[Federal Register Volume 60, Number 24 (Monday, February 6, 1995)]
[Rules and Regulations]
[Pages 6945-6957]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-2313]



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  Federal Register / Vol. 60, No. 24 / Monday, February 6, 1995 / Rules 
and Regulations  
[[Page 6945]]

DEPARTMENT OF AGRICULTURE

Office of the Secretary

7 CFR Part 25

RIN 0503-AA09


Designation of Rural Empowerment Zones and Enterprise Communities

AGENCY: Office of the Secretary, USDA.

ACTION: Final rule.

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SUMMARY: This final rule implements that portion of Subchapter C, Part 
I (Empowerment Zones, Enterprise Communities and Rural Development 
Investment Areas) of Title XIII of the Omnibus Budget Reconciliation 
Act of 1993 (Pub. L. 103-66, approved August 10, 1993) dealing with the 
designation of rural Empowerment Zones and Enterprise Communities. This 
rule authorizes the Secretary of Agriculture (USDA) to designate not 
more than three (3) rural Empowerment Zones and not more than thirty 
(30) rural Enterprise Communities based upon the effectiveness of the 
strategic plan submitted by an applicant and nominated by a State or 
States and local governments.
    The purpose of this program is to empower rural communities and 
their residents to create jobs and opportunities to build for tomorrow 
as part of a Federal-State-local and private-sector partnership. 
Businesses will be encouraged to invest and create jobs in distressed 
areas, and comprehensive local strategic plans are to be adopted and 
implemented, encouraging entrepreneurship, furthering local self-
development and assisting in the revitalization of these areas.

EFFECTIVE DATE: March 8, 1995.

FOR FURTHER INFORMATION CONTACT:
Sandi Brewster-Walker, Deputy Administrator, Rural Business and 
Cooperative Development Service, Reporters Building, Room 701, 300 7th 
Street, SW, Washington, DC 20024, telephone 1-800-645-4712, or by 
sending an Internet Mail message to: ezecdir.rurdev.usda.gov.

SUPPLEMENTARY INFORMATION:

Paperwork Reduction Act

    No new data collection or record keeping requiring Office of 
Management and Budget (OMB) approval under the Paperwork Reduction Act 
of 1980 are included in this final rule. The reporting and record 
keeping burden associated with this rule is approved by the Office of 
Management and Budget under OMB No. 2506-0148.

I. Background

    The Empowerment Zones program confers upon rural distressed 
American communities the opportunity to take effective action to create 
jobs and opportunities. The program combines tax benefits with 
substantial investment of Federal resources and enhanced coordination 
among Federal agencies.
    All communities which complete the nomination process will be 
strengthened by it; gaining by taking stock of their assets and 
problems, by creating a vision of a better future, and by structuring a 
plan for achieving their vision. Local partnerships among community 
residents, businesses, financial institutions, service providers, 
neighborhood associations and State and local governments will be 
formed or strengthened by going through the application process. 
Communities will be afforded an opportunity to work with these partners 
in the creation and implementation of a community-based strategic plan.
    Communities that were not designated as Empowerment Zones or 
Enterprise Communities are eligible for certain benefits. Under a 
separate program directed by the Department of Housing and Urban 
Development, Community Development Corporations (CDCs) nominated by the 
locality, or the applicant for the Empowerment Zone or Enterprise 
Community, will be considered eligible for designation to receive tax 
preferred contributions from donors. HUD has committed to designating 
eight rural CDCs for this program. Communities with innovative visions 
for change will be considered for requested waivers of Federal program 
regulations, flexible use of existing program funds, and cooperation in 
meeting essential mandates, even if they did not receive a designation 
by the Secretary as an Empowerment Zone or Enterprise Community.
    Communities that are designated as Enterprise Communities receive a 
number of benefits. Enterprise Communities are eligible for new Tax-
Exempt Facilities Bonds for certain private business activities. States 
with designated Communities will receive Empowerment Zone/Enterprise 
Community Social Service Block Grants (EZ/EC SSBG) in the amount of 
approximately $3 million for each rural Enterprise Community to pass 
through to each designated area for approved activities identified in 
the strategic plans. Enterprise Communities receive special 
consideration in competition for funding under numerous Federal 
programs, including the new National Service and Community Policing 
initiatives. The Federal Government will focus special attention on 
working cooperatively with designated Enterprise Communities to 
overcome regulatory impediments, to permit flexible use of existing 
Federal funds, and to assist these Communities in meeting essential 
mandates.
    Communities that are designated as Empowerment Zones receive all of 
the benefits provided to Enterprise Communities, in addition to other 
benefits. States with designated rural Empowerment Zones will receive 
Empowerment Zone/Enterprise Community Social Service Block Grants in 
the amount of $40 million for each rural Empowerment Zone. Employer 
Wage Credits for Empowerment Zone residents are provided to qualified 
employers engaged in trade, business, or human service delivery in 
designated Empowerment Zones. Businesses are afforded an increased 
deduction under section 179 of the Internal Revenue Code for qualified 
investments.
    The rural part of the program will be administered by USDA as a 
Federal-State-local-private partnership, with a minimum of red tape 
associated with the application process. Applicants must demonstrate 
the ability to design and implement an effective strategic plan for 
real opportunities for growth and revitalization, that deal with local 
problems in a comprehensive way, and must demonstrate the capacity or 
the commitment to carry out these plans. Development of an effective 
plan must [[Page 6946]] also involve the participation of the community 
affected by the nomination of the rural area, and of the private 
sector, acting in concert with the State or States and local 
governments. The plan should be developed in accordance with four key 
principles, which will also serve as the basis for the selection 
criteria that will be used to evaluate the plan. These key principles 
reflect the Secretary's intention that Empowerment Zone and Enterprise 
Community designations should be based on potential for successful 
economic and community revitalization as reflected in the strategic 
planning process, participants in the plan, and the quality of the 
plan. Poverty, unemployment, and other need factors are critical in 
determining eligibility for Empowerment Zone or Enterprise Community 
status, but play a less significant role in the selection process. The 
four key principles are:
    (1) Economic opportunity, including job creation within the 
community and throughout the region, entrepreneurial initiatives, small 
business expansion, and training for jobs that offer upward mobility;
    (2) Sustainable community development, to advance the creation of 
livable and vibrant communities through comprehensive approaches that 
coordinate economic, physical, environmental, community and human 
development;
    (3) Community-based partnerships, involving participation of all 
segments of the community, including the political and governmental 
leadership, community groups, health and social service groups, 
environmental groups, religious organizations, the private and non-
profit sectors, centers of learning, other community institutions, and 
individual citizens; and
    (4) Strategic vision for change, which identifies what the 
community will become and a strategic map for revitalization. The 
vision should build on assets and coordinate a response to community 
needs in a comprehensive fashion. It should also set goals and 
performance benchmarks for measuring progress and establish a framework 
for evaluating and adjusting the revitalization plan.
    State and local governments and economic development corporations 
that are state chartered may nominate distressed rural areas for 
designation as Empowerment Zones (which will also permit their 
consideration for designation as Enterprise Communities), or solely for 
designation as Enterprise Communities.
    Title XIII of the Omnibus Reconciliation Act of 1993 included 
Empowerment Zones and Enterprise Communities as a new program.

II. Program Description

General

    Pursuant to Title XIII of the Omnibus Reconciliation Act of 1993, 
the Secretary of USDA may designate up to three rural Empowerment Zones 
and up to thirty rural Enterprise Communities.

Eligibility

    To be eligible for designation as a rural Empowerment Zone or 
Enterprise Community an area must:
    (1) Have a maximum population of 30,000;
    (2) Be one of pervasive poverty, unemployment, and general 
distress;
    (3) Not exceed one thousand square miles in total land area;
    (4) Demonstrate a poverty rate that is not less than:
    (a) 20 percent in each census tract or census block numbering area 
(BNA);
    (b) 25 percent in 90 percent of the population census tracts and 
BNAs within the nominated area;
    (c) 35 percent for at least 50 percent of the population census 
tracts and BNAs within the nominated area;
    (5) Be located entirely within no more than three contiguous 
States; if it is located in more than one State, the area must have one 
continuous boundary; if located in only one State, the area may consist 
of no more than three noncontiguous parcels;
    (6) If the nominated area consists of noncontiguous parcels, each 
must independently meet the three poverty requirements;
    (7) Be located entirely within the jurisdiction of the unit or 
units of general local government making the nomination;
    (8) Not include any portion of a census-defined central business 
district unless the poverty rate for each population census tract is at 
least 35 percent for an Empowerment Zone and 30 percent for an 
Enterprise Community; and
    (9) Not include any portion of an Indian reservation.

Nomination Process

    The law requires that areas be nominated by one or more local 
governments and the State(s) in which a nominated rural area is 
located. Nominations can be considered for designation only if:
    (1) The area meets the eligibility requirements set forth in these 
rules;
    (2) The area is within the jurisdiction of the nominating local 
government(s) and the State(s);
    (3) The local government(s) and State(s) provide assurances that 
the required strategic plan submitted by the applicant will be 
implemented;
    (4) All information furnished by the nominating local government(s) 
and State(s) is determined by the Secretary of USDA to be reasonably 
accurate;
    (5) The local government(s) and State(s) certify that no portion of 
a nominated rural area is already in an Empowerment Zone or Enterprise 
Community or in an area otherwise nominated for designation; and
    (6) The local government(s) and State(s) certify that they possess 
the legal authority to make the nomination.
    The nomination must be accompanied by an application for 
designation including a strategic plan, which:
    (1) Indicates and briefly describes the specific groups, 
organization and individuals participating in the development of the 
plan, and describes the history of these groups in the community;
    (2) Explains how participants were selected and provides evidence 
that the participants, taken as a whole, are broadly representative of 
the racial, cultural and economic diversity of the community;
    (3) Describes the role of the participants in the creation and 
development of the plan and indicates how they will participate in its 
implementation;
    (4) Identifies two or three topics addressed in the plan that 
caused the most serious disagreements among participants and describes 
how those disagreements were resolved;
    (5) Explains how the community participated in choosing the area to 
be nominated and why the area was nominated;
    (6) Provides evidence that key participants have the capacity or 
how they will develop the capacity to implement the plan;
    (7) Provides a brief explanation of the community's vision for 
revitalizing the area;
    (8) Explains how the vision stimulates economic opportunity, 
encourages self-sufficiency and promotes sustainable community 
development;
    (9) Identifies key needs of the area and the barriers that restrict 
the community from achieving its vision, including a description of 
poverty and general distress, barriers to economic opportunity and 
development and barriers to human development;
    (10) Discusses how the vision is related to the assets and 
capacities of the area and its surroundings; and
    (11) Describes the ways in which the community's approaches to 
economic [[Page 6947]] development, social/human services, 
transportation, housing, sustainable community development, public 
safety, drug abuse prevention, and educational and environmental 
concerns will be addressed in a coordinated fashion.
    The strategic plan must identify how government resources will be 
used to support the plan. Specifically, the plan must indicate:
    (1) How Social Service Block Grant (SSBG) funds for designated 
Zones and Communities, tax benefits for designated Zones and 
Communities, State and local resources, existing Federal resources 
available to the locality and additional Federal resources believed 
necessary to implement the strategic plan will be utilized within the 
Empowerment Zone or Enterprise Community;
    (2) The level of commitment necessary to ensure that these 
resources will be available to the area upon designation; and
    (3) The Federal resources being applied for or for which 
applications are planned.
    The plan must identify private resources committed to its 
implementation, including:
    (1) Private resources and support, including assistance from 
businesses, non-profit organizations and foundations, that are 
available to be leveraged with public resources; and
    (2) Assurances that these resources will be made available to the 
area upon designation.
    The plan must address changes needed in Federal rules and 
regulations necessary to implement the plan, including:
    (1) Specific paperwork or other Federal program requirements that 
need to be altered to permit effective implementation of the strategic 
plan; and
    (2) Specific regulatory and other impediments to implementing the 
strategic plan for which waivers are requested, with appropriate 
citations and an indication whether waivers can be accomplished 
administratively or require statutory changes.
    The plan must demonstrate how State and local governments will 
reinvent themselves to help implement the plan, by:
    (1) Identifying the changes that will be made in State and local 
organizations, processes and procedures, including laws and ordinances, 
to facilitate implementation of the plan; and
    (2) Explaining how different agencies in State and local 
governments will work together in new responsive ways to implement the 
strategic plan.
    The plan must provide details as to the manner in which the plan 
will be implemented and indicate what benchmarks will be used to 
measure progress, by:
    (1) Identifying the specific tasks necessary to implement the plan;
    (2) Describing the partnerships that will be established to carry 
out the plan;
    (3) Explaining how the strategic plan will be regularly revised to 
reflect new information and opportunities; and
    (4) Identifying the baselines, benchmarks and goals that will be 
used in evaluating performance in implementing the plan.

III. Differences Between Final Rule and Interim Rule

    This final rule makes appropriate corrections to the January 18, 
1994 interim rule. As will be discussed in the following section of 
this preamble, USDA received several good suggestions and 
recommendations of matters that the rule should address or expand upon, 
or terms that should be defined. These changes are largely directed at 
the nomination process, the eligibility process, the contents of the 
strategic plans, and evaluations of the strategic plans or policies 
associated with the use of EZ/EC funds.
    The technical changes made by this final rule are largely directed 
to that section of the rule (Sec. 25.200(d)) which addresses the use of 
EZ/EC SSBG funds and therefore are relevant even after the designation 
process is complete. The following provides a list of editorial/
technical changes made to the interim rule by this final rule.
    1. In Sec. 25.200 (Nominations by State and local governments), 
USDA sets forth the procedures for nominations by State and local 
governments of areas for designation as an Empowerment Zone and/or 
Enterprise Community. Paragraph (d) of the section addresses the 
elements of the strategic plan which must be developed as part of the 
application for designation, and paragraph (d)(12) specifically 
addresses how the Social Services Block Grant (SSBG) funds for 
designated Empowerment Zones and Enterprise Communities will be 
utilized. Several technical errors were made in paragraph (d)(12), and 
these are as follows:
    a. Paragraph (d)(12)(i)(A) discusses the commitment concerning the 
use of EZ/EC SSBG funds. The rule provides for the commitment to be 
made by the ``applicant as well as by the State government(s).'' In 
this paragraph, USDA inadvertently omitted reference to the full range 
of nominating entities that would have to make this commitment, and 
only listed ``State governments.'' (Note that Sec. 25.501 provides for 
nomination by States and local governments and Sec. 25.502 provides for 
nominations by State-chartered economic development corporations.) 
Accordingly, the final rule corrects this paragraph to include not only 
State governments, but local governments and State-chartered economic 
development corporations. The final rule also explains that the 
``services or activities'' referenced in this paragraph are the 
``services or activities which can be used to achieve or maintain the 
goals set forth in paragraph (d)(12).''
    b. Paragraph (d)(12)(ii) provides, in error, that Empowerment Zone 
or Enterprise Community SSBG funds (EZ/EC SSBG funds) may be used to 
achieve certain goals set forth in the paragraph by ``undertaking one 
of the below specified options.'' The correct wording should provide 
that States and local governments may undertake ``one or more'' of the 
options set forth in the paragraph. One option available to States and 
local governments for the use of EZ/EC SSBG funds was inadvertently 
omitted from the interim rule. This option provides for the use of EZ/
EC SSBG funds to promote the economic independence of low-income 
residents, such as capitalizing revolving or micro-enterprise loan 
funds for their benefit.
    c. In paragraph (d)(12)(ii), the interim rule provides that EZ/EC 
SSBG funds ``may'' be used to maintain the goals set forth in paragraph 
(d)(12). The rule should have stated that the EZ/EC SSBG funds ``must'' 
be used to maintain the goals set forth in paragraph (d)(12), and that 
the goals ``may be achieved'' by undertaking the program options listed 
in (d)(12)(ii).
    d. The interim rule inadvertently omitted the paragraph that 
provides guidance concerning how designated Empowerment Zones and 
Enterprise Communities may meet the goals specified in paragraph 
(d)(12). This paragraph does not dictate how the goals may be met, but 
offers guidance as to how they may be met. This rule makes this 
correction by adding a new paragraph (iii), and by redesignating the 
succeeding paragraphs accordingly.
    e. In paragraph (d)(12)(v) of the interim rule, the Department 
provided that the State must obligate EZ/EC SSBG funds in accordance 
with the strategic plan within two years from the ``date of designation 
of the Empowerment Zone or Enterprise Community.'' This time frame is 
incorrect. This paragraph should have provided that the State must 
obligate funds two years from the date ``the funds are paid to the 
State.'' This paragraph is also corrected by this 
[[Page 6948]] document to add that ``funds not obligated must be 
remitted to the Secretary of Health and Human Services.'' This sentence 
was inadvertently dropped in the rule text.
    f. Two requirements pertaining to the strategic plan were 
inadvertently omitted from paragraph (d)(12). One requirement provides 
that the strategic plan must indicate how the EZ/EC SSBG funds will be 
invested and used for the period of designation, and the second 
provides that the strategic plan must provide for periodic reporting of 
information by the relevant State. These requirements are now set forth 
in (d)(12) (vii) and (viii).
    2. In Sec. 25.401 (Periodic Performance Reviews), USDA sets forth 
guidelines for evaluation of progress in the implementation of 
strategic plans. This section is expanded to include responsibilities 
of implementation entities.
    3. Editorial corrections are as follows:
    a. In Sec. 25.300(b)(1) the second sentence is deleted; ``and;'' is 
added.
    b. In Sec. 25.302 the numeral `3' is replaced by ``three''.
    c. In Sec. 25.401 ``important'' is replaced by ``impartial''.
    d. In Sec. 25.504 (b) the sentence ``On a case basis, the Secretary 
will grant requests for waiver from the above definition of ``rural'' 
upon a showing of good cause'', ``above'' is deleted and ``stated in 
paragraph (2) of this section'', is added following the word ``rural''. 
In the next sentence, ``the above subsection'' is deleted and ``the 
definition in paragraph (a) of this section'' is added following the 
word ``satisfy''.
    The designation of Rural Development Administration has been 
changed to Rural Business and Cooperative Development Service.

IV. The Public Comments

General Comments

    The January 18, 1994 interim rule provided for a 30-day public 
comment period. The public comment period expired on February 17, 1994. 
Comments, however, were accepted through March 1, 1994. By this date, a 
total of 36 comments had been received. The commenters consisted of the 
Federal agencies, labor unions, (insert ``private citizens'') State and 
local jurisdictions, state legislators and non-profit organizations. 
USDA received several good suggestions and recommendations from 
commenters that will be adopted or considered in any future rulemaking. 
Other suggestions, although of equal merit, could not be adopted given 
the current statutory framework of the EZ/EC Program. Other requests 
for changes or clarification were determined to be adequately addressed 
by the January 18, 1994 interim rule. The following provides a summary 
of the significant issues raised by public commenters and USDA's 
response to these issues.

Technical Corrections

    Comment: Five commenters highlighted inadvertent omissions in the 
text of the interim rule regarding the use of EZ/EC SSBG funds.
    Response: Appropriate corrections were adopted in this final rule.

Business Non-Relocation

    Comment: The AFL-CIO makes the point that public funds should not 
be used to encourage plant relocations from one location to another and 
that the Federal government should not be a participant in state and 
local programs which only shift employment from one location to 
another. The letter called for strengthening regulations by placing the 
responsibility on the communities to show that relocations did not 
occur and that jobs created in the community are not at the expense of 
another location. The following recommendations were made regarding 
enforcement of the non-relocation provision: (1) Require firms to 
certify that they did not relocate from another area; (2) require 
public assistance to firms be paid back if plant relocations occur; (3) 
require employers to list annual employment at plant locations so that 
relocations could be monitored. Commenters also recommend revocation of 
EZ/EC designation if job relocations occur in the approved zones. The 
final comment sought the addition of labor unions to the list among 
segments of the community that could form community-based partnerships.
    Response: The issue of non-relocation of business received 
consideration early in the developmental stages of the EZ/EC program. 
The regulations include a prohibition against business relocation by 
prohibiting any activity in the strategic plan to assist business 
relocation to the nominated area from an area outside the nominated 
area. According to the Empowerment Zone statute (26 U.S.C. 1391 
(f)(2)(F)), expansion of an existing business entity is permitted if 
(1) it will not result in a decrease in employment in any area where 
the company currently conducts business; and (2) there is no reason to 
believe that a new branch is being established with the intention of 
closing down the existing business in another area. The issue of non-
relocation can be dealt with in the monitoring and evaluation process.
    Comment: One commenter requested clarification on the issue of 
relocation of foreign plants/entities to Empowerment Zones or 
Enterprise Communities.
    Response: The statute does not distinguish between foreign and 
domestic businesses in the prohibition against business relocation.

Comments on Census Data Calculations

    Comment: One commenter recommended that where calculations are made 
to determine eligibility, numbers should be rounded off and in a 
direction to favor the applicant. This recommendation would allow 
readjustment of the poverty threshold in the case of less than 10 
census tracts and rounding off up to 5 percentage points.
    Response: USDA disagrees with the commenter. Section 25.103 b(4) 
states: ``In making the calculations required by this section, the 
Secretary shall round all fractional percentages of one-half percentage 
point or more up to the next highest whole percentage point figure''. 
There is no authority for special mathematical rounding of the number 
of census tracts when there are less than 10 tracts (BNAs) identified.

Comments on Census Tracts and Census Tract Definitions

    Comment: Nineteen commenters requested the use of census block data 
in lieu of census tract data and to broaden the definition of 
population census tracts.
    Response: USDA is unable to adopt the suggestions of the 
commenters. The statute requires the use of the most recent decennial 
census data available. The regulations which govern designation of 
Empowerment Zones and Enterprise Communities (part 25, subpart A, 
Sec. 25.101(a)) indicate that the data employed to determine 
eligibility is based on the 1990 Census and from information published 
by the Bureau of the Census and the Bureau of Labor Statistics. Census 
tracts or block numbering areas are used to satisfy these requirements. 
The census data is reported in terms of census tracts or block number 
areas and not for other graphical units.
    Comment: Three commenters indicated that the statutory requirement 
to limit the area of nominated areas to 20 square miles for urban areas 
and 1000 square miles for rural areas imposed undue difficulties for 
many areas of the West and Southwest.
    Response: USDA is unable to adopt the suggestions of the 
commenters. The statute requires the size limitation and 
[[Page 6949]] does not permit exclusions as suggested by the 
commenters.

Comments on the Definition of Rural Area

    Comment: Several comments involved the definition of a `rural 
area'. The current definition of rural in the regulation excludes 
communities where predominantly rural populations reside within 
Metropolitan Areas (MA) or where more than 50 percent of the population 
resides within a designated Metropolitan Area. Metropolitan Area does 
not have an exact definition in the Bureau of the Census Dictionary of 
Geographical Terms. Tracts within MA's are restricted from applying 
unless they are contiguous to and part of a multicounty application.
    Response: No rule changes are required. Statute Section 
1393(a)(2)(B) and Sec. 25.504(b) of part 25 give the Secretary 
sufficient discretionary power to define a rural area.

General Comments on the Rule

    Comment: Apparent conflict between the EZ/EC rules and the Cash 
Management Act of 1990. Concern was expressed that while, under the 
Cash Management Act, States drawing Federal monies must make 
expenditures within three days of receipt or pay interest, EZ/EC SSBG 
funds are transferred to the states to be passed on to the implementing 
entities and that the State has two years to obligate these funds to 
the implementing entities.
    Response: Department of Health and Human Services has advised that 
the Cash Management Act does not apply to SSBG funds.
    Comment: The Governor of Texas and the Texas Department of Commerce 
requested that the application deadline be extended to six months from 
the issue date of the Interim Rule to allow time to prepare 
comprehensive applications.
    Response: USDA disagrees with the commenters. Extension of the 
deadline would penalize States that have allocated funds and technical 
assistance in order to meet the June 30, 1994 deadline.
    Comment: One commenter stated that the interim rule as a whole did 
not adequately address the needs of extremely low-income persons.
    Response: USDA disagrees with the commenter. The eligibility for 
designation as an Empowerment Zone or Enterprise Community requires a 
significant level of poverty, and the strategic plan is required to 
include various descriptions of how the nominated area would address 
the need of low-income persons, for example, through the creation of 
economic opportunities, home ownership, education or other route to 
economic independence for low-income families, youth and other 
individuals. (See Sec. 25.200.)
    Comment: One commenter stated that the definition of ``State-
chartered economic development corporation'' was not very clear.
    Response: The statute defined this term, and the rule simply 
incorporated the statutory definition.
    Comment: Three commenters stated that the strategic plan principle 
concerning employment should emphasize job creation for low-income 
persons. Another commenter stated that the strategic plan principle 
concerning employment should emphasize job creation for minority 
businesses.
    Response: USDA agrees with the commenters and such emphasis will be 
considered in future rulemaking that may be necessary for any 
additional rounds of designations that may be authorized.
    Comment: One commenter raised the concern of possible channeling of 
EDA assistance from Economic Development Districts, which may not 
qualify the EZ/EC designation, to designated EZ/EC areas.
    Response: The intent of the legislation is to provide assistance to 
distressed communities by encouraging creation of jobs and 
opportunities for local development as part of a Federal-State-local 
and private-sector partnership. Although this effort addresses `local' 
issues within each community, the context of revitalization applies 
nationally. Therefore diversion of programmed assistance from one 
distressed area to the designated EZ/EC communities is not consistent 
with the purpose of the EZ/EC program.
    Comment: One commenter stated that labor union should be added to 
the list among the segments of the community that could form Community-
based Partnerships.
    Response: While labor unions were not named specifically, they are 
included under the regulation. Subpart C (Nomination Procedure) 
Sec. 25.200 Paragraph (c)(3) states that ``Community based 
partnerships, involve the participation of all segments of the 
community groups, health and social service groups, environmental 
groups, religious organizations, the private and non-profit sectors, 
centers of learning, and other community institutions and individual 
citizens.'' The organizations listed are examples of the kinds of 
partnerships that could be formed by communities.
    Comment: One commenter addressed issues related to the use of 
certain statistics in the determination of applicant eligibility for 
the EZ/EC program.
    Response: These suggestions will be considered in any future 
rulemaking needed for a new round of designation.
    Comment: Two commenters stated that the rule should allow 
designated communities to use funds and other resources identified in 
the strategic plans for properties directly adjacent to the boundaries 
of the designated census tracts.
    Response: The regulation is clear on the use of EZ/EC SSBG funds 
for approved EZ/EC activities identified in the community strategic 
plans. A issue of this type can be addressed during the approval 
process.

V. Other Matters

National Environmental Policy Act

    This document has been reviewed in accordance with 7 CFR part 1940, 
subpart G, ``Environmental Program.'' It is the determination of USDA 
that this action does not constitute a major Federal action 
significantly affecting the quality of the human environment and in 
accordance the National Environmental Policy Act of 1969, Pub. L. 91-
190, an Environmental Impact Statement is not required.

Executive Order 12866, Regulatory Planning and Review

    This rule was reviewed and approved by the Office of Management and 
Budget as a significant rule, as that term is defined in Executive 
Order 12866, which was signed by the President on September 30, 1993. 
The economic analysis required by Executive Order 12866 will be 
retained in the public file with the Department's Rule Docket Clerk.

Regulatory Flexibility Act

    The Secretary, in accordance with the Regulatory Flexibility Act (5 
U.S.C. 605(b)), has reviewed this rule before publication and by 
approving it certifies that the rule will not have a significant 
economic impact on a substantial number of small entities. The Act is 
intended to encourage Federal agencies to utilize innovative 
administrative procedures in dealing with individuals, small 
businesses, small organizations, and small governmental bodies that 
would otherwise be unnecessarily adversely affected by Federal 
regulations. To the extent that this rule affects those entities, its 
purpose is to reduce any disproportionate burden by providing for the 
waiver of regulations [[Page 6950]] and by affording other incentives 
directed toward a positive economic impact. Therefore, no regulatory 
flexibility analysis under the Act is necessary.

Executive Order 12611, Federalism

    The General Counsel, as the Designated Official under section 6(a) 
of Executive Order 12611, Federalism, has determined that the policies 
contained in this rule will not have substantial direct effects on 
States or their political subdivisions, or the relationship between the 
Federal Government and the States, or on the distribution of power and 
responsibilities among the various levels of government. The purpose of 
this rule is to provide a cooperative atmosphere between the Federal 
Government and the States and local governments, and to reduce any 
regulatory burden imposed by the Federal Government that impedes the 
ability of State and local governments to solve pressing economic, 
social, and physical problems in their communities.

List of Subjects in 7 CFR Part 25

    Community development, Economic development, Empowerment zones, 
Enterprise communities, Housing, Indians, Intergovernmental relations, 
Reporting and recordkeeping requirements.

    In accordance with the reasons set out in the preamble, title 7, 
subtitle A, part 25 of the Code of Federal Regulations is revised to 
read as follows:
    1. Title 7, subtitle A is amended by revising part 25 to read as 
follows:

PART 25--RURAL EMPOWERMENT ZONES AND ENTERPRISE COMMUNITIES

Sec.

Subpart A--General Provisions

25.1  Applicability and scope.
25.2  Objective and purpose.
25.3  Definitions.
25.4  Secretarial review and designation.
25.5  Waivers.

Subpart B--Area Requirements

25.100  Eligibility requirements and data usage.
25.101  Data utilized for eligibility determinations.
25.102  Tests of pervasive poverty, unemployment and general 
distress.
25.103  Poverty rate.

Subpart C--Nomination Procedure

25.200  Nominations by State and local governments.
25.201  Evaluating the strategic plan.
25.202  Submission of nominations for designation.

Subpart D--Designation Process

25.300  USDA action and review of nominations for designation.
25.301  Selection factors for designation of nominated rural areas.
25.302  Number of Rural Empowerment Zones and Enterprise 
Communities.

Subpart E--Post-Designation Requirements

25.400  Reporting.
25.401  Periodic performance reviews.
25.402  Validation of designation.
25.403  Revocation of designation.

Subpart F--Special Rules

25.500  Indian reservations.
25.501  Governments.
25.502  Nominations by economic development corporations.
25.503  Use of census data.
25.504  Rural areas.

    Authority: 5 U.S.C. 301; 26 U.S.C. 1391 et seq.

Subpart A--General Provisions


Sec. 25.1  Applicability and scope.

    (a) Applicability. This part establishes policies and procedures 
applicable to rural Empowerment Zones and Enterprise Communities, 
authorized under the Omnibus Budget Reconciliation Act of 1993, title 
XIII, subchapter C, part I (Pub. L. 103-66, approved August 10, 1993), 
which amended the Internal Revenue Code by adding a new subchapter U, 
relating to the designation and treatment of Empowerment Zones and 
Enterprise Communities.
    (b) Scope. This part contains provisions relating to area 
requirements, the nomination process for rural Empowerment Zones and 
rural Enterprise Communities, and the designation of these Zones and 
Communities by USDA. Provisions dealing with the nominations and 
designation of urban Empowerment Zones and Enterprise Communities are 
promulgated by the United States Department of Housing and Urban 
Development (HUD). USDA and HUD will consult in all cases in which 
nominated areas possess both rural and urban characteristics and will 
utilize a flexible approach in determining the appropriate designation.


Sec. 25.2  Objective and purpose.

    The purpose of this part is to provide for the establishment of 
Empowerment Zones and Enterprise Communities in rural areas, to 
stimulate the creation of new jobs, particularly for the disadvantaged 
and long-term unemployed, and to promote revitalization of economically 
distressed areas, primarily by providing or encouraging:
    (a) Coordination of economic, human, community, and physical 
development plans and related activities at the local level;
    (b) Local partnerships fully involving affected communities and 
local institutions and organizations in developing and implementing a 
strategic plan for any nominated rural Empowerment Zone or Enterprise 
Community;
    (c) Tax incentives and credits; and
    (d) Empowerment Zone/Enterprise Community Social Service Block 
Grant (EZ/EC SSBG) funds.


Sec. 25.3  Definitions.

    As used in this part--
    Applicant means the lead entity that has prepared and will 
implement the community's strategic plan, pursuant to the provisions of 
Sec. 25.200(c) of this part, for comprehensive economic, human, 
community, and physical development within the area; such an entity may 
include, but is not limited to, state governments, local governments, 
regional planning agencies, non-profit organizations, community-based 
organizations, or a partnership of community members and other 
entities.
    Designation means the process by which the Secretary designates 
rural areas as Empowerment Zones or Enterprise Communities eligible for 
tax incentives and credits established by subchapter U of the Internal 
Revenue Code (26 U.S.C. 1391 et seq.), EZ/EC SSBGS as established by 
the Department of Health and Human Services (HHS), and for 
consideration for programs of Federal assistance.
    Empowerment Zone means a rural area so designated by the Secretary 
pursuant to this part. Up to three such zones may be designated.
    Enterprise Community means a rural area so designated by the 
Secretary pursuant to this part. Up to 30 such communities may be 
designated.
    EZ/EC SSBG Funds means grants made by the Secretary of HHS to 
States containing Empowerment Zones and Enterprise Communities whose 
strategic plans are qualified plans as defined in section 13761 of the 
Omnibus Budget Reconciliation Act of 1993.
    Indian reservation means a reservation as defined in section 3(d) 
of the Indian Financing Act of 1974 (25 U.S.C. 1452(d)) or section 
4(10) of the Indian Child Welfare Act of 1978 (25 U.S.C. 1903(10)).
    Local government means any county, city, town, township, parish, 
village, or other general purpose political subdivision of a State, and 
any combination of these political [[Page 6951]] subdivisions which is 
recognized by the Secretary.
    Nominated area means an area which is nominated by one or more 
local governments and the State or States in which it is located for 
designation pursuant to this part.
    Population census tract means a census tract, or, if census tracts 
are not defined for the area, a block numbering area (BNA).
    Poverty means the number of persons listed as being in poverty in 
the 1990 Census.
    Revocation of designation means the process by which the Secretary 
may revoke the designation of an area as an Empowerment Zone or 
Enterprise Community pursuant to Sec. 25.403 of this part.
    Rural area means any area defined pursuant to Sec. 25.504 of this 
part.
    Secretary means the Secretary of Agriculture.
    State means any State in the United States.
    Strategic plan means a strategy developed by the applicant, with 
the participation and commitment of local governments, State 
government(s), private sector, community members and others, pursuant 
to the provisions of Sec. 25.200(c) of this part. The plan must include 
written commitments from the local governments and State(s) that they 
will adhere to the strategy.
    USDA means the U.S. Department of Agriculture.


Sec. 25.4  Secretarial review and designation.

    (a) Designation. The Secretary will review applications for the 
designation of nominated rural areas to determine the effectiveness of 
the strategic plans submitted by applicants in accordance with 
Sec. 25.200 of this part. The Secretary will designate up to three 
rural Empowerment Zones and up to 30 rural Enterprise Communities.
    (b) Period of designation. The designation of a rural area as an 
Empowerment Zone or Enterprise Community shall remain in full effect 
during the period beginning on the date of designation and ending on 
the earliest of:
    (1) The close of the tenth calendar year beginning or after the 
date of designation;
    (2) The termination date designated by the State and local 
governments in their application for nomination; or
    (3) The date the Secretary revokes or modifies the designation, in 
accordance with Sec. 25.402 or Sec. 25.403 of this part.


Sec. 25.5  Waivers.

    The Secretary may waive any provision of this part in any 
particular case subject only to statutory limitations, for good cause, 
where it is determined that application of the requirement would 
produce a result adverse to the purpose and objectives of this part.

Subpart B--Area Requirements


Sec. 25.100  Eligibility requirements and data usage.

    Eligibility Criteria. A nominated rural area may be eligible for 
designation pursuant to this part only if the area:
    (a) Has a maximum population of 30,000;
    (b) Is one of pervasive poverty, unemployment, and general 
distress, as described in Sec. 25.102 of this part;
    (c) Does not exceed one thousand square miles in total land area;
    (d) Be located entirely within no more than three contiguous 
States; if it is located in more than one State, the area must have one 
continuous boundary; if located in only one State, the area may consist 
of up to three noncontiguous parcels;
    (e) Is located entirely within the jurisdiction of the unit or 
units of general local government making the nomination;
    (f) Does not include any portion of a central business district, as 
this term is used in the most recent Census of Retail Trade, unless the 
individual poverty rate of each population census tract in the district 
is not less than 35 percent for an Empowerment Zone and 30 percent for 
an Enterprise Community; and
    (g) Does not include any area within an Indian reservation.


Sec. 25.101  Data utilized for eligibility determinations.

    (a) Source of data. The data to be employed in determining 
eligibility pursuant to the criteria described in Sec. 25.102 of this 
part shall be based on the 1990 Census, and from information published 
by the Bureau of Census and the Bureau of Labor Statistics. The data 
shall be comparable in point or period of time and methodology 
employed.
    (b) Use of statistics on boundaries. The boundary of a rural area 
nominated for designation as an Empowerment Zone or Enterprise 
Community must coincide with the boundaries of census tracts, or, where 
tracts are not defined, with block numbering areas.


Sec. 25.102  Tests of pervasive poverty, unemployment and general 
distress.

    (a) Pervasive poverty. Conditions of poverty must be reasonably 
distributed throughout the entire nominated area. The degree of poverty 
shall be demonstrated by citing available statistics on low-income 
population and levels of public assistance. Poverty is demonstrated by 
poverty data from the 1990 census.
    (b) Unemployment. The degree of unemployment shall be demonstrated 
by the provision of information on the number of persons unemployed, 
underemployed (those with only a seasonal or part-time job) or 
discouraged workers (those capable of working but who have dropped out 
of the labor market--hence are not counted as unemployed), increase in 
unemployment rate, job loss, plant or military base closing, or other 
relevant unemployment indicators having a direct effect on the 
nominated area.
    (c) General distress. General distress shall be evidenced by 
describing adverse conditions within the nominated area other than 
those of pervasive poverty and unemployment. Below average or decline 
in per capita income, earnings per worker, per capita property tax 
base, average years of school completed; outmitigration and population 
decline from 1980-1990, and a high or rising incidence of crime, 
narcotics use, abandoned housing, deteriorated infrastructure, school 
dropouts and illiteracy are examples of appropriate indicators of 
general distress. The data and methods used to produce such indicators 
that are used to describe general distress must all be stated.


Sec. 25.103  Poverty rate.

    (a) General. Eligibility of an area on the basis of poverty shall 
be established in accordance with the following criteria:
    (1) In each census tract within a nominated area, the poverty rate 
shall be not less than 20 percent; and
    (2) For at least 90 percent of the population census tracts within 
the nominated area, the poverty rate shall not be less than 25 percent; 
and
    (3) For at least 50 percent of the population census tracts within 
the nominated area, the poverty rate shall be not less than 35 percent.
    (b) Special rules relating to the determination of poverty rate.--
(1) Census tracts with no population. Census tracts with no population 
shall be treated as having a poverty rate that meets the standards of 
paragraphs (a)(1) and (a)(2) of this section, but shall be treated as 
having a zero poverty rate for purposes of applying paragraph (a)(3) of 
this section.
    (2) Census tracts with populations of less than 2,000. A population 
census tract with a population of less than 2,000 shall be treated as 
having a poverty rate that meets the requirements [[Page 6952]] of 
paragraphs (a)(1) and (a)(2) of this section if more than 75 percent of 
the tract is zone for commercial or industrial use.
    (3) Adjustment of poverty rates for Enterprise Communities. For 
Enterprise Communities only, the Secretary has the discretion to reduce 
by 5 percentage points one of the following thresholds for not more 
than 10 percent of the census tracts, or, if fewer, five population 
census tracts in the nominated area:
    (i) The 20 percent threshold in paragraph (a)(1) of this section;
    (ii) The 25 percent threshold in paragraph (a)(2) of this section; 
and
    (iii) The 35 percent threshold in paragraph (a)(3) of this section;

Provided that, the Secretary may in the alternative reduce the 35 
percent threshold by 10 percentage points for three population census 
tracts.
    (4) Rounding up of percentages. In making the calculations required 
by this section, the Secretary shall round all fractional percentages 
of one-half percentage point or more up to the next highest whole 
percentage point figure.
    (c) Noncontiguous areas. There can be no more than 3 noncontiguous 
areas if the nominated area is located within one state; noncontiguous 
areas are not allowed in the multistate area. Each such parcel must 
separately meet the poverty criteria set forth in this section.
    (d) Areas not within census tracts. In the case of an area that 
does not have population census tracts, the block numbering area shall 
be used for purposes of determining poverty rates.

Subpart C--Nomination Procedure


Sec. 25.200  Nominations by State and local governments.

    (a) Nomination criteria. One or more local governments and the 
State or States in which an area is located must nominate such area for 
designation as an Empowerment Zone or Enterprise Community, if:
    (1) The rural area meets the requirements for eligibility described 
in Sec. 25.100 and Sec. 25.103 of this part;
    (2) The rural area is entirely within the jurisdiction of the 
nominating State or States and local government(s); such governments 
must have the authority to nominate the area for designation and 
provide written assurances satisfactory to the Secretary that the 
strategic plan described in paragraph (c) of this section will be 
implemented;
    (3) All information furnished by the nominating State(s) and local 
government(s) is determined by the Secretary to be reasonably accurate; 
and
    (4) The State(s) and local government(s) certify that no portion of 
the area nominated is already included in an Empowerment Zone or 
Enterprise Community under this Act or in an area otherwise nominated 
to be designated under this section.
    (b) Nomination for designation. No rural area may be considered for 
designation pursuant to subpart D of this part unless the application 
for designation:
    (1) Demonstrates that the nominated rural area satisfies the 
eligibility criteria set forth at Sec. 25.100 of this part;
    (2) Includes a strategic plan, as described in paragraph (c) of 
this section; and
    (3) Includes such other information as may be required by USDA in a 
Notice Inviting Applications, to be published in the Federal Register.
    (c) Strategic plan. Each application for designation must be 
accompanied by a strategic plan, which must be developed in accordance 
with four key principles that will be utilized to evaluate the plan. 
These key principles are:
    (1) Economic opportunity, including job creation within the 
community and throughout the region, entrepreneurial initiatives, small 
business expansion, and training for jobs that offer upward mobility;
    (2) Sustainable community development, to advance the creation of 
livable and vibrant communities through comprehensive approaches that 
coordinate economic, physical, environmental, community and human 
development;
    (3) Community-based partnerships, involving the participation of 
all segments of the community, including the political and governmental 
leadership, community groups, health and social service groups, 
environmental groups, religious organizations, the private and non-
profit sectors, centers of learning, and other community institutions 
and individual citizens; and
    (4) Strategic vision for change, which identifies what the 
community will become and a strategic map for revitalization. The 
vision should build on assets and coordinate a response to community 
needs in a comprehensive fashion. It should also set goals and 
performance benchmarks for measuring progress and establish a framework 
for evaluating and adjusting the revitalization plan.
    (d) Elements of strategic plan. The strategic plan should:
    (1) Indicate and briefly describe the specific groups, 
organizations, and individuals participating in its production, and 
describe the history of these groups in the community;
    (2) Explain how participants were selected and provide evidence 
that the participants, taken as a whole, are broadly representative of 
the entire community;
    (3) Describe the role of the participants in the creation and 
development of the plan and indicate how they will participate in its 
implementation;
    (4) Identify two or three topics addressed in the plan that caused 
the most serious disagreements among participants and describe how 
those disagreements were resolved;
    (5) Explain how the community participated in choosing the area to 
be nominated and why the area was nominated;
    (6) Provide evidence that key participants have the capacity to 
implement the plan;
    (7) Provide a brief explanation of the community's vision for 
revitalizing the area;
    (8) Explain how the vision creates economic opportunity, encourages 
self-sufficiency and promotes community development;
    (9) Identify key community goals and the barriers that restrict the 
community from achieving such goals, including a description of poverty 
and general distress, barriers to economic opportunity and development, 
and barriers to human development;
    (10) Discuss how the vision is related to the assets and needs of 
the area as well as to the surrounding community;
    (11) Describe the ways in which the community's approaches to 
economic development, social/human services, transportation, housing, 
community development, public safety, drug abuse prevention and 
educational and environmental concerns will be addressed in a 
coordinated fashion; and explain how these linkages support the 
community's vision;
    (12) Indicate how all EZ/EC SSBG funds for the designated 
Empowerment Zone or Enterprise Community will be utilized.
    (i) In doing so, the strategic plan shall provide the following 
information:
    (A) A commitment by the applicant, as well as by the nominating 
state-chartered economic development corporation or State 
government(s), and local government(s), that the EZ/EC SSBG funds will 
be used to supplement, not replace, other Federal or non-Federal funds 
available for financing services or activities which can be used to 
achieve or maintain the goals outlined in paragraph (d)(12)(ii) of this 
section;
    (B) a description of the entities that will administer the EZ/EC 
SSBG funds; [[Page 6953]] 
    (C) a certification by such entities that they will provide 
periodic reports on the use of the EZ/EC SSBG funds; and
    (D) a detailed description of all the activities to be financed 
with the EZ/EC SSBG funds and how all such funds will be allocated.
    (ii) The EZ/EC SSBG funds must be used to achieve or maintain the 
following goals through undertaking one of the below specified program 
options. The goals may be achieved by undertaking one or more of the 
following program options:
    (A) The goal of economic self-support to prevent, reduce or 
eliminate dependencies, through one of the following program options:
    (1) Funding community and economic development services focused on 
disadvantaged adults and youths, including skills training, 
transportation services and job, housing, business, and financial 
management counseling;
    (2) Supporting programs that promote home ownership, education or 
other routes to economic independence for low-income families, youths, 
and other individuals;
    (3) Assisting in the provision of emergency and transitional 
shelter for disadvantaged families, youths, and other individuals;
    (B) The goal of self-sufficiency, including reduction or prevention 
of dependencies, through one of the following program options:
    (1) Providing assistance to non-profit organizations and/or 
community and junior colleges that provide disadvantaged individuals 
with opportunities for short-term training courses in entrepreneurial, 
self employment, and other skills that promote individual self-
sufficiency, and the interest of the community;
    (2) Funding programs to provide training and employment for 
disadvantaged adults and youths in construction, rehabilitation or 
improvement of affordable housing, public infrastructure and community 
facilities; and,
    (C) The goal of prevention or amelioration of the neglect, abuse, 
or exploitation of children and/or adults unable to protect themselves; 
and, where appropriate, the goal of preservation or rehabilitation of 
families, through one or more of the following program options:
    (1) Providing support for residential or non-residential drug and 
alcohol prevention and treatment programs that offer comprehensive 
services for pregnant women, and mothers, and their children;
    (2) Establishing programs that provide activities after school 
hours, including keeping school buildings open during evenings and 
weekends for mentor and study programs.
    (iii) Designated Empowerment Zones and Enterprise Communities may 
work to achieve or maintain the goals outlined in paragraphs 
(d)(12)(ii)(A) and (B) of this section by using EZ/EC SSBG funds to 
capitalize revolving or micro-enterprise loan funds which benefit low-
income residents of the designated Empowerment Zones or Enterprise 
Communities. Similarly, grantees may work to achieve or maintain the 
goals outlined in paragraphs (d)(12)(ii)(A) and (B) of this section by 
using the EZ/EC SSBG funds to create jobs and promote economic 
opportunity for low-income families and individuals through matching 
grants, loans, or investments in community development financial 
institutions.
    (iv) If the applicant intends to use the EZ/EC SSBG funds for 
program options not included in paragraph (d)(12) of this section, the 
strategic plan must indicate how the proposed activities meet the goals 
set forth in paragraph (d)(12) (ii)(B) of this section, and the reasons 
the any approved program options were not pursued.
    (v) To the extent that the EZ/EC SSBG funds are used for the 
program options included in paragraph (d)(12) (ii)(B) of this section, 
the applicant may use EZ/EC SSBG funds for the following activities, in 
addition to those activities permitted by Sec. 2005 of the Social 
Security Act (42 USC 1397d):
    (A) To purchase or improve land or facilities;
    (B) To make cash payments to individuals for subsistence or room 
and board;
    (C) To make wage payments to individuals as a social service;
    (D) To make cash payments for medical care; and
    (E) To provide social services to institutionalized persons.
    (vi) The State must obligate the EZ/EC SSBG funds to in accordance 
with the strategic plan within 2 years from the date of payment to the 
state, or remit the unobligated funds to the Secretary of Health and 
Human Services (HHS).
    (vii) The Strategic Plan must indicate how the EZ/EC SSBG funds 
will be invested and used for the 10 year period of designation. The 
EZ/EC SSBG funds may be used to promote economic independence for low-
income residents, such as capitalizing revolving or micro-enterprise 
loan funds for the benefit of residents. The EZ/EC SSBG funds may also 
be used to create jobs and promote economic opportunity for low-income 
families and individuals through matching grants, loans, or investments 
in community development financial institutions.
    (viii) The strategic plan must indicate how all the EZ/EC SSBG 
funds will be used or invested for the period of designation of the 
Empowerment Zone or Enterprise Community.
    (ix) The strategic plan must provide for periodic reporting of 
information by the relevant State.
    (13) Indicate how tax benefits for designated zones and 
communities, State and local resources, existing Federal resources 
available to the locality and additional Federal resources believed 
necessary to implement the strategic plan will be utilized within the 
Empowerment Zone or Enterprise Community;
    (14) Indicate a level of commitment necessary to ensure that these 
resources will be available to the area upon designation;
    (15) Identify the Federal resources applied for or for which 
applications are planned;
    (16) Identify private resources and support, including assistance 
from businesses, non-profit organizations, and foundations, which are 
available to be leverage with public resources; and provide assurances 
that these resources will be made available to the area upon 
designation.
    (17) Identify changes requested in Federal rules and regulations 
necessary to implement the plan, including specific paperwork or other 
Federal program requirements that must be altered to permit effective 
implementation of the strategic plan;
    (18) Identify specific regulatory and other impediments to 
implementing the strategic plan for which waivers are requested, with 
appropriate citations and an indication whether waivers can be 
accomplished administratively or require statutory changes;
    (19) Demonstrate how State and local governments will reinvent 
themselves to help implement the plan, by identifying changes that will 
be made in State and local organizations, processes and procedures, 
including laws and ordinances;
    (20) Explain how different agencies in State and local governments 
will work together in new responsive ways to implement the strategic 
plan;
    (21) Identify the specific tasks necessary to implement the plan;
    (22) Described the partnerships that will be established to carry 
out the plan;
    (23) Explain how the plan will be regularly revised to reflect new 
information and opportunities; and
    (24) Identify baselines, benchmarks and goals that will be used in 
evaluating performance in implementing the plan. [[Page 6954]] 
    (e) Prohibition against business relocation. The strategic plan may 
not include any action to assist any establishment in relocating from 
an area outside the nominated area to the nominated area, except that 
assistance for the expansion of an existing business entity through the 
establishment of a new branch, affiliate, or subsidiary is permitted, 
if:
    (1) The establishment of a new branch affiliate or subsidiary will 
not result in a decrease in employment in the area of original location 
or in any other area where the existing business entity conducts 
business operations, and
    (2) There is no reason to believe that the new branch, affiliate, 
or subsidiary is being established with the intention of closing down 
the operations of the existing business entity conducts business 
operations.
    (f) Implementation of strategic plan. The strategic plan may be 
implemented by the State government(s), local governments, regional 
planning agencies, non-profit organizations, community-based 
organizations, and/or other nongovernmental entities. Activities 
included in the plan may be funded from any source, Federal, State, 
local, or private, which agrees to provide assistance to the nominated 
area.
    (g) Elements of the strategic plan. A strategic plan may include, 
but is not limited to, activities that address:
    (1) Economic problems, through measures designed to create 
employment opportunities; support business startup or expansion; or 
development of community institutions;
    (2) Human concerns, through the provision of social services, such 
as rehabilitation and treatment programs or the provision of training, 
education or other services within the affected areas;
    (3) Community needs, such as the expansion of housing stock and 
homeownership opportunities, efforts to reduce homelessness, to promote 
fair housing and equal opportunity, to reduce and prevent crime and 
improve security in the area; and
    (4) Physical improvements, such as the provision or improvement of 
public infrastructure, or the provision or improvement of recreational, 
transportation, or other public services within the affected area.


Sec. 25.201  Evaluating the strategic plan.

    The strategic plan will be evaluated for effectiveness as part of 
the designation process for nominated rural areas described in 
Sec. 25.301 of this part. On the basis of this evaluation, USDA may 
request additional information pertaining to the plan and the proposed 
area and may, as part of that request, suggest modifications to the 
plan, proposed area, or term that would enhance its effectiveness. The 
effectiveness of the strategic plan will be determined in accordance 
with the four key principles set forth in Sec. 25.200(c) of this part. 
USDA will review each plan submitted in terms of the four equally 
weighted key principles, and of such other elements of these key 
principles as are appropriate to address the opportunities and problems 
of each nominated area, which may include:
    (a) Economic opportunity. (1) The extent to which businesses, jobs, 
and entrepreneurship will increase within the zone or community;
    (2) The extent to which residents will achieve a real economic 
stake in the zone or community;
    (3) The extent to which residents will be employed in the process 
of implementing the plan and in all phases of economic and community 
development;
    (4) The extent to which residents will be linked with employers and 
jobs throughout the entire area and the way in which residents will 
receive training, assistance, and family support to become economically 
self-sufficient;
    (5) The extent to which economic revitalization in the zone or 
community interrelates with the broader regional economies; and
    (6) The extent to which lending and investment opportunities will 
increase within the zone or community through the establishment of 
mechanisms to encourage community investment and to create new economic 
growth.
    (b) Sustainable community development--(1) Consolidated planning. 
The extent to which the plan is part of a larger strategic community 
development plan for the nominating localities and is consistent with 
broader regional development strategies;
    (2) Public safety. The extent to which strategies such as community 
policing will be used to guarantee the basic safety and security of 
persons and property within the zone or community;
    (3) Amenities and design. The extent to which the plan considers 
issues of design and amenities that will foster a sustainable 
community, such as open spaces, recreational areas, cultural 
institutions, transportation, energy, land and water uses, waste 
management, environmental protection and the vitality of life of the 
community;
    (4) Sustainable development. The extent to which economic 
development will be achieved in a manner consistent that protects pubic 
health and the environment;
    (5) Supporting families. The extent to which the strengths of 
families will be supported so that parents can succeed at work, provide 
nurture in the home, and contribute to the life of the community;
    (6) Youth development. The extent to which the development of 
children, youth, and young adults into economically productive and 
socially responsible adults will be promoted, and the extent to which 
young people will be provided with the opportunity to take 
responsibility for learning the skills, discipline, attitude, and 
initiative to make work rewarding.
    (7) Education goals. The extent to which schools, religious 
organizations, non-profit organizations, for-profit enterprises, local 
governments and families will work cooperatively to provide all 
individuals with he fundamental skills and knowledge they need to 
become active participants and contributors to their community, and to 
succeed in an increasingly competitive global economy;
    (8) Affordable housing. The extent to which a housing component, 
providing for adequate safe housing and ensuring that all residents 
will have equal access to that housing is contained in the strategic 
plan;
    (9) Drug abuse. The extent to which the plan addresses levels of 
drug abuse and drug-related activity through the expansion of drug 
treatment services, drug law enforcement initiatives, and community-
based drug abuse education programs; and
    (10) Equal opportunity. The extent to which the plan offers an 
opportunity for diverse residents to participate in the rewards and 
responsibilities of work and service. The extent to which the plan 
ensures that no business within a nominated zone or community will 
directly or through contractual or other arrangements subject a person 
to discrimination on the basis of race, color, national origin, gender, 
handicap or age in its employment practices, including recruitment, 
recruitment advertising, employment, layoff, termination, upgrading, 
demotion, transfer, rates of pay or the forms of compensation, or use 
of facilities. Applicants must comply with the provisions of Title VI 
of the Civil Rights Act of 1964, section 504 of the Rehabilitation Act 
of 1973, and the Age Discrimination Act of 1975, as implemented by 
USDA.
    (c) Community-based partnerships----(1) Community partners. The 
extent to which residents of the strategic plan and their commitment to 
implementing it. The extent to which community-based organizations in 
the nominated area have participated in the development of 
[[Page 6955]] the nominated area have participated in the development 
of the plan, and their record of success measured by their achievements 
and support for undertakings within the nominated area:
    (2) Private and non-profit organizations as partners. The extent to 
which partnership arrangements include commitments from private and 
non-profit organizations, including corporations, utilities, banks and 
other financial institutions, and educational institutions supporting 
implementation of the strategic plan;
    (3) State and local government partners. The extent to which 
State(s) and local governments are committed to providing support to 
the strategic plan, including their commitment to ``reinventing'' their 
roles and coordinating programs to implement the strategic plan; and
    (4) Permanent implementation and evaluation structure. The extent 
to which a responsible and accountable implementation structure or 
process has been created to ensure that the plan is successfully 
carried out and that improvements are made throughout the period of the 
zone or community's designation.
    (d) Strategic vision for change.-- (1) Goals and coordinated 
strategy. The extent to which the strategic plan reflects a projection 
for the community's revitalization which links economic, human, 
physical, community development and other activities in a mutually 
reinforcing, synergistic way to achieve ultimate goals;
    (2) Creativity and innovation. The extent to which the activities 
proposed in the plan are creative, innovative and promising and will 
promote the civic spirit necessary to revitalize the nominated area;
    (3) Building on assets. The extent to which the vision for 
revitalization realistically addresses the needs of the nominated area 
in a way that takes advantage of its assets; and
    (4) Benchmarks and learning. The extent to which the plan includes 
performance benchmarks for measuring progress in its implementation, 
including an on-going process for adjustments, corrections and building 
on what works.


Sec. 25.202  Submission of nominations for designation.

    (a) General. A separate nomination for designation as an 
Empowerment Zone and/or Enterprise Community must be submitted for each 
rural area for which such designation is requested. The nomination 
shall be submitted in a form to be prescribed by USDA in the Notice 
Inviting Applications published in the Fedeal Register, and must 
contain complete and accurate information.
    (b) Certifications. Certifications must be submitted by the 
State(s) and local government(s) requesting designation stating that:
    (1) The nominated area satisfies the boundary tests of 
Sec. 25.100(d) of this part;
    (2) The nominated area is one of pervasive poverty, unemployment, 
and general distress, as described by Sec. 25.102 of this part;
    (3) The nominated area satisfies the poverty rate criteria set 
forth in Sec. 25.103 of this part;
    (4) The nominated rural area contains no portion of an area that is 
either already designated as an Empowerment Zone and/or Enterprise 
Community or is otherwise included in any other area nominated for 
designation as a Empowerment Zone and/or Enterprise Community;
    (5) Each nominating governmental entity has the authority to:
    (i) Nominate the rural area for designation as an Empowerment Zone 
and/or Enterprise Community;
    (ii) Make the State and local commitments required by 
Sec. 25.200(d) of this part; and
    (iii) Provide written assurances satisfactory to the Secretary that 
these commitments will be met;
    (6) Provide assurances the amounts provided to the State for the 
area under section 2007 of Title XX of the Social Security Act will not 
be used to supplant Federal or non-Federal funds for sevices and 
activities which promote the purposes of section 2007;
    (7) Provide that the nominating governments or corporations agree 
to make available all information requested by USDA to aid in the 
evaluation of progress in implementing the strategic plan and reporting 
on the use of EZ/EC SSBG funds; and
    (8) Provide assurances that the nominating State(s) agrees to 
distribute the EZ/EC SSBG funds in accordance with the strategic plan 
submitted for the designated zone or community.
    (c) Maps and area description. Maps and a general description of 
the nominated area shall accompany the nomination request.

Subpart D--Designation Process


Sec. 25.300  USDA action and review of nominations for designation.

    (a) Establishment of submission procedures. USDA will establish a 
time period and procedure for the submission of application as 
Empowerment Zones or Enterprise Communities, including submission 
deadlines and addresses, in a Notice Inviting Applications, to be 
published in the Federal Register.
    (b) Acceptance for processing. USDA will accept for processing 
those applications as Empowerment Zones or Enterprise Communities which 
USDA determines have met the criteria required under this part. USDA 
will notify the State(s) and local government(s) whether or not the 
nomination has been accepted for processing. The criteria for 
acceptance for processing is that the application as an Empowerment 
Zone or Enterprise Community must be received by USDA on or before the 
close of business on the date established by the Notice Inviting 
Applications published in the Federal Register. The applications must 
be complete and must be accompanied by a strategic plan, as required by 
Sec. 25.200(c) of this part and the certifications required by 
Sec. 25.202(b) of this part.
    (c) Evaluation of applications. In the process of reviewing each 
application accepted for processing, USDA may undertake a site visit(s) 
to any nominated area to aid in the process of evaluation.
    (d) Modification of the strategic plan, boundaries of nominated 
rural areas, and/or period during which designation is in effect. 
Subject to the limitations imposed by Sec. 25.100 of this part, USDA 
may request additional information pertaining to the plan and proposed 
area and may, as a part of that request, suggest modifications to the 
plan that would enhance its effectiveness.
    (e) Publication of designations. Final determination of the 
boundaries of areas and the term for which the designations will remain 
in effect will be made by the Secretary. Announcements of those 
nominated areas designated as Empowerment Zones of Enterprise 
Communities will be made by publication of a Notice in the Federal 
Register.


Sec. 25.301  Selection factors for designation of nominated rural 
areas.

    In choosing among nominated rural areas eligible for designation, 
the Secretary shall consider:
    (a) The effectiveness of the Strategic plan, in accordance with the 
key principles set out in Sec. 25.201 of this part.
    (b) The effectiveness of the assurances made pursuant to 
Sec. 25.200(a)(2) of this part that the strategic plan will be 
implemented.
    (c) The extent to which an application proposes activities that are 
creative and innovative. [[Page 6956]] 
    (d) Such other factors as established by the Secretary, which 
include the degree of need demonstrated by the nominated area for 
assistance under this part and the diversity within and among the 
nominated areas. If other factors are established by USDA, a Federal 
Register Notice will be published identifying such factors, along with 
an extension of the application due date if necessary.


Sec. 25.302  Number of Rural Empowerment Zones and Enterprise 
Communities.

    The Secretary may designate up to three rural Empowerment Zones and 
up to thirty rural Enterprise Communities.

Subpart E--Post-Designation Requirements


Sec. 25.400  Reporting.

    USDA will require periodic reports for the Empowerment Zones and 
Enterprise Communities and other applicants designated pursuant to this 
part. These reports will identify the community, local government and 
State actions which have been taken in accordance with the strategic 
plan. In addition to these reports, such other information relating to 
designated Empowerment Zones and Enterprise Communities as USDA shall 
request from time to time shall be submitted promptly. On the basis of 
this information and of on-site reviews, USDA will prepare and issue 
periodic reports on the effectiveness of the Empowerment Zones/
Enterprise Communities Program.


Sec. 25.401  Periodic performance reviews.

    USDA will regularly evaluate the progress in implementing the 
strategic plan in each designated Empowerment Zone and Enterprise 
Community on the basis of performance reviews to be conducted on site 
and using other information submitted. USDA may also commission 
evaluations of the Empowerment Zone program as a whole by an impartial 
third party. Where not prevented by State law, nominating State 
governments must provide the timely release of data requested by USDA 
for the purposes of monitoring and assisting the success of Empowerment 
Zones and Enterprise Communities. The implementing entity for 
Empowerment Zones/Enterprises Communities will be responsible for EZ/EC 
program activities and fiscal management of the EZ/EC funds. They must 
demonstrate continual involvement of all segments of the community, 
including low income/disadvantaged residents, in the implementation of 
the Strategic Plan.


Sec. 25.402  Validation of designation.

    (a) Reevaluation of designations. On the basis of the performance 
review described in Sec. 25.401 of this part, and subject to the 
provisions relating to the revocation of designation appearing at 
Sec. 25.403 of this part, USDA will make findings as to the continuing 
eligibility for the validity of the designation of any Empowerment Zone 
or Enterprise Community. Determinations of whether any designated 
Empowerment Zone or Enterprise Community remains in good standing shall 
be promptly communicated to all Federal agencies providing assistance 
or administering programs under which assistance can be made available 
in such Zone or community.
    (b) Modification of designation. Based on a rural Zone or 
community's success in carrying out its strategic plan, and subject to 
the provisions relating to revocation of designation appearing at 
Sec. 25.403 of this part and the requirements as to the number, maximum 
population and other characteristics of rural Empowerment Zones set 
forth in Sec. 25.100 of this part, the Secretary may modify 
designations by reclassifying rural Empowerment Zones as Enterprise 
Communities or Enterprise Communities as Empowerment Zones.


Sec. 25.403  Revocation of designation.

    (a) Basis for revocation. The Secretary may revoke the designation 
of a rural area as an Empowerment Zone or Enterprise Community if the 
Secretary determines on the basis of the periodic monitoring and 
assessments described in Sec. 25.401 of this part, that the applicant 
or the State(s) or local government(s) in which the rural area is 
located:
    (1) Has modified the boundaries of the area;
    (2) Has failed to make satisfactory progress in achieving the 
benchmarks set forth in the strategic plan; or
    (3) Has not complied substantially with the strategic plan.
    (b) Warning letter. Before revoking the designation of a rural area 
as an Empowerment Zone or Enterprise Community, the Secretary will 
issue a letter of warning to the applicant and the nominating State(s) 
and local government(s):
    (1) Advising that the Secretary has determined that the applicant 
and/or the nominating local government(s)and/or State(s) has:
    (i) Modified the boundaries of the area; or
    (ii) Is not complying substantially with, or has failed to make 
satisfactory progress in achieving the benchmarks set forth in the 
strategic plan prepared pursuant to Sec. 25.200(d) of this part; and
    (2) Requesting a reply from all involved parties within 90 days of 
the receipt of this letter of warning.
    (c) Notice of revocation. After allowing 90 days from the date of 
receipt of the letter of warning for response, and after making a 
determination pursuant to paragraph (a) of this section, the Secretary 
may issue a final notice of revocation of the designation of the rural 
area as an Empowerment Zone or Enterprise Community.
    (d) Notice to affected Federal agencies. USDA will notify all 
affected Federal agencies providing assistance in a rural Empowerment 
Zone or Enterprise Community of its determination to revoke any 
designation pursuant to this section or to modify a designation 
pursuant to Sec. 25.402 of this part.

Subpart F--Special Rules


Sec. 25.500  Indian reservations.

    No rural Empowerment Zone or Enterprise Community may include any 
area within an Indian reservation.


Sec. 25.501  Governments.

    If more than one State or local government seeks to nominate an 
area under this part, any reference to or requirement of this part 
shall apply to all such governments.


Sec. 25.502  Nominations by economic development corporations.

    Any rural area nominated by an economic development corporation 
chartered by a State and qualified to do business in the State in which 
it is located, shall be treated as nominated by a State and local 
governments.


Sec. 25.503  Use of census data.

    Population and poverty rate data shall be determined by the 1990 
Census Data.


Sec. 25.504  Rural areas.

    (a) What constitutes ``rural''. A rural area may consist of any 
area that lies outside the boundaries of a Metropolitan Area, as 
designated by the Office of Management and Budget, or, as an area that 
is primarily rural and has at least 50 percent of the population of the 
nominated area residing outside of a Metropolitan Area.
    (b) Exceptions to the definition. On a case by case basis, the 
Secretary will grant requests for waiver from the definition of 
``rural'' stated in paragraph (a) of this section upon a showing of 
good cause. Applicants seeking to apply for a rural designation who do 
not satisfy the definition in paragraph (a) of [[Page 6957]] this 
section must submit a request for waiver in writing to the Rural 
Business and Cooperative Development Service, Empowerment Zone Office, 
Department of Agriculture, AG Box 3202, 14th Street and Independence 
Avenue, SW, Washington, DC 20250-3200. Requests must include:
    (1) The name, address and daytime phone number of the contact 
person for the applicant seeking the waiver; and
    (2) Sufficient information regarding the area that would support 
the infrequent exception from the definition.
    (c) The waiver process. The Secretary, in consultation with the 
Department of Commerce, will have discretion to permit rural 
applications for communities that do not meet the above rural criteria.


Sec. 25.550

    Dated: January 25, 1995.
Richard E. Rominger,
Acting Secretary.
[FR Doc. 95-2313 Filed 2-3-95; 8:45 am]
BILLING CODE 3410-01-M