[Congressional Record Volume 141, Number 6 (Wednesday, January 11, 1995)]
[Extensions of Remarks]
[Pages E74-E75]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]


INTRODUCTION OF THE ECONOMIC DEVELOPMENT LOAN ASSISTANCE DEMONSTRATION 
                          PROGRAM ACT OF 1995

                                 ______

                      HON. JAMES A. TRAFICANT, JR.

                                of ohio

                    in the house of representatives

                      Wednesday, January 11, 1995
  Mr. TRAFICANT. Mr. Speaker, today I am introducing the Economic 
Development Loan Assistance Demonstration Program Act of 1995 to 
incentivize private sector investment in our Nation's most needy areas.
  When President Clinton announced the establishment of more than 100 
enterprise communities and empowerment zones last month, the Federal 
Government signaled that it is willing to provide incentives to 
entrepreneurs, small businesses, and nonprofit groups who look to 
locate in our depressed communities. I reintroduced this bill to 
enhance this worthy initiative.
  Specifically, the bill authorizes the Secretary of Housing and Urban 
Development [HUD] to make grants to bank Community Development 
Corporations [CDC's] that have targeted Federal enterprise communities 
for revitalization. The CDC's are then authorized to use the grant 
moneys to buy down interest rates on loans to businesses and nonprofit 
organizations that engage in economic redevelopment activities in the 
enterprise communities. The new rate cannot exceed 60 percent of the 
market rate of interest on the loan.
  I understand that money for new programs is scarce. I also understand 
the need to test market new ideas before diverting precious resources 
to fund them. This is why my legislation specifies that the program be 
established in only five Federal enterprise zones. It is also why the 
measure requires a review of the entire program in a report to Congress 
within 1 year of its enactment. The report enables Congress to 
determine the cost effectiveness of the program, which is authorized 
from fiscal year 1994 through fiscal year 1996 at a level of 
approximately $33 million each year.
  [[Page E75]] Under the bill, economic development activities are 
defined as the construction and rehabilitation of housing, downtown and 
neighborhood commercial revitalization, industrial development and 
redevelopment, small and minority business assistance, neighborhood 
marketing, training and technical assistance, research and planning for 
nonprofit development groups, and other activities that create 
permanent private sector jobs.
  Because of their continued involvement in the community, I believe it 
is best to work with CDC's to finance these activities. CDC's are 
established by national banks or bank holding companies and are 
regulated by either the Federal Reserve or the U.S. Treasury, depending 
on the particular corporation. The CDC's offer incentives for banks to 
participate in local community development projects. In exchange, bank 
regulatory agencies allow CDC's more flexibility with their 
investments. Under this setup, the Federal Government benefits from 
private sector organizations investing in their local communities, 
while CDC's benefit from higher yield investments, such as real estate 
and more chancy businesses.
  As we all know, Mr. Speaker, it is essential that the private sector 
invest in its community. The Federal Government cannot and should not 
be the only entity investing in our depressed communities. This is why 
I believe my bill is significant. In the past, I have had moderate 
success with passing comparable programs. During the 101st Congress, I 
offered similar legislation as an amendment to the Cranston-Gonzalez 
National Affordable Housing Act, Public Law 101-625, when it was under 
consideration on the House floor. Although I was successful at 
attaching the measure, it was stripped during conference. More 
recently, I was able to attach a provision to the Economic Development 
Administration and Appalachian Regional Commission reauthorization bill 
that allowed the EDA to buy down interest loans on private economic 
development loans.
  Despite this success, much more is needed to stem the tide of 
hopelessness in our communities. My bill is important because it merges 
two existing community development tools, CDC's and enterprise 
communities. Both have had limited success on their own on the local 
and State level, but with a jump start from this Federal demonstration 
program, we can combine them and incentivize investment.
  Since 1977, my community has been devastated by an exodus of 55,000 
manufacturing jobs. Unemployment in Youngstown, OH is twice that of the 
national average. I have seen first hand the hopelessness of a 
community crumbling around its citizens. As representatives of 
Americans like these, it is our duty to help them help themselves, to 
lend a hand so that they can return their communities to the thriving, 
healthy environment it once was.
  We can begin this process, Mr. Speaker, through passage of this bill. 
I urge my colleagues to cosponsor the Economic Development Loan 
Assistance Program Act of 1995.
                                H.R. --

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Economic Development Loan 
     Assistance Demonstration Program Act of 1995''.

     SEC. 2. ESTABLISHMENT AND SCOPE OF DEMONSTRATION PROGRAM.

       (a) Establishment.--The Secretary of Housing and Urban 
     Development shall carry out a program to demonstrate the 
     effectiveness of encouraging economic development in 
     enterprise communities by making grants to community 
     development corporations for reducing interest rates on loans 
     for economic development activities in the enterprise 
     communities.
       (b) Selection of Enterprise Communities.--
       (1) Number.--The Secretary shall carry out the 
     demonstration program under this Act with respect to 5 
     enterprise communities, which the Secretary shall select not 
     later than the expiration of the 30-day period beginning on 
     the date of the enactment of this Act.
       (2) Diversity.--Of the enterprise communities selected 
     under this subsection, not less than 2 shall be located in 
     rural areas (as defined in section 1393(a) of the Internal 
     Revenue Code of 1986) and not less than 2 shall be located in 
     metropolitan statistical areas (within the meaning of section 
     143(k)(2)(B) of such Code). In selecting the enterprise 
     communities, the Secretary shall provide for national 
     geographic diversity among enterprise communities 
     participating in the demonstration program.

     SEC. 3. GRANTS FOR ECONOMIC DEVELOPMENT LOAN ASSISTANCE.

       (a) Authority.--Under the demonstration program under this 
     Act, the Secretary may make grants to any community 
     development corporation sponsored by a bank or thrift 
     institution, by a nonbank economic development corporation, 
     or by residents of an enterprise community selected under 
     section 2(b).
       (b) Use.--Each community development corporation receiving 
     a grant under the demonstration program under this Act shall 
     use the grant amounts to assist businesses and nonprofit 
     organizations by reducing interest rates on loans for 
     economic development activities carried out in an enterprise 
     community selected under section 2(b).
       (c) Other Requirements.--The Secretary shall require each 
     community development corporation receiving a grant under the 
     demonstration program under this Act to--
       (1) use the grant amounts to reduce the interest rate on a 
     loan described in subsection (b) by an amount not to exceed 
     60 percent of the market rate of interest on such loan; and
       (2) take any actions necessary to inform businesses and 
     nonprofit organizations of the availability of such loans, 
     including holding informational meetings, making public 
     announcements, and placing notices in newspapers and other 
     publications.

     SEC. 4. MONITORING.

       The Secretary shall monitor the use of grants made under 
     this Act and the costs of administering such grants.

     SEC. 5. REPORTS AND STUDY.

       (a) Annual Report.--The Secretary shall submit to the 
     Congress, not later than 1 year after the date that amounts 
     to carry out this Act are first made available under 
     appropriations Acts and for each year thereafter in which 
     amounts are available to carry out the demonstration program, 
     a report containing an evaluation of the effectiveness of 
     grants made under the demonstration program.
       (b) Study and Report on Expanded Program.--
       (1) Study.--The Secretary shall conduct a study regarding 
     the effects and costs of carrying out a long-term and 
     expanded program of making grants for the purposes under this 
     Act. The study shall determine the need for such grants and 
     the amount of funds necessary to carry out an effective 
     program of national scope.
       (2) Report.--The Secretary shall submit to the Congress, 
     not later than September 30, 1998, a report regarding the 
     results of the study under paragraph (1) and any 
     recommendations for carrying out a program as described in 
     paragraph (1).

     SEC. 6. DEFINITIONS.

       For the purposes of this Act:
       (1) Economic development activities.--The term ``economic 
     development activities'' means the construction and 
     rehabilitation of housing, downtown and neighborhood 
     commercial revitalization, industrial development and 
     redevelopment, small and minority business assistance, 
     neighborhood marketing, training, and technical assistance, 
     research and planning for nonprofit development groups, and 
     other activities which create permanent private sector jobs.
       (2) Enterprise community.--The term ``enterprise 
     community'' means an area that is designated as an enterprise 
     community under section 1391 of the Internal Revenue Code of 
     1986.
       (3) Secretary.--The term ``Secretary'' means the Secretary 
     of Housing and Urban Development.

     SEC. 7. AUTHORIZATION OF APPROPRIATIONS.

       There is authorized to be appropriated to carry out this 
     Act in fiscal years 1996, 1997, and 1998 a total of 
     $100,000,000.

     SEC. 8. REGULATIONS.

       The Secretary may issue any regulations necessary to carry 
     out this Act.
     

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