.
I am Dave Spaur, president, Economic Development
Corporation, Merced County, located in the Central Valley of
California. It is an eight-county region, I am one of eight
counties. I served on that committee several years as its
chair, been in the Central Valley over 10 years, and I have
served on the board of directors of the International Economic
Development Council. I do partner with NADO, and appreciate the
assistance that these organizations provide to us, particularly
in rural communities.
I have about 25 years of economic development experience,
mostly in California, a little bit in Arizona. I have worked in
rural communities, I have worked in urban communities. Started
working with Sierra Economic Development District. Kind of
straddles Lake Tahoe, so it gives you a little bit of
perspective of where it's at. They're a planning organization
and an economic development organization, not an easy task.
I wanted to state to this committee some of the important
things, and focus my comments on some of the projects that we
have been working on in the Central Valley.
As you have heard from the chairman's opening comments, our
unemployment rate is 17 to 22 percent. Some of our cities are
23, 24, and 25 percent. And they have been that way for the
past decade, or for the last 30 years. I am sure some of your
communities are the same way. Chronic unemployment is an
issues.
Strategies is what reduces that. Infrastructure investment
is what reduces that. We were on the Forbes list as the worst
community for foreclosures in the entire United States. We were
rated number one. I am proud to announce today we are rated
number four. We haven't moved up the list much, but programs
like EDA help us do that, and they are extremely important.
There is just not enough funds to go around, so you have
competing communities and competing counties. And I think,
Congresswoman Edwards, some of the complaints you hear about
EDA is, because there is not enough money to go around, we tend
to compete with one another.
EDA is a very stringent and conservative program under the
Department of Commerce. And I think when they were first formed
there might have been scrutiny. Are we really going to create
jobs? And as a result, they have deed restrictions on
properties when you enter into an agreement to build an
incubator, or bricks and mortar for a building to help a
company. On water and sewer--I have done airports, I have done
water and sewer. And very stringent numbers on you have to
create jobs. Because they are all about creating jobs.
But the job reporting really doesn't get reported right.
Because of their conservative approach, even the Grant Thornton
report is counting direct jobs related to that project. There
is hundreds of other jobs created after that project happens.
EDA, what it is not, it is not an earmark. We all know
earmarks have funded many infrastructure projects. Earmarks are
very important in our district, as well as your district.
Our experience is the bid process has been streamlined, but
that is where a lot of complaints do come from. It is not a
complaint to get rid of EDA, it is a complaint that we wish it
were faster, we wish we got the money sooner.
EDA is extremely cost effective. It forces private sector
to come to the table. It forces me to provide a dollar-for-
dollar match, which--really, no other program does that out
there. And it does bring the private sector and the public
sectors together.
The EDA leverage you have heard is really seven-to-one. For
every dollar they put in, it leverages another $7. I think that
that is extremely important.
It's got a heck of a portfolio of projects. But accessing
those portfolio of projects would be best practices. And I was
fortunate to learn about one in Pomona, Cal Poly Pomona, on
leveraging dollars for a hospital, for a blood bank, and for a
biotech life science center. That came from Will Marshall, who
handles southern California and the Central Valley. And I was
trying to do the same thing in Sacramento, and he shared with
me how that could be done. If we had more access to EDA and
their other programs, we could look at best practices and we
could look at better strategies on solving solutions across the
United States. It's just not enough funds and not enough staff
to go around.
You have a list of the projects here. In Merced we have an
Air Force base that closed, Castle. It has been difficult to
get jobs there. But UC Merced came along, and UC Merced
partnered, and we got a $4 million grant to bring in
infrastructure, critical infrastructure. That has created the
Solar Institute. And the Solar Institute is the world's
foremost authority on energy efficiency, not just solar, but
energy efficiency. And that center is now spurring off new
company startups, and we assist those company startups. We
don't get to count those jobs after those initial dollars went
in; we wish we could.
Also, Fresno, the $1.8 million that went into the WET lab,
the WET lab started as a Central Valley business incubator.
They design nozzles, drip irrigation to meter water,
fertilizer, and the spray of pesticides. This technology is
used in Israel. They have over 400 members. Most of their
members are international. We don't get to count those jobs,
the innovations that come out of that lab, not just for
California, but across the world. We don't get to count those
hundreds of jobs and hundreds of businesses that are created
from that one important lab and partnership.
Kings County, another county next to us, has benefitted, as
well as the city of Stockton. And I wanted to point out the
city of Stockton did an intermodal facility with the dollars
that they received from EDA. A competitor to me in Fresno. And
it relocated our intermodal facility when I worked in Fresno up
to Stockton. It has created 27 companies as a result. It has
become a logistics hub for the Central Valley. And each one of
those eight counties in the Central Valley has benefitted from
the jobs. Now, I am mad, I am angry I lost that intermodal
facility to Stockton. But I am relieved, for the Central
Valley, that it is creating jobs up and down the valley, and
overall, it is helping the goods movement in California and
reducing poor air quality.
Mr. Denham. Mr. Spaur, if you could, wrap it up.
Mr. Spaur. Certainly. The rest of the projects I think you
can see in my testimony that is written and provided to you. I
think what is most important is you need to realize EDA, as a
program for economic developers, really needs to be thoroughly
vetted, so you understand the benefits, so you understand there
is not overlap there. There may be overlap in other programs.
And if you wanted a strategy that could cut across the
various programs, I think the Economic Development
Administration, along with its partners, could deliver that for
you. Thank you very much.
Mr. Denham. Thank you, Mr. Spaur.
Mr. Baker?
Mr. Baker. Thank you, Chairman Denham, Congressman
Crawford, and Congresswoman Edwards, and other members of the
subcommittee, for this opportunity to testify today about our
experience with the U.S. Economic Development Administration,
our region's economic development district, and the impact that
it has had on our company.
My professional background includes four decades of
chemical industry, both domestic and international, with
Eastman Chemical Company. I worked in Asia and Europe, and
while domiciled there, worked with economic development
agencies in those countries.
FutureFuel Chemical Company is a subsidiary of FutureFuel
Corporation. We are traded on the New York Stock Exchange now
with symbol FF. We currently own 2,200 acres of land southeast
of Batesville in north central Arkansas. We occupy about 500
acres of that site with continuous manufacturing facilities,
laboratories, and other infrastructure. In perspective,
Batesville's population is 10,000; the county's population is
37,000.
Before we acquired the site, Eastman Kodak and Eastman
Chemical constructed the site for production of photographic
and imaging chemicals. Over the years they added other
specialty chemicals. The site did quite well in some years.
Unfortunately, it became non-core to Eastman Chemical Company.
Employment declined from 750 in 1998 to approximately 400 when
we bought the site.
After the acquisition in 2006, we had an objective to
become a world leader in the U.S. biofuels industry, which we
had just begun at the site, while maintaining a facility status
as a world-class specialty chemical manufacturer. The new
ownership quickly realized that in order to facilitate growth,
we needed infrastructure changes, additions in rail, truck, and
storage. So we knew we could generate projects that could
achieve those goals, but not without the infrastructure.
By 2008, FutureFuel had developed a portfolio of time-
sensitive business opportunities. We shared those with White
River Planning and Development, a district designated an
economic development district by EDA. We also had shared our
vision of the future with county leadership and Arkansas
Economic Development Commission.
White River Planning arranged a meeting for us with EDA in
Austin, to share our vision, goals, and needs. And we were able
to work with them and secure a grant that was granted in late
2009 to Independence County. The grant was $3.4 million. The
State of Arkansas gave us a grant of $2.4 million. Independence
County provided some early site work for the project. We
provided capital. And that total project was $7 million.
The rail project should be complete late this year. Parts
of it are usable. The results thus far, we have moved from an
annual capacity for biodiesel from about 12 million gallons
when we bought the site to more than 30 million gallons. We are
completing projects that will give us 59 million annual rate
using feed stocks that are not in the food chain. So we're a
chemical company with technology, as Congressman Crawford
indicated, that move into those areas.
We also have increased or doubled our truck traffic in that
time period. We doubled our rail traffic. We are adding many
new products, including an anode material that goes into
electric drive vehicles.
Our region had experienced a lot of job losses, GDX almost
600 jobs lost, White-Rodgers 125. We believe we are a success.
We believe that all agencies believe that we have created what
we said, the grants were funded. We have reacted to those. We
continue to grow. We believe those resources will continue to
grow our region. So we will add to the 100 jobs that we have
already created at the job site.
So, in closing, FCC is proud of our accomplishments as a
new company. With the help and guidance of our economic
development district on how to identify and leverage resources
through a small investment from EDA, combined with local and
State assistance, we have been able to experience tremendous
growth at our site in rural Arkansas during an extremely
turbulent and challenging business climate.
Thank you, Mr. Chairman and members of the committee, for
the opportunity to share with you today. Pleased to answer any
questions.
Mr. Denham. Thank you, Mr. Baker. Thank you to all of our
panel for your testimony. I will now recognize each Member for
5 minutes, starting with Mr. Crawford.
Mr. Crawford. Thank you, Mr. Chairman. I just want to ask
my constituent a couple of questions here.
You highlighted in your testimony that your county in
Arkansas in predominantly rural and agriculture in nature. How
important are infrastructure projects such as the one you
highlighted to spurring economic growth in rural areas?
Mr. Baker. Yes, I think it is very important for a county
and a State that has experienced, like the rest of the country,
unemployment problems. We add jobs to the region. It attracts
other industries to support the industries already there, and
it grows the infrastructure for the county, in order to have
goods and services that aren't available in the area come in
and locate there.
Mr. Crawford. Excellent. As you may know, the GAO has
identified 80 programs in 4 different departments that fund
economic development programs. Did your company explore any
other Federal programs? And, if so, was there any particular
reason--or, if not, were there any particular reasons they were
not pursued?
Mr. Baker. We have looked at those programs that are a fit
for our company. So we were a recipient of a U.S. rural grant
for biodiesel. That has helped us expand. We are constantly
looking to see how we can leverage our dollars, which have been
significant at the site, with Federal to grow and provide jobs.
Mr. Crawford. OK. And finally, given your experience with
EDA on this project, are there areas of improvement you would
recommend?
Mr. Baker. We have had a very good experience. I am sure
there are things that could be helped. The time cycles,
obviously, are slow. But they are to make sure that the
projects are worthy of funding. So, in order to get the good
projects, obviously that part of the program needs to be intact
and working well.
Mr. Crawford. Thank you, Mr. Baker. I yield back, Mr.
Chairman.
Mr. Denham. Thank you. Ms. Edwards?
Ms. Edwards. Thank you, Mr. Chairman. And again, thank you
to the witnesses.
Mr. Etcher, I am really intrigued by your testimony, and by
the experience of your members. And I wonder. In the GAO report
one of the things that was pointed out was this idea of
multiple programs, potentially some duplication of activities.
But it does seem to me that duplication, in and of itself, is
not a reason not to fund in these areas.
I mean I was a grantmaker at one point, and one of the ways
that we use duplicative funding was to try to experiment with
some things, to see, in some places where, you know, something
could work, and maybe something else would work someplace else.
And so, I wonder if you could comment about that, because I
worry about going down a track of saying, ``Well, this is
duplicate, and so therefore, stop doing one thing,'' as opposed
to looking at this more holistically, and looking at the idea
of collaboration.
Mr. Etcher. Thank you. That is an excellent question. I
guess my initial response is when I hear the word
``duplicate,'' I am thinking of something that is exactly
identical. And I think within that Federal program, or 80
Federal programs, you are not going to find exact replication
of each and every one of those programs. They may have a broad
mission of economic development or community development, but
they are each individually uniquely designed to address a
specific need or clientele or eligibility. So, you are not
having two programs offering the exact same service, the exact
same benefits. They are all unique.
The beauty of that, from a practitioner's standpoint,
though, is you can take your local and regional needs and apply
them to those specific programs that respond specifically to
those needs that are local and regional.
So, while we can streamline it, and I think we can do more
integration, more coordination, to just blanketly call them
duplicative--they are not exact.
Ms. Edwards. Thank you. And I wonder if you could speak to
this idea of what it takes to coordinate and collaborate.
One of the things that I have learned is that coordination
and collaboration require funding. You cannot just expect
agencies to do it on their own. Or local governments to do that
on their own in a region, because people are strapped for
resources, they have their own mission and activity.
And I wonder if you could speak to the role that the EDA
can play in encouraging and underwriting the kind of
collaboration and coordination that is actually necessary to
achieve success.
Mr. Etcher. Excellent question. And EDA already plays a
role in that. They fund, through their planning partnership
program, the economic development districts. What that does is
it provides expertise, at the practitioner level, to help
encourage coordination among local, State, and the various
Federal programs. Obviously, that investment is critical to our
organization. That is what gives us the staff resources to
bring the various funding agencies together, whether it be SBA
and EDA, or whether it be CDBG and the EDA.
Without that local expertise--and some of that expertise is
not cheap. I mean it takes more and more and more to sustain
these organizations. But without that, I think what you would
have is a very siloed approach to every specific problem,
versus looking at what is good for the community and the
region, the State, and the Nation, as a whole. So, EDA's
investment allows that holistic address.
Ms. Edwards. And then, of course, the worry is that once
you get those silos, you actually end up spending way more
money than you needed to on a given project or strategy, or
community.
I want to turn to Mr. Spaur for a minute, because I just
have a bit of time left. And it is to ask about this--I mean I
think EDA does a great job in terms of what they do for smaller
and rural communities. I come from this large, metropolitan
region. But buried within that large county are 20-some-odd
municipalities that struggle with their own economic activity.
And I wonder if you could speak to the role that EDA can or
should play in those kind of areas, where you see pockets of
disinvestment, but they get buried en masse beneath, you know,
a larger urban area.
Mr. Spaur. Absolutely, Congresswoman. I think Mr. Etcher
hit the nail on the head, that comprehensive economic
development strategy, the planning process that the EDA funds
in their districts, really requires or forces collaboration. It
is asking each community--so we have 6 communities in Merced
County, I had 15 communities in Fresno County. Each one of
those communities has to outline its priority projects. When
they do that, you look at where there is leverage and where
there is not. Are any of these compatible? If we fund one,
could it help the other in the other city? And many times it
can. Cal Poly Pomona was a good example. For UC San Francisco
in San Francisco and Sacramento with UC Davis and Shriners
Hospital.
But these strategies force the collaborations. So we are
trying to combine an eight-county economic development
district. The first 2 years were competition among counties.
They didn't want one district to control the submittal of
grants. What it did do is it looked at all the projects in each
of those counties and said, ``Hey, we have clusters. We've got
logistics, we've got agriculture, we have biofuels, we have
different--these life sciences that are going on,'' and of
course the WET lab that binds them all together.
Once we put all those together, the competition started
dropping. Once EDA streamlined its submittal process--it's
still not really fast, but it's quicker--once that happened,
now we are able to pull the district and say, ``We don't
control the submittals, you can submit them electronically. But
if you want technical assistance, if you want alignment or help
on your strategy, we will help you do that.'' So now, those
small cities or rural cities get big-city help.
Ms. Edwards. And I am way out of time. Thank you, Mr.
Chairman.
Mr. Denham. Thank you. And thank you, Mr. Spaur. Actually,
my final question is on that exact example that you gave on
this California Central Valley coalition that you are putting
together, forming. How far along are you in that process of
forming the coalition between all the eight counties?
Mr. Spaur. We are at the completion stage. The last step is
for each board of supervisors to pass a resolution and make an
appointment to the board. We have the governor's letter. We
probably have to refresh it, because we have a new governor.
But we have the last step.
Our comprehensive economic development strategy is out of
date, so it is time to update it. So now is a good time to do
it, when we submit the resolution to each of the counties. The
only thing that is left is to seat the board. Now that we have
eliminated the competition among the counties, and they are
actually coming together to collaborate--these are very
difficult times, so it is much easier to get people to
collaborate.
We just wish there were more funds for these economic
development districts. We just wish there were more funds for
the individual projects. They are oversubscribed. And the
forming of the district will help us prioritize or lower the
competition, so we can fund the most needed projects first.
Mr. Denham. We also want to work with the State governments
in leveraging dollars that may be available there. I know that
the California partnership has been defunded. Is there anything
that can be done with the California partnership and working
with the formation of EDD, or are they just two completely
separate issues?
Mr. Spaur. Yes, sir, there is. The California Partnership
for the San Joaquin Valley was an Executive order by the
governor, and it formed these eight counties. We already had an
eight-county group called the Central Valley Economic
Development Corporation. Each economic development corporation,
or EDC, pulls $11,000 together. And in that we do the business
retention and business recruitment.
We have been coming to Washington and talking to USDA and
HUD and all the agencies. And all the agencies have said,
``Partner regionally, work on innovation, and produce jobs, or
no funding. Earmarks are gone. You need to collaborate.'' So
this California partnership is the collaboration. This new
economic development district is part of that collaboration. If
we are going to get any more funds, it will be because we are
regional, we are innovative, and we create jobs, and we work
together.
Mr. Denham. Thank you. And finally, I would just ask a
quick response from each of you before we close.
The common theme I heard from each of you is that it is too
slow, we need to create more efficiencies. Can you give me
specific examples of how we could better facilitate getting
money moved quickly and into the hands of locals to be able to
create jobs? Mr. Etcher?
Mr. Etcher. Thank you, Mr. Chairman. I think EDA has taken
some very progressive steps to streamline their process. I
think other agencies can look at that process and say, ``We
need to be more responsive, we need to be timely in the
marketplace.''
We are in a very competitive environment. And if the
agencies continue to take lengthy processes, not only just in
the evaluation and approval of the grants, businesses are going
to go elsewhere, where they can be accommodated in a timely
fashion.
But moreover than that is there is a lot of process, once
an application is funded, until construction can begin. And we
need to continue to look at how can we reform and streamline
that process so we are not an obstacle to business expansion
and job creation in our regions.
Mr. Spaur. Congressman, I think that EDA has done a great
job in streamlining the process, and it has helped us greatly.
They just--they don't have enough reps. If they had more reps
to help you, coach you through the process, then you would get
the projects done a lot faster and get them submitted faster,
and eliminate some of the duplication. If there were more
funding there, they wouldn't be oversubscribed, and they
wouldn't overscrutinize. They are very stringent, and very
conservative. It is because they just don't have the dollars to
go around.
Mr. Denham. Thank you. Mr. Baker?
Mr. Baker. Yes. In our experience, our economic development
district has been very helpful. They had a lot of experience in
dealing with these programs before, have guided us through
that. They were very efficient and effective. EDA was
responsive. But again, there is a time lag there.
So, I think experience with people in the program itself
with the economic development district working with EPA helps.
But also it continues to be an immense amount of paperwork that
needs to be completed in certain sequences, in order to bring
those projects to fruition. And if companies like ours have
very time-sensitive business opportunities, they could lose
those before they really developed.
Mr. Denham. Thank you. I would like to thank each of you
for your testimony today. It has been helpful in today's
discussion.
If there are no further questions I would ask unanimous
consent that the record of today's hearing remain open until
such time as our witnesses have provided answers to any
questions that may be submitted to them in writing, and
unanimous consent that the record remain open for 15 days for
any additional comments and information submitted by Members or
witnesses to be included in the record of today's hearing.
[No response.]
Mr. Denham. Without objection, so ordered.
I would like to thank our witnesses again for their
testimony today. And if no Members have anything to add, the
subcommittee stands adjourned. Thank you.
[Whereupon, at 11:55 a.m., the subcommittee was adjourned.]