Community Development: Status of Urban Empowerment Zones (Letter Report,
12/20/96, GAO/RCED-97-21).

Pursuant to a congressional request, GAO reviewed the Department of
Housing and Urban Development's (HUD) Empowerment Zone and Enterprise
Community (EZ/EC) Program, focusing on the: (1) status of the program's
implementation in the urban EZs, including the extent to which public
housing officials and residents have been involved; (2) factors that
participants believe have either helped or hindered efforts to carry out
the program; and (3) plans for evaluating the program.

GAO found that: (1) the six urban EZs reviewed resemble each other in
some ways, but also differ in ways that reflect the diversity of the
communities; (2) all of the EZs have included public housing authority
officials in planning and implementing the program; (3) many officials
involved in implementing the program generally agreed on factors that
have either helped or hindered their efforts; (4) in a survey GAO
conducted of program participants at the federal, state, and local
levels, over half of the 27 program officials who responded agreed that
community representation on the EZ governance boards, technical
assistance provided by HUD's contractors, enhanced communication among
stakeholders, and support from the city's mayor and from White House and
cabinet-level officials had helped the program's implementation; (5)
conversely, the difficulty in selecting a governance structure, the
additional layer of bureaucracy created by the state government's
involvement, preexisting relationships among EZ stakeholders, pressure
for quick results, and the lack of federal funding for the program's
initial administrative activities were frequently identified as factors
constraining implementation; (6) HUD required each EZ to prepare a
strategic plan indicating how it would satisfy the EZ program's four key
principles and required the strategic plan to include realistic
performance benchmarks for measuring progress in implementing the
program; (7) all six of the urban EZs prepared strategic plans that
include benchmarks describing the activities that the EZ planned to
accomplish during the first 2 years of the program; and (8) HUD and the
EZs have not yet described measurable outcomes for the program's key
principles or indicated how the outputs anticipated from one or more
benchmarks will help to achieve those outcomes.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  RCED-97-21
     TITLE:  Community Development: Status of Urban Empowerment Zones
      DATE:  12/20/96
   SUBJECT:  Block grants
             Community development programs
             Strategic planning
             Public housing
             Intergovernmental fiscal relations
             Economically depressed areas
             Urban economic development
             Technical assistance
IDENTIFIER:  HUD Empowerment Zones and Enterprise Communities Program
             Social Services Block Grant
             Atlanta (GA)
             Baltimore (MD)
             Chicago (IL)
             Detroit (MI)
             New York (NY)
             Philadelphia (PA)
             Camden (NJ)
             HUD Hope IV Program
             
******************************************************************
** This file contains an ASCII representation of the text of a  **
** GAO report.  Delineations within the text indicating chapter **
** titles, headings, and bullets are preserved.  Major          **
** divisions and subdivisions of the text, such as Chapters,    **
** Sections, and Appendixes, are identified by double and       **
** single lines.  The numbers on the right end of these lines   **
** indicate the position of each of the subsections in the      **
** document outline.  These numbers do NOT correspond with the  **
** page numbers of the printed product.                         **
**                                                              **
** No attempt has been made to display graphic images, although **
** figure captions are reproduced.  Tables are included, but    **
** may not resemble those in the printed version.               **
**                                                              **
** Please see the PDF (Portable Document Format) file, when     **
** available, for a complete electronic file of the printed     **
** document's contents.                                         **
**                                                              **
** A printed copy of this report may be obtained from the GAO   **
** Document Distribution Center.  For further details, please   **
** send an e-mail message to:                                   **
**                                                              **
**                                            **
**                                                              **
** with the message 'info' in the body.                         **
******************************************************************


Cover
================================================================ COVER


Report to the Chairman, Subcommittee on Human Resources and
Intergovernmental Relations, Committee on Government Reform and
Oversight, House of Representatives

December 1996

COMMUNITY DEVELOPMENT - STATUS OF
URBAN EMPOWERMENT ZONES

GAO/RCED-97-21

Community Development

(385605)


Abbreviations
=============================================================== ABBREV

  EZ/EC - Empowerment Zone and Enterprise Community
  EZ -
  EC -
  EDI - Economic Development Initiative
  SSBG - Social Services Block Grant
  HHS - Department of Health and Human Services
  HUD - Department of Housing and Urban Development
  PHA - public housing authority
  USDA - U.S.  Department of Agriculture

Letter
=============================================================== LETTER


B-275112

December 20, 1996

The Honorable Christopher Shays
Chairman
Subcommittee on Human Resources
 and Intergovernmental Relations
Committee on Government Reform
 and Oversight
House of Representatives

Dear Mr.  Chairman: 

For over 30 years, the nation has faced the challenge of revitalizing
its deteriorating urban and rural communities.  In the past, the
federal government has tried to revive distressed areas by providing
grants for activities ranging from job training and social services
to the repair and replacement of aging infrastructure.  The most
recent effort to help distressed communities is called the
Empowerment Zone and Enterprise Community (EZ/EC) program.  This
10-year program targets federal grants to distressed urban and rural
communities for social services and community redevelopment and
provides tax and regulatory relief to attract or retain businesses in
distressed communities.  In general, the same eligibility criteria
and selection process apply to the EZs and the ECs.  However, the EZs
receive much larger grants than the ECs, and businesses located in
the EZs are eligible for more tax incentives than businesses in the
ECs. 

The enacting legislation designated 104 communities as either EZs or
ECs.  Federal funding for the EZs and ECs was made available through
the title XX Social Services Block Grant (SSBG) program, which is
administered by the Department of Health and Human Services (HHS). 
This report focuses on the six urban EZs, which receive the majority
of the EZ/EC SSBG funds, as well as some tax incentives that are not
available to the ECs.\1 The urban EZs are located in Atlanta,
Baltimore, Chicago, Detroit, New York, and Philadelphia-Camden (a
bistate zone). 

In response to your request, this report (1) describes the status of
the program's implementation in the urban EZs, including the extent
to which public housing officials and residents have been involved;
(2) identifies factors that participants believe have either helped
or hindered efforts to carry out the program; and (3) examines the
plans for evaluating the program. 


--------------------
\1 During the next year, we plan to report to the Senate Committee on
Agriculture, Nutrition, and Forestry on the Department of
Agriculture's implementation of the EZ/EC program in rural areas. 


   RESULTS IN BRIEF
------------------------------------------------------------ Letter :1

The six urban EZs resemble each other in some ways but also differ in
ways that reflect the diversity of their communities.  For example,
all of the EZs have prepared strategic plans, signed agreements with
the Department of Housing and Urban Development (HUD) and the states,
drafted performance benchmarks, and set up their governance
structures.  Also, as of October 31, 1996, each EZ had used part of
the $100 million grant available to it for the 10-year program. 
However, the EZs differ in their physical and demographic
characteristics, such as their geographic size and number of
residents; in the types of organizations involved in carrying out the
program; in the activities planned; and in the amounts of federal
funds used.  In addition, all of the EZs have included public housing
authority officials in planning and implementing the program. 
Although public housing officials in three EZs indicated that their
EZ could have involved the public housing authority or public housing
residents to a greater extent, most of the officials were optimistic
about their future involvement in the program. 

Many officials involved in implementing the program generally agreed
on factors that have either helped or hindered their efforts.  In a
survey we conducted of program participants at the federal, state,
and local levels, over half of the 27 program officials who responded
agreed that community representation on the EZ governance boards,
technical assistance provided by HUD's contractors, enhanced
communication among stakeholders, and support from the city's mayor
and from White House and cabinet-level officials had helped the
program's implementation.  Conversely, the difficulty in selecting a
governance structure, the additional layer of bureaucracy created by
the state government's involvement, preexisting relationships among
EZ stakeholders, pressure for quick results, and the lack of federal
funding for the program's initial administrative activities were
frequently identified as factors constraining implementation. 

From the beginning, the Congress and HUD made evaluation plans an
integral part of the EZ program through legislation and guidelines. 
HUD required each EZ to prepare a strategic plan indicating how it
would satisfy the EZ program's four key principles--creating economic
opportunity, creating sustainable community development, building
broad participation among community-based partners, and describing a
strategic vision for change in the community.  HUD also required the
strategic plan to include realistic performance benchmarks for
measuring progress in implementing the program.  All six of the urban
EZs prepared strategic plans that include benchmarks describing the
activities that the EZ planned to accomplish during the first 2 years
of the program.  These efforts constitute the initial steps toward
establishing results-oriented measures for the EZ program.  However,
HUD and the EZs have not yet (1) described measurable outcomes for
the program's key principles or (2) indicated how the outputs
anticipated from one or more benchmarks will help to achieve those
outcomes. 


   BACKGROUND
------------------------------------------------------------ Letter :2

On August 10, 1993, the Congress enacted the Omnibus Budget
Reconciliation Act of 1993 (OBRA 1993, P.L.  103-66), which
established the EZ/EC program's eligibility criteria, designation
procedures, and benefits.  The act specified that an area could not
be selected for the program unless it (1) met specific criteria for
characteristics such as geographic size and poverty rate and (2)
prepared a strategic plan for implementing the program.  The act also
authorized the Secretary of Housing and Urban Development and the
Secretary of Agriculture to designate the EZs and ECs in urban and
rural areas, respectively; limited the number of designations that
could be made; set the length of the designation at 10 years;\2
required that nominations be made jointly by the local and state
governments; and authorized the Secretaries to prescribe any
regulations needed to carry out the program. 

The act also amended title XX of the Social Security Act to authorize
the special use of SSBG funds\3 for the EZ program.  The use of SSBG
funds was expanded to cover a range of economic and social
development activities.  Like other SSBG funds, the funds allotted
for the EZ program are granted by HHS to the state, which is fiscally
responsible for the funds.  HHS' regulations covering block grants
(45 C.F.R.  part 96) provide maximum fiscal and administrative
discretion to the states and place full reliance on state law and
procedures.  HHS encouraged the states to carry out their EZ funding
responsibilities with as few restrictions as possible under the law. 
After the state grants the funds to the EZ or the city, the EZ can
draw down the funds through the state for specific projects over the
10-year life of the program. 

In January 1994, the Clinton administration announced the nominating
procedure and required that nominations be received by June 30, 1994. 
After collaborating with other federal agencies including HHS, HUD
and the U.S.  Department of Agriculture (USDA) jointly issued an
application guide\4 requiring each applicant to submit its nomination
along with a strategic plan that had been developed with input from
community stakeholders, such as residents, businesses, financial
institutions, service providers, and state and local governments. 
The plan was to describe the community's overall vision for
revitalization, link this vision to the program's four key
principles, identify other governmental and private resources that
would be committed to this program, and describe potential barriers
to the successful implementation of the plan.  HUD also published
guidelines for developing strategic plans,\5 conducted technical
assistance workshops around the country, provided advice and
technical assistance through federal employees, and contracted for
technical assistance in fields such as planning and community
development. 

The federal government received over 500 nominations, including 290
from urban communities.  The nominations were reviewed by the EZ/EC
task force, which consisted of federal employees detailed from many
federal agencies.  This task force reported on the urban applications
to a review panel that consisted of three senior officials from HUD's
Office of Community Planning and Development.  This panel recommended
potential urban designees to the Secretary of Housing and Urban
Development.  The Secretary then sent his preliminary selections to
the Community Empowerment Board for review.\6 This board is chaired
by the Vice President and its members include the heads of
cabinet-level and other federal agencies.  The board was established
to offer a single point of federal coordination for communities and
to facilitate one-stop access to federal resources.  On December 21,
1994, the Secretaries of Housing and Agriculture designated 104 EZs
and ECs--6 urban EZs, 3 rural EZs, 65 urban ECs, and 30 rural ECs.\7
On the same day, HHS awarded the first half of the SSBG to the EZs
and ECs, as provided for in the authorizing legislation.\8
Subsequently, HHS provided information to the designees to clarify
the uses of and controls on the EZ/EC SSBG funds and advised the EZs
and ECs about other HHS grants that have been awarded or are
available to the EZs. 

All of the designated communities will receive federal assistance;
however, as established by OBRA 1993 and HUD's implementing
regulation (24 C.F.R.  part 597), the EZs are eligible for more
assistance than the ECs.  Each urban EZ was allocated $100 million,
and each rural EZ was allocated $40 million, in EZ/EC SSBG funds for
use over the 10-year life of the program.  In addition, up to $20
million in state and local bonds--whose proceeds were to be used to
provide facilities and land for businesses in the zone--would be
tax-exempt.  Furthermore, businesses located in the EZ would be
eligible for (1) tax credits on wages paid to employees who live in
the EZ and (2) increased deductions for depreciation.  Each urban and
rural EC was allocated just under $3 million and qualified only for
the tax-exempt bonds.  The federal government also made a commitment
to all of the EZs and ECs to (1) give them special consideration in
competitions for funds from other federal programs, (2) work
cooperatively with them in overcoming regulatory impediments, and (3)
allow them to make more flexible use of existing federal funds. 

After making the designations, HUD issued implementation guidelines\9
describing the program as one in which (1) solutions to community
problems are to originate from the neighborhood up rather than from
Washington down and (2) progress is to be based on performance
benchmarks established by the EZs, not on the amount of federal money
spent.  The benchmarks are to measure the results of the activities
described in each EZ's strategic plan.  These benchmarks became part
of the agreement that was signed by HUD and state and local
government officials for each zone.  The EZ/EC task force's members
were available to assist the EZs in preparing their benchmarks.  HUD
also uses contractors, which HUD refers to as generalists, to provide
day-to-day assistance to the EZs. 


--------------------
\2 The act allows the state or local government to provide for a
shorter term in the nomination, which none did, and allows HUD to
revoke a designation before the end of the 10-year term if the EZ
changes its boundaries or does not make significant progress in
achieving the benchmarks in its plan. 

\3 SSBG typically funds state governments for social service
activities.  The amount of each state's grant from HHS is based on an
allotment formula specified in title XX of the Social Security Act. 

\4 Empowerment Zones and Enterprise Communities Application Guide
(HUD-1445-CPD), HUD, Office of Community Planning and Development,
and USDA, Office of Small Community and Rural Development (Jan. 
1994). 

\5 A Guidebook for Community-Based Strategic Planning for Empowerment
Zones and Enterprise Communities (HUD-1443-CPD), HUD, Office of
Community Planning and Development (Jan.  1994). 

\6 On August 31, 1995, HUD's Office of Inspector General issued an
audit report entitled Review of Empowerment Zone, Enterprise
Community, and Economic Development Initiative Grant Selection
Processes (95-HQ-154-0002), which describes the selection process in
more detail. 

\7 On the same day, HUD's Secretary designated six communities, five
of which were also ECs, as Supplemental Empowerment Zones and
Enhanced Enterprise Communities.  Unlike the other EZs and ECs, these
communities each received funds through HUD's Economic Development
Initiative (EDI) grant.  The supplemental zones, located in Los
Angeles and Cleveland, received EDI grants of $125 million and $87
million, respectively.  The enhanced communities, located in Oakland,
Boston, Kansas City, and Houston, received $22 million each.  Except
for Los Angeles, all of these communities received an additional $3
million in EZ/EC SSBG funds as ECs. 

\8 The remaining half of the SSBG was granted on October 1, 1995. 

\9 Empowerment Zones Enterprise Communities Implementation Guide,
HUD, Office of Community Planning and Development (May 1995). 


   STATUS OF THE PROGRAM'S
   IMPLEMENTATION
------------------------------------------------------------ Letter :3

All six of the urban EZs have met the criteria defined in OBRA
1993,\10 developed a strategic plan, signed an agreement with HUD and
the state for implementing the program, signed an agreement with the
state for obtaining the EZ/EC SSBG funds, drafted performance
benchmarks, and set up a governance structure.  In addition, all of
the EZs have included public housing officials and public housing
residents in planning and implementing the program.  However, the EZs
differ in their demographic characteristics, organizational
structure, and plans for using their EZ/EC SSBG funds.  Also, a few
public housing officials indicated that their EZ had not done enough
to involve the public housing authority or public housing residents. 


--------------------
\10 The act required that the nominated area have a maximum
population of the lesser of (1) 200,000 or (2) the greater of 50,000
or 10 percent of the city's population.  In addition, the act
required that the area have "pervasive poverty, unemployment, and
general distress," not exceed 20 square miles, have a continuous
boundary or consist of three or fewer noncontiguous parts, be located
in no more than two contiguous states, and exclude the central
business district.  Finally, the area had to meet a three-tier
criterion for poverty rates:  (1) 100 percent of the census tracts in
the nominated area had to have a minimum poverty rate of 20 percent,
(2) 90 percent of the tracts had to have a minimum poverty rate of 25
percent, and (3) 50 percent of the tracts had to have a minimum
poverty rate of 35 percent. 


      DIFFERENCES AMONG THE EZS
---------------------------------------------------------- Letter :3.1

The EZs differ in their geographic and demographic characteristics,
reflecting the selection criteria.  For example, Detroit's EZ covers
about 18 square miles and is over four times as large as the
Philadelphia-Camden EZ.  In Baltimore, Chicago, and
Philadelphia-Camden, the areas included in the EZ are not contiguous,
while in Atlanta, Detroit, and New York,\11 they are contiguous. 
Furthermore, the Philadelphia-Camden EZ is unique because it is
located in two cities and states.  The population of the EZs ranges
from about 50,000 in Atlanta and Philadelphia-Camden to nearly
200,000 in Chicago and New York. 

The poverty and unemployment rates\12 also vary across the EZs.  The
overall poverty rate for the Atlanta EZ was the highest, encompassing
55 percent of the residents, while the New York and Baltimore EZs
reported an overall poverty rate of about 40 percent.  The poverty
rates for all of the EZs are high compared with the national poverty
rate of about 14 percent.  Similarly, the unemployment rates in the
EZs ranged from 15 percent in Baltimore to 29 percent in Detroit,
while the national rate was about 6 percent.  (See table 1 for
details on each EZ.)



                                         Table 1
                         
                           Characteristics of Urban Empowerment
                                          Zones

                                                                            Philadelphia-
                Atlanta   Baltimore     Chicago     Detroit    New York            Camden
-----------  ----------  ----------  ----------  ----------  ----------  ----------------
City's          395,247     736,014   2,783,726   1,027,974   7,322,564         1,673,069
 population
EZ's             49,998      72,362     199,938     101,279     199,375            49,645
 population
EZ's                 55          41          49          47          42              50\c
 poverty
 rate
 (percent)
EZ's                 17          15          25          29          18              22\c
 unemployme
 nt rate
 (percent)
Percent of           50          18          15           6          42                10
 EZ's
 residents
 in public
 housing\a
Area of the         9.3         6.8        14.3        18.4         6.5               4.4
 EZ (square
 miles)
Funds drawn  $1,535,605  $2,095,500    $279,000     $54,327    $511,202          $570,943
 down\b
-----------------------------------------------------------------------------------------
Note:  Unless otherwise noted, these data are from the EZs' plans. 

\a These data are based on information provided by public housing
authority officials in the EZ cities. 

\b These data were reported by HHS and the EZs as of October 31,
1996. 

\c We calculated these rates using 1990 Census data. 

Local governments have chosen different approaches to implementing
the EZ program.  Atlanta, Baltimore, Detroit, New York, and Camden
have each established a nonprofit corporation to administer the
program, while Chicago and Philadelphia are operating through the
city government. 

At the state level, the types of agencies involved and the
requirements for drawing down the EZ/EC SSBG funds differ.  HHS
awarded the funds to the state agency that managed the regular SSBG
program unless the state asked HHS to transfer the responsibility to
a state agency that deals primarily with economic development. 
Consequently, the funds for Atlanta and New York pass through their
state's economic development agency, while the funds for the other
EZs pass through the state agency that manages the regular SSBG
program.  Some states, as the entities with fiscal responsibility for
the EZ/EC SSBG funds, identified additional requirements that the EZ
must meet before it can draw down funds.  For example, one state
requires the EZ to follow the guidelines established in the Office of
Management and Budget's Circular A-87, Cost Principles for State,
Local, and Indian Tribal Governments.\13 The federal government does
not require the recipients of SSBG funds to follow these guidelines. 

Finally, each EZ has planned diverse activities to meet its city's
unique needs.  All of the EZs have planned activities to increase the
number of jobs in the EZ, improve the EZ's infrastructure, and
provide better support to families.  However, the specific activities
vary, reflecting decisions made within each EZ.  According to HUD,
the EZs have obligated over $170 million.  However, the definition of
obligations differs across the EZs.  For example, one EZ defines
obligations as the amount of money awarded under contracts.  Another
EZ defines obligations as the total value of the projects that have
been approved by the city council, only a small part of which has
been awarded under contracts.  As of October 31, 1996, the six EZs
had drawn down about $5 million from the EZ/EC SSBG funds for
administrative costs, as well as for specific activities in the EZs. 
Administrative costs covered salaries, office equipment, supplies,
audits, and consultants' fees.  Individual EZs had also provided
funds for activities such as initiating a project to reduce alcohol-
and drug-related violence among high-risk youth, acquiring sites for
a supermarket and retail stores, and creating an industrial
ecological park.  The EZs have used very little of the federal
funding available to them because they have been involved in other
activities, such as setting up their governance structures,
establishing procedures for obtaining funds, and encouraging
businesses to invest in them.  (See app.  I for details on each EZ's
governance structure, use of EZ/EC SSBG funds, and planned
activities.)


--------------------
\11 While New York submitted its nominated area as a contiguous zone,
the zone includes parts of Bronx and New York counties, which are
separated by the Harlem River. 

\12 For the 1990 Census, which was the only acceptable source of data
for EZ applicants, the poverty rate was the percentage of people
whose poverty status was computed and whose 1989 income was below a
specific threshold.  For example, the threshold for a family of four
was $12,674.  The unemployment rate is the percentage of civilians
who were not working, were over 16 years old, were looking for a job,
and were available to accept a job. 

\13 This circular establishes principles and standards for
determining the costs for federal awards that are carried out through
grants and other agreements with state and local governments.  It
includes guidelines on which costs are allowable under federal
grants. 


      INVOLVEMENT OF PUBLIC
      HOUSING OFFICIALS AND
      RESIDENTS
---------------------------------------------------------- Letter :3.2

The EZ program requires the participation of various segments of the
community, including the residents.  Although the program does not
explicitly require the involvement of public housing authority (PHA)
officials or public housing residents, all of the EZs contain public
housing units.\14 We interviewed PHA officials in the six urban EZs
to obtain information on the number of public housing residents in
each EZ and the participation of PHAs and public housing residents in
their EZ's activities.  According to the information we obtained,
about 50 percent of the residents in the Atlanta EZ live in public
housing, followed by 42 percent in New York, 18 percent in Baltimore,
15 percent in Chicago, 10 percent in Philadelphia-Camden, and 6
percent in Detroit. 

PHA officials in all six EZs said that they and the residents they
serve participated in their EZ's activities.  Initially, PHAs and
residents helped to develop the EZ's applications and benchmarks,
organized community meetings, and served on housing committees and
local task forces.  More recently, PHA officials and residents have
served on governance boards and housing councils and have been active
in human service and job training programs. 

Officials from three of the EZs, including one with a large number of
public housing residents, told us that their EZ had not done enough
to include either the PHA or the public housing residents in the EZ's
activities after designation.  These officials suggested that greater
involvement is needed because a large proportion of their city's
public housing is in or near the EZ.  The officials also reported
that their involvement in the EZ program could maximize their city's
use of the federal resources allocated to public housing and the EZ's
activities.  For example, one official saw an opportunity to
coordinate HUD's Hope VI program with the EZ's activities.\15

Overall, PHA officials are optimistic about their involvement in the
EZ program and believe that it will continue or increase.  In
addition to serving on various boards and councils, the PHAs expect
to expand their role in home ownership and housing rehabilitation
initiatives and in job creation and training programs.\16


--------------------
\14 According to the Camden Public Housing Authority, there are no
public housing units in the Camden part of the Philadelphia-Camden
EZ. 

\15 HUD's Hope VI program was created to revitalize severely
distressed or obsolete public housing developments. 

\16 In commenting on this report, HUD officials identified two
programs that they felt exemplified HUD's support for coordination
between EZ and public housing officials.  One was the Early Childhood
Initiative, which provided $21 million for child care services to
support public housing residents in EZs.  The other was the Hope VI
1996 competition, through which all six urban EZs received funds. 


   FACTORS THAT HELPED OR HINDERED
   THE PROGRAM'S IMPLEMENTATION
------------------------------------------------------------ Letter :4

We interviewed participants in the EZ program across all six
EZs--including EZ directors and governance board members, state
officials involved in drawing down the EZ/EC SSBG funds, contractors
who provide day-to-day assistance to the EZs, and HUD and HHS
employees--and asked them to identify what had and had not gone well
in planning and implementing the program.  To obtain reactions to all
of the factors that these individuals identified, we listed the
factors in a questionnaire and mailed it to 32 program participants,
including those we had already interviewed.  The questionnaire asked
the survey recipients to indicate the extent to which each factor had
helped or hindered the program's implementation.  The survey also
provided space for the respondents to give examples or suggest
solutions.  While the survey respondents' views cannot be generalized
to the entire EZ/EC program, they may be useful to HUD as a starting
point for communicating with the EZs to improve the current program. 
These views also can form a basis for framing future initiatives with
goals similar to those of the EZ program.  (App.  II lists all of the
factors identified in the telephone interviews and in the survey. 
App.  III contains a more detailed discussion of our methodology.)

In the 27 surveys that were returned to us, five factors were
frequently identified as having helped, and six factors were
frequently identified as having constrained, the program's
implementation.\17


--------------------
\17 These factors are discussed in the order of their appearance in
our survey.  We did not independently analyze the factors identified
by the respondents or examine their applicability across all of the
EZs.  (See app.  II.)


      FACTORS THAT HELPED THE
      PROGRAM'S IMPLEMENTATION
---------------------------------------------------------- Letter :4.1

Five factors were identified by more than half of the survey
respondents as having helped them plan and implement the EZ program: 
community representation on the EZ governance boards, assistance from
HUD's contractors (called generalists),\18

enhanced communication among stakeholders, support from the city's
mayor, and support from White House and cabinet-level officials. 

  -- Having community representatives on the governance boards
     created a shared responsibility for the program's success and
     helped to break down barriers between the residents and other
     segments of the community that were represented on the board,
     such as the local government and businesses. 

  -- The generalists hired by HUD to work on a daily basis with the
     zones have been accessible and have provided important
     assistance to the zones.  Respondents said that the generalists'
     assistance included providing information, negotiating with
     elected and public officials, forging relationships with the
     private sector, and arranging meetings.  One respondent said
     that the generalists are seen as people who can cut through
     bureaucratic red tape and get things done in the community. 

  -- The EZ program has brought community stakeholders together. 
     People from the neighborhoods, the private sector, and the city
     and state governments who did not previously interact are now
     discussing community revitalization.  These stakeholders have
     created partnerships that respondents believe have improved
     relationships between government officials and community
     leaders; stimulated revitalization throughout the city, not just
     within the EZ; increased coordination across economic and human
     development activities, as well as among the public, private,
     and nonprofit sectors, thereby expanding the availability of
     funds; and created a basis for ensuring sustainable results. 

  -- Strong mayoral support, shown by activities such as reviewing
     proposed benchmarks and providing needed resources, produced
     benefits that included obtaining a high level of involvement
     from the private sector, resolving issues of distrust,
     effectively conveying the city's concerns to federal officials,
     helping attract economic development to the EZ, and increasing
     the coordination with city departments whose assistance was
     critical to the program's success. 

  -- The participation of White House and cabinet-level officials
     enhanced the program's credibility at the community level.  For
     example, one city official said that the involvement of White
     House officials gave the community hope that their issues would
     be heard and that federal regulations would be eliminated. 


--------------------
\18 Generalists are private-sector community development specialists
who act as liaisons to specific communities within a geographical
area.  They provide the EZs and ECs with a single point of access to
various types of technical assistance, provide information about
federal programs and private-sector initiatives, and foster community
involvement in implementing strategic plans. 


      FACTORS THAT CONSTRAINED THE
      PROGRAM'S IMPLEMENTATION
---------------------------------------------------------- Letter :4.2

Six factors were frequently identified by survey respondents as
having constrained their efforts to plan and implement the EZ
program:  difficulty in selecting an appropriate governance board
structure, the additional layer of bureaucracy created by the state
government's involvement, preexisting relationships among EZ
stakeholders, pressure for quick results from the media, the lack of
federal funding for initial administrative activities, and pressure
for quick results from the public and private sectors. 

  -- Several respondents noted that selecting the governance
     structure and deciding on the size and composition of the
     executive board was time-consuming, taking in at least one case
     more than a year to resolve.  Respondents suggested that HUD
     could have (1) provided examples of governance structures in its
     application guidelines and (2) set a time limit for the EZs to
     adopt a governance structure. 

  -- The state government's involvement has created an unnecessary
     layer of bureaucracy, according to some respondents.  One
     respondent said that the state government is requiring the EZ to
     obtain the state's approval for funding requests.  In the
     respondent's view, this requirement exceeds the state's
     responsibility to provide fiscal oversight.  Some federal and
     city government respondents said that the approvals at the state
     level add an unnecessary layer of bureaucracy.  At least one
     state respondent agreed but said the states have no alternative
     because the SSBG program's regulations, which were not revised
     for the EZ program, require the states to oversee the use of
     EZ/EC SSBG funds.  He added that even without the fiscal
     oversight role, state agency officials should be involved in
     activities such as reviewing the EZ's plans or ensuring
     consistency with other programs.  Suggestions for preventing
     cumbersome state reviews included (1) clarifying early in the
     program that the state's role is minimal, (2) eliminating the
     state's fiscal responsibility for the EZ/EC SSBG funds allocated
     to the EZ program, and (3) financing the program with funds
     that, unlike SSBG funds, do not have to flow through the state. 

  -- In some communities, a history of antagonism and ineffective
     communication among state and local government representatives,
     community leaders, residents, and private-sector representatives
     has impeded consensus-building and teamwork.  One respondent
     suggested that increased team-building efforts-- such as
     off-site team-building training for governance board
     members--and more effective communication programs could help. 

  -- Pressure for quick results from the media has created
     unrealistic expectations about how quickly progress can be
     achieved.  Respondents wrote that some media representatives may
     not understand the program and that media attention stemmed from
     the way the federal government initially described the program. 
     Suggested remedies included having (1) local public information
     officers clarify the program's goals for the media and (2) the
     federal government stress that this is a 10-year program. 

  -- Immediately after designation, some EZs did not have the
     financial and/or human resources that they needed to perform the
     program's initial administrative activities.  The federal
     government initially told the EZs that they could not access the
     EZ/EC SSBG funds until agreements were signed by the federal,
     state, and city governments.  The earliest of these was signed
     in July 1995.  In some cases, city and state governments
     provided funding and assigned staff to the EZ; however, one
     respondent noted that having work performed by government
     employees created doubts about who controlled the program--the
     government or the community.  Respondents' suggestions for
     reducing confusion included (1) making an EZ's designation
     contingent on a commitment by the city and/or state government
     to provide funds for hiring administrative staff or (2)
     providing a portion of the EZ/EC SSBG funds to the EZ for
     administration immediately after designation. 

  -- Pressure for quick results from officials at the federal, state,
     and/or local levels, as well as from the public, was also
     identified as an impediment.  One respondent suggested that
     before money could be spent on revitalizing the community, the
     EZs had to develop team-building and decision-making processes. 
     These processes were not in place when the program began, took
     time to develop, and were necessary to ensure sustainable
     results.  Some respondents noted that, in some instances,
     rushing the planning and implementation steps resulted in
     mistakes that took time to correct.  Furthermore, the
     community-based approach used in this program involves a larger
     group of people than does more traditional decision-making;
     thus, reaching decisions takes more time.  Respondents suggested
     that the federal government should (1) measure short-term
     success by the development of capacity in the zones, such as the
     establishment of participatory processes, not by the amount of
     money spent and (2) emphasize and encourage the replication of
     best practices and the transfer of technology among the zones. 


   PLANS FOR EVALUATING THE
   PROGRAM
------------------------------------------------------------ Letter :5

From the beginning, the Congress and HUD have made evaluation plans
an integral part of the EZ program.  OBRA 1993 required that each EZ
applicant identify in its strategic plan the baselines, methods, and
benchmarks for measuring the success of its plan and vision.  In its
application guidelines, HUD amplified the act's requirements by
asking each urban applicant to submit a strategic plan based on four
principles:  (1) creating economic opportunity for the EZ's
residents, (2) creating sustainable community development, (3)
building broad participation among community-based partners, and (4)
describing a strategic vision for change in the community.  These
guidelines also stated that the EZs' performance would be tracked in
order to, among other things, "measure the impact of the EZ/EC
program so that we can learn what works." According to HUD, these
four principles serve as the overall goals of the program. 

Furthermore, HUD's implementation guidelines required each EZ to
measure the results of its plan by defining benchmarks for each
activity in the plan.  HUD intended to track performance by (1)
requiring the EZs to report periodically to HUD on their progress in
accomplishing the benchmarks established in their strategic plans and
(2) commissioning third-party evaluations of the program.  HUD stated
that information from the progress reports that the EZs prepare would
provide the raw material for annual status reports to HUD and
long-term evaluation reports.\19 HUD is reviewing information on the
progress made in each EZ and EC to decide whether to continue each
community's designation as an EZ or an EC. 

All six of the urban EZs prepared strategic plans that include a
section on evaluation.  They also prepared benchmarks that comply
with HUD's guidelines and describe activities that they have planned
to implement the program.  In most cases, the benchmarks indicate how
much work, often referred to as an output, will be accomplished
relative to a baseline.  For example, a benchmark for one EZ is
establishing a single point of access to substance abuse treatment
for 1,800 EZ residents.  The baseline associated with this benchmark
is that 5,400 EZ residents lack access to substance abuse treatment. 
A benchmark for another EZ states that the EZ will assist businesses
and entrepreneurs in gaining access to capital resources and
technical assistance through the establishment of a single facility
called a one-stop capital shop.  The associated baseline is that
there is currently no one-stop capital shop to promote business
activity.  The performance measures for this benchmark include the
amount of money provided in commercial lending, the number of loans
made, the number of consultations provided, and the number of people
trained. 

As we have previously reported,\20 the Congress, the executive
branch, and the public are beginning to hold agencies accountable for
the outcomes of their programs--the results as measured by the
differences that the programs make, for example, in participants'
lives.  Specifically, the Government Performance and Results Act
requires federal agencies to clearly define their missions and to
establish long-term strategic goals, as well as annual goals linked
to the strategic ones.  Our previous report found that
results-oriented organizations follow three steps:  (1) define the
mission and desired outcomes, (2) measure performance to reinforce
the relationship of daily activities to the long-term mission and
outcomes, and (3) use information on performance as a basis for
decision-making. 

In the EZ program, HUD has followed this format to some extent by (1)
defining the four key principles, which serve as missions and goals
for the EZs; (2) requiring baselines and performance measures for
benchmarks in each EZ to help measure the EZ's progress in achieving
specific benchmarks; and (3) developing procedures for including
performance measures in HUD's decision-making process.  However, the
measures being used generally describe the amount of work that will
be produced (outputs) rather than the results that are anticipated
(outcomes).  For example, for the second benchmark cited above
(establishing a one-stop capital shop), the EZ has not indicated how
the outputs (the amount of money provided in commercial lending, the
number of loans made, the number of consultations provided, and the
number of people trained) will help to achieve the desired outcome
(creating economic opportunity, the relevant key principle).  To link
the outputs to the outcome, the EZ could measure the extent to which
accomplishing the benchmark increases the number of businesses
located in the zone.  Without identifying and measuring desired
outcomes, HUD and the EZs may have difficulty determining how much
progress the EZs are making toward accomplishing the program's
overall mission. 

HUD officials involved in the EZ/EC program told us that HUD has been
working with the EZs to ensure that they can measure their
accomplishment of the individual benchmarks.  The benchmarks are
revised, as needed, to reflect changes in the community and to
include activities that will be performed after the first 2 years of
the program.  HUD officials agree that the performance measures used
in the EZ program are output-oriented and believe that these are
appropriate in the short term.  They believe that the desired
outcomes of the EZ program are subject to actions that cannot be
controlled by the entities involved in managing this program.  In
addition, the impact of the EZ program on desired outcomes cannot be
isolated from the impact of other events.  Consequently, HUD believes
that defining outcomes for the EZ program is not feasible. 

Concerns about the feasibility of establishing measurable outcomes
for programs are common among agencies facing this difficult task. 
However, because HUD and the EZs have made steady progress in
establishing an output-oriented process for evaluating performance in
the EZ program, they could build on their efforts to incorporate
measures that are more outcome-oriented.  Specifically, HUD and the
EZs could describe measurable outcomes for the program's key
principles and indicate how the outputs anticipated from one or more
benchmarks will help to achieve those outcomes. 


--------------------
\19 HUD's Office of Community Planning and Development awarded a
contract for the first annual status reports on each EZ and the
Office of Policy Development and Research awarded a separate contract
for long-term evaluations of the overall program.  The first annual
status report is due to be published by the end of 1996.  Two
long-term evaluation reports are scheduled for completion on the
program's 5- and 10-year anniversaries in 1999 and 2004. 

\20 Executive Guide:  Effectively Implementing the Government
Performance and Results Act (GAO/GGD-96-118, June 1996). 


   CONCLUSION
------------------------------------------------------------ Letter :6

HUD has taken commendable steps toward establishing results-oriented
measures for the EZ program.  Among other things, the EZs have
developed benchmarks that describe planned activities, as well as the
baselines and time frames against which progress toward accomplishing
individual benchmarks can be measured.  However, HUD and the EZs are
not yet measuring performance in a way that allows them to assess how
much progress is being made in satisfying the program's four key
principles because they have not yet (1) described measurable
outcomes for the program's key principles or (2) indicated how the
outputs anticipated from one or more benchmarks will help to achieve
those outcomes.  Unless they can measure the EZs' progress in
producing desired outcomes, HUD and the EZs may have difficulty
identifying activities that should be duplicated at other locations. 
In addition, HUD and the EZs may not be able to describe the extent
to which the program's activities are helping to accomplish the
program's mission. 


   RECOMMENDATION
------------------------------------------------------------ Letter :7

We recommend that the Secretary of Housing and Urban Development work
with the EZs to establish a process for incorporating measurable
outcomes for the program's principles into any future revisions of
the EZs' strategic plans and benchmarks.  Among other things, this
process should describe the outcomes anticipated from the EZs'
activities, indicate how the outcomes will be measured, and identify
the benchmarks helping to achieve each outcome. 


   AGENCY COMMENTS AND OUR
   EVALUATION
------------------------------------------------------------ Letter :8

We provided copies of a draft of this report for review and comment
to HUD and HHS.  These agencies' written comments and our responses
appear in appendixes IV and V. 

In commenting on the draft, HUD said that it found the report to be a
useful and accurate description and analysis of the status of the
EZ/EC initiative.  HUD also indicated two primary areas of concern
about the report.  First, HUD expressed concern that we did not
understand its process for measuring performance for the EZ/EC
program.  This process uses the benchmarks as the basis for measuring
quantitative progress in implementing the EZs' and ECs' strategic
plans.  We agree that HUD has established procedures for measuring
individual activities within each EZ.  However, more could be done to
describe the program's anticipated outcomes and link individual
activities to those outcomes.  Such additional efforts should allow
HUD and the EZs to better measure performance over the program's
10-year life.  We revised the information in the report to include
HUD's concerns and to clarify the actions that HUD and the EZs can
take to strengthen their evaluation efforts. 

Second, HUD felt that the amounts of EZ/EC SSBG funds that have been
drawn down, viewed in isolation, could be misleading as measures of
the program's spending.  HUD provided a list of amounts obligated by
each EZ and asked us to include those obligations in table 1. 
However, the definition of obligations differs across the EZs.  For
example, one EZ defines obligations as the amount of money awarded
under contracts.  Another EZ defines obligations as the total value
of the projects that have been approved by the city council, only a
small part of which has been awarded under contracts.  We chose not
to include obligations in the table because including them would
invite inappropriate comparisons across the EZs.  However, we revised
the report to indicate that higher amounts have been obligated by the
EZs. 

HUD also commented on the sections of the report in which we
summarized the concerns of program participants about the role of the
states, the lack of early administrative funding, and the pressure
from the federal government and others for quick results.  HUD asked
us to revise these sections of the report because it felt that the
concerns were inaccurate or did not recognize actions taken by HUD. 
As stated earlier in this letter and in the appendix on our scope and
methodology, we did not independently analyze the factors identified
by the respondents or examine their applicability across all of the
EZs.  Although we did add a sentence specifying when HHS obligated
the EZ/EC SSBG funds, we believe that the report accurately and
sufficiently covers participants' concerns about the topics
mentioned, and we did not make other changes suggested by HUD. 
Finally, HUD suggested editorial and technical changes, which we
incorporated when appropriate. 

In its comments on the report, HHS said that it found the report very
well done and thought provoking.  HHS also noted that Philadelphia
and Camden operate as two separate entities in many ways and thought
that the report should treat the two parts of this EZ separately,
rather than as one EZ.  We agree that, for the most part, the two
segments of this zone operate autonomously; however, we believe that
discussing them together is appropriate because Philadelphia-Camden
is a single, bistate zone.  Furthermore, the administration of this
EZ was not significantly different from that of the New York EZ,
which has split its operations between two corporations covering
distinct parts of the designated zone.  HHS also thought that the
report should include additional background information about HHS'
role in the program and raised a number of editorial and technical
comments on the report.  We revised the wording of the report, as
appropriate, to address these comments.  (See apps.  IV and V for
HUD's and HHS' comments on the report and our responses to those
comments.)

We also sent the detailed information on each EZ to the applicable EZ
director for review and comment.  We received minor technical and
editorial corrections from all of the EZs and incorporated these into
the report as appropriate. 


---------------------------------------------------------- Letter :8.1

To assess the status of HUD's implementation of the six urban EZs and
to describe the Department's plans for evaluating the initiative, we
interviewed officials from HUD and HHS who were responsible for the
EZ program and reviewed documents obtained from HUD, HHS, and the
EZs.  To understand the role played by public housing officials and
residents in the EZ program, we surveyed representatives of the PHAs
in the seven cities included in the six urban EZs using a structured
telephone survey.  We used interviews with EZ program participants
and responses to a mailed questionnaire to identify factors that have
helped or hindered efforts to carry out the EZ program. 

We performed our work at HUD's Office of Community Planning and
Development and HHS' EZ/EC Support Team in Washington, D.C.  We also
retained Dr.  Marilyn M.  Rubin, an expert with extensive knowledge
in economic development and evaluation, to advise us on all aspects
of our work.  We performed our work in accordance with generally
accepted government auditing standards from November 1995 through
October 1996.  Appendix III contains details on our scope and
methodology. 

As agreed with your office, unless you publicly announce its contents
earlier, we plan no further distribution of this report until 30 days
from the date of this letter.  At that time, we will send copies to
the Secretaries of Housing and Urban Development and Health and Human
Services, as well as to the people who participated in our survey. 
Copies will be made available to others upon request. 


Please call me at (202) 512-7631 if you or your staff have any
questions.  Major contributors to this report are listed in appendix
VI. 

Sincerely yours,

Lawrence J.  Dyckman
Associate Director, Housing and
 Community Development Issues


EMPOWERMENT ZONE SUMMARIES
=========================================================== Appendix I


   ATLANTA, GEORGIA
--------------------------------------------------------- Appendix I:1

   Figure I.1:  Atlanta
   Empowerment Zone

   (See figure in printed
   edition.)


      GOVERNANCE
------------------------------------------------------- Appendix I:1.1

  -- The Atlanta Empowerment Zone Corporation was formed as a
     nonprofit organization to oversee the implementation of the
     strategic plan.  It is headed by a president who answers to the
     executive board and includes staff to administer the programs
     and service contracts. 

  -- The 17-member executive board comprises representatives of
     public agencies, service providers, the private sector, and the
     community, as well as 6 residents.  The board is the final
     decision-making body for the EZ. 

  -- The 36-member Community Empowerment Advisory Board will carry
     advice from the community to the executive board.  This board
     consists of 1 representative from each of the 30 neighborhoods
     in the zone, plus 6 representatives from 39 communities adjacent
     to the zone. 


      FUNDING
------------------------------------------------------- Appendix I:1.2

The EZ/EC SSBG funds pass through the Georgia Department of Community
Affairs to the city of Atlanta for use by the EZ.  As of October 31,
1996, the EZ had obtained $1,535,605 for administrative expenses that
include costs for EZ personnel, consultants, travel, office equipment
and supplies, and printing.  A portion of these funds was used to
support the community advisory board's office staff. 


      STRATEGIC PLAN
------------------------------------------------------- Appendix I:1.3

Atlanta envisions the EZ as an "urban village" working cooperatively
to improve the quality of life in its neighborhoods and emphasizing
development that is economically and ecologically sound.  Atlanta has
organized its planned activities into five categories: 

  -- expanding employment and economic investment by increasing jobs,
     training for jobs, and transportation to jobs; attracting
     businesses to the EZ; and increasing sources of funds for
     businesses;

  -- creating safe and livable communities by increasing public
     safety; improving streets, sidewalks, lighting, and parks; and
     promoting ecologically sustainable communities;

  -- lifting youth and families out of poverty by confronting and
     reducing drug and substance abuse, increasing learning
     opportunities to reduce the number of high school dropouts,
     creating food cooperatives and community gardens to feed the
     hungry, and providing comprehensive human development programs;

  -- providing adequate housing for all by increasing access to
     credit, improving the affordability and availability of housing,
     increasing home ownership, and meeting the needs of the
     homeless; and

  -- providing governance by creating the corporation to implement
     the EZ's strategic plan. 


   BALTIMORE, MARYLAND
--------------------------------------------------------- Appendix I:2

   Figure I.2:  Baltimore
   Empowerment Zone

   (See figure in printed
   edition.)


      GOVERNANCE
------------------------------------------------------- Appendix I:2.1

  -- The Empower Baltimore Management Corporation, which has a
     president and chief executive officer, was formed as a public,
     nonprofit organization to oversee the implementation of the
     strategic plan. 

  -- The corporation's board of directors, which is headed by a
     chairman, consists of 30 members including community leaders,
     city agency heads, and representatives of the business
     community, foundations, and universities. 

  -- Six village centers have been created as public, nonprofit
     organizations that will help create sustainable communities. 


      FUNDING
------------------------------------------------------- Appendix I:2.2

The EZ/EC SSBG funds pass through the Maryland Department of Human
Resources to the Empower Baltimore Management Corporation for use in
the EZ.  As of October 31, 1996, Baltimore had obtained $2,095,500 of
its EZ funds for administrative costs and grants.  The administrative
costs have included costs for salaries, printing, and office supplies
and equipment.  The grants have been awarded to fund a business
empowerment center; the Fairfield Ecological Industrial Park; and the
village centers. 


      STRATEGIC PLAN
------------------------------------------------------- Appendix I:2.3

Baltimore's goal is to connect the EZ's workforce with the area's
mainstream economy, rebuild all basic social and neighborhood systems
simultaneously through comprehensive approaches, and solve problems
and advance EZ initiatives through a highly mobilized
citizen-resident force on a block-by-block basis.  Baltimore has
organized its planned activities into eight categories: 

  -- community mobilization, which includes creating village centers,
     providing technical assistance to communities, and using
     information and community technology at the community level;

  -- community development, which includes developing a land-use plan
     and improving the area's overall environment and quality of
     life;

  -- public safety, which includes enhancing community policing,
     addressing substance abuse enforcement, and designing safe
     neighborhoods;

  -- housing, which includes facilitating home ownership, increasing
     the availability of affordable rental housing, and improving
     substandard housing;

  -- health and family development, which includes linking human
     services to support workforce development;

  -- education, training, and literacy, which includes providing a
     full range of training opportunities for EZ residents, such as
     training in classrooms and in local career centers;

  -- economic development, which includes strengthening and expanding
     existing businesses, attracting new businesses, and developing
     entrepreneurs within the EZ; and

  -- evaluating and monitoring, which includes operating the Empower
     Baltimore Management Corporation, as well as evaluating and
     monitoring the program. 


   CHICAGO, ILLINOIS
--------------------------------------------------------- Appendix I:3

   Figure I.3:  Chicago
   Empowerment Zone

   (See figure in printed
   edition.)


      GOVERNANCE
------------------------------------------------------- Appendix I:3.1

  -- The EZ/EC Coordinating Council is the governing body of the
     Chicago EZ.  Its 39 members include representatives from
     businesses and communities in the zone and officials from the
     city, county, and state governments.  The council also includes
     representatives from three city-designated neighborhoods that
     the city wants to benefit from the zone's activities.  The
     council's responsibilities include developing zonewide policies,
     identifying support resources, and reviewing and recommending
     the approval of requests for funding projects aimed at
     implementing the strategic plan. 

  -- Four committees established by the EZ/EC Coordinating Council
     manage the EZ.  The Executive Committee calls meetings and
     establishes rules and procedures for the coordinating council. 
     The Committee on Policy and Planning advises the council on the
     allocation of EZ funds, while the Committee on Finance monitors
     the receipt, use, and distribution of funds.  Finally, the
     Committee on Community and Business Outreach promotes the
     benefits and services of the EZ to businesses and residents. 


      FUNDING
------------------------------------------------------- Appendix I:3.2

The EZ/EC SSBG funds pass through the Illinois Division of Family
Support Services to the city of Chicago for use by the EZ.  As of
October 31, 1996, the EZ had drawn down $279,000 to initiate projects
that would rehabilitate office space for future use by businesses,
establish a mechanism to link EZ residents with employers, promote
home ownership, develop public schools into community learning
centers, provide business training to 30 EZ residents with business
potential, and create a partnership with a local college to prepare
students for the General Educational Development tests.  These
projects are the first of 86 projects that were approved by the EZ in
September 1996.  Funding for these projects totals about $45 million,
including $41 million in federal funds. 


      STRATEGIC PLAN
------------------------------------------------------- Appendix I:3.3

Chicago's two overall goals for the EZ are alleviating poverty and
changing the way that the federal, state, county, and city
governments interact with the EZ's residents.  Chicago's strategic
plan includes seven initiatives aimed at achieving these goals: 

  -- building human and organizational capacity by developing
     programs that expand traditional job training projects to
     include life skills, job readiness, and apprenticeship and
     mentoring;

  -- linking health and human services by establishing a wellness
     system that encourages a healthy workforce through health
     screening, assessment, and medical referrals;

  -- improving public safety by increasing community security and
     providing opportunities for local residents to become more
     involved in making their environment safe;

  -- achieving economic empowerment by increasing investment in and
     by the community;

  -- developing affordable and accessible housing by expanding home
     ownership opportunities within the community and increasing the
     number of housing units for the elderly and persons with
     disabilities;

  -- enhancing youth futures by establishing youth training programs
     and youth-run businesses; and

  -- building on cultural diversity by promoting tourism and
     increasing and fostering cultural sensitivity. 


   DETROIT, MICHIGAN
--------------------------------------------------------- Appendix I:4

   Figure I.4:  Detroit
   Empowerment Zone

   (See figure in printed
   edition.)


      GOVERNANCE
------------------------------------------------------- Appendix I:4.1

  -- The Empowerment Zone Development Corporation was formed as a
     nonprofit corporation by state and local legislation to oversee
     the implementation of the strategic plan.  An executive
     director, who is hired by the board of directors, heads the
     corporation and is assisted by other staff. 

  -- The board of directors is composed of 50 representatives of all
     sectors in the community.  Sixty percent of the board's members
     are community-based, including representatives of community
     development corporations, businesses, neighborhood councils, and
     places of worship.  The remaining 40 percent represent the
     larger community, which includes government, corporations,
     banks, and foundations. 

  -- An executive committee, which consists of 25 members selected
     from the board of directors, conducts the corporation's
     business. 

  -- Neighborhood review panels will provide a way for the EZ's
     neighborhoods to convey new ideas or suggest revisions to the
     executive committee.  The panels will consist of residential and
     business representatives from all three neighborhoods in the EZ. 


      FUNDING
------------------------------------------------------- Appendix I:4.2

The EZ/EC SSBG funds pass through the Michigan Family Independence
Agency to the city of Detroit, which disburses funds to agencies
implementing the programs and projects in the approved strategic plan
under contracts approved by the Detroit City Council.  As of October
31, 1996, Detroit had drawn down $54,327 to begin a school-based
program designed to reduce alcohol- and drug-related violence.  In
addition, Detroit has contracted with 18 agencies to implement
projects totaling $29.4 million in EZ/EC SSBG funds. 


      STRATEGIC PLAN
------------------------------------------------------- Appendix I:4.3

Detroit envisions healthy neighborhoods, strong families, and
economic opportunities that provide well-paying jobs.  Detroit has
organized its planned activities into the following three categories: 

  -- creating economic opportunity by improving businesses' access to
     capital, attracting new businesses to the EZ, linking residents
     to jobs, and increasing international trade and tourism;

  -- sustaining families by improving public safety; building on
     existing programs to support productive, stable families;
     improving the quality of learning; and integrating technology
     into training and educational programs; and

  -- upgrading neighborhoods by preserving and developing affordable
     housing, creating housing alternatives for the homeless, making
     transportation more accessible, improving vacant land,
     increasing the reuse of contaminated land, and improving
     recreational facilities and programs. 


   NEW YORK, NEW YORK
--------------------------------------------------------- Appendix I:5

   Figure I.5:  New York
   Empowerment Zone

   (See figure in printed
   edition.)


      GOVERNANCE
------------------------------------------------------- Appendix I:5.1

  -- The New York Empowerment Zone Corporation is a local-city-state
     public benefit corporation.  The corporation has a seven-member
     board composed of representatives from Harlem, the South Bronx,
     New York City, and New York State. 

  -- The Bronx Overall Economic Development Corporation and the Upper
     Manhattan Empowerment Zone Development Corporation are nonprofit
     organizations that plan and implement zone activities in their
     respective parts of the EZ.  Their functions include directing
     the execution of contracts with service providers, negotiating
     contracts, and awarding contracts. 


      FUNDING
------------------------------------------------------- Appendix I:5.2

The EZ/EC SSBG funds pass through the state's Empire State
Development Corporation to the New York Empowerment Zone Corporation
for use by the EZ.  As of October 31, 1996, the EZ had obtained
$511,202 of its funds. 


      STRATEGIC PLAN
------------------------------------------------------- Appendix I:5.3

New York envisions revitalizing the economic, social, and physical
infrastructure of the EZ's neighborhoods.  New York has organized its
planned activities into five categories: 

  -- creating economic opportunities by enhancing the small business
     base in neighborhoods, fortifying community-based organizations,
     providing comprehensive educational and job training programs,
     and aligning the EZ's neighborhoods and residents with economic
     opportunities in the city and region;

  -- preparing children and youth for a productive future by
     expanding and upgrading early childhood development and day care
     programs;

  -- supporting families by ensuring the availability and quality of,
     and increasing the funding for, a variety of support services,
     such as primary health care programs and substance abuse
     prevention and treatment programs;

  -- restoring and maintaining the EZ's infrastructure--its housing
     and open spaces--and making them safe;

  -- encouraging community involvement by increasing ways that
     residents can participate in decisions affecting their
     community, creating neighborhood planning centers, and
     connecting the EZ to the information superhighway through a
     communitywide network. 


   PHILADELPHIA,
   PENNSYLVANIA-CAMDEN, NEW JERSEY
--------------------------------------------------------- Appendix I:6

   Figure I.6: 
   Philadelphia-Camden Empowerment
   Zone

   (See figure in printed
   edition.)


      GOVERNANCE
------------------------------------------------------- Appendix I:6.1

  -- The Philadelphia-Camden Bi-State Governance Board will provide
     oversight and guidance for regional aspects of the strategic
     plan. 

  -- The Philadelphia segment of the EZ is divided into three
     neighborhoods--American Street, North Central Philadelphia and
     West Philadelphia--each of which has a Community Trust Board,
     whose members are responsible for overseeing the EZ's activities
     in their neighborhood.  The board members are elected by the
     zone's residents or appointed by the mayor. 

  -- The Philadelphia Empowerment Zone Office is part of the city of
     Philadelphia's government.  Its employees include people hired
     from the EZ's communities and staff on loan from other city
     departments.  The office organizes communities and works with
     the community trust boards and neighborhood committees to
     implement the benchmarks in the neighborhoods. 

  -- The Camden segment of the EZ has set up the Camden Empowerment
     Zone Corporation.  Its board consists of 35 representatives, at
     least 12 of whom are residents elected to sit on the board.  The
     remaining members are appointed by the mayor.  The mayor and the
     mayor's department heads sit on the board as ex-officio members. 


      FUNDING
------------------------------------------------------- Appendix I:6.2

The EZ/EC SSBG funds pass through the Pennsylvania Department of
Public Welfare to the city of Philadelphia for use by the EZ and
through the New Jersey Department of Human Resources to the
corporation.  The EZ entities have agreed that the $100 million will
be split between the two cities, with Philadelphia receiving $79
million and Camden receiving $21 million.  As of October 31, 1996,
the EZ had obtained $570,943 to buy sites for a supermarket and
retail stores in the Philadelphia part of the EZ, which the EZ hopes
will create jobs for residents. 


      STRATEGIC PLAN
------------------------------------------------------- Appendix I:6.3

The Philadelphia-Camden vision for the EZ is based on revitalizing
the economic, social, and physical infrastructure of the zone's
neighborhoods.  The EZ has organized its activities into five
categories: 

  -- producing economic growth by creating 10,000 jobs over the life
     of the program;

  -- creating affordable housing by establishing a housing trust fund
     to support the development of at least 1,000 affordable
     dwellings for home owners and renters;

  -- supporting families by establishing a center to provide
     one-stop-shopping for family support services. 

  -- improving public health by expanding medical services to the
     community through activities such as providing additional intake
     facilities for drug and alcohol programs and people with AIDS. 

  -- increasing safety by organizing and expanding community
     policing, developing 40 new Town Watch programs, and
     establishing community safety centers. 




(See figure in printed edition.)Appendix II
FACTORS THAT HAVE HELPED OR
HINDERED THE EZS' PLANNING AND
IMPLEMENTATION EFFORTS
=========================================================== Appendix I



(See figure in printed edition.)



(See figure in printed edition.)



(See figure in printed edition.)



(See figure in printed edition.)



(See figure in printed edition.)



(See figure in printed edition.)


SCOPE AND METHODOLOGY
========================================================= Appendix III

To assess the status of HUD's implementation of the six urban EZs and
to describe the Department's plans for evaluating the initiative, we
interviewed officials from HUD and HHS who were responsible for the
EZ program.  We also reviewed HUD's and HHS' application and
implementation guidance and policy memorandums, evaluation plans, and
other relevant documents.  We interviewed the EZ directors in all six
urban EZs and visited the Atlanta, Baltimore, and Philadelphia-Camden
EZs.  We also reviewed the EZs' strategic plans, benchmarks, status
reports, and funding documents.  We did not evaluate whether the EZ
program will meet its objectives.  We also did not examine the use of
tax incentives or of funds other than the EZ/EC SSBG funds. 

To understand the role played by public housing officials and
residents in the EZ program, we surveyed representatives of the PHAs
in the seven cities included in the six urban EZs.  Using a
structured telephone survey, we asked the PHA representatives (1) to
what extent, if any, the PHA and its residents were involved in the
EZ's activities before and after their city was designated as a
federal EZ and (2) whether they felt their level of involvement was
appropriate.  We did not evaluate the adequacy of the PHA officials'
or the public housing residents' participation in the EZ program. 

To identify factors that have helped or hindered efforts to carry out
the EZ program, we interviewed 28 participants who represented all
six EZs and included EZ directors, governance board members, state
officials involved in drawing down the EZ/EC SSBG funds, generalists
hired by HUD, and HUD and HHS employees.  We selected these
participants from a list provided by HUD.  To obtain more consistent
reactions to the factors that these individuals identified, we listed
all of the factors in a questionnaire and mailed 34 questionnaires to
32 participants, including those we had already interviewed.  One HUD
generalist received three questionnaires--one for each of the cities
with which he works.  We did not independently analyze the factors
identified by the respondents or examine their applicability across
all of the EZs. 

The questionnaire asked the survey recipients to indicate the extent
to which each factor had helped or hindered the program's
implementation.  We also asked the recipients to elaborate on the
factors that most extensively helped or hindered implementation and
to identify possible remedies for the impediments.  Finally, we asked
the recipients to pick the three factors that had helped efforts the
most and the three factors that had hindered efforts the most.  Two
people told us they preferred not to return the questionnaire.  One
was a private-sector representative on an EZ board who was concerned
that completing the questionnaire could be perceived as an
endorsement of the program.  The other was a state government
official who said that he was not sufficiently involved in the
program to be able to complete the questionnaire.  We received 27
completed surveys from respondents representing all of the EZs, as
well as the federal and state governments. 

In general, the factors discussed in this report were the ones that
were most often identified by respondents as (1) having a great or
very great impact on the program's implementation\21 and (2) having
helped or hindered implementation more than other similar factors. 
The results of this survey cannot be generalized to the entire EZ/EC
program. 

We performed our work at HUD's Office of Community Planning and
Development and HHS' EZ/EC Support Team in Washington, D.C.  We also
retained Dr.  Marilyn M.  Rubin, an expert with extensive knowledge
in economic development and evaluation, to advise us on all aspects
of our work.  We performed our work in accordance with generally
accepted government auditing standards from November 1995 through
October 1996. 



(See figure in printed edition.)Appendix IV

--------------------
\21 For each factor, we asked the survey recipients to use a
five-point scale--little or no extent, some extent, moderate extent,
great extent, and very great extent--to indicate the extent to which
that factor had helped or hindered efforts to plan and implement the
program. 


COMMENTS FROM THE DEPARTMENT OF
HOUSING AND URBAN DEVELOPMENT
========================================================= Appendix III



(See figure in printed edition.)



(See figure in printed edition.)



(See figure in printed edition.)



(See figure in printed edition.)



(See figure in printed edition.)



(See figure in printed edition.)



(See figure in printed edition.)



(See figure in printed edition.)


The following are GAO's comments on HUD's letter dated November 22,
1996. 


   GAO COMMENTS
------------------------------------------------------- Appendix III:1

1.  Throughout our assignment, we have included program evaluation as
a topic in interviews that included the Office of Community Planning
and Development's General Deputy Assistant Secretary and Special
Assistant to the General Deputy Assistant Secretary, and the Office
of Economic Development's Director and Deputy Director, as well as
members of the EZ/EC task force.  As recently as October 16, 1996, we
asked the Deputy Director of the Office of Economic Development,
under which the EZ/EC task force is located, for a copy of the
reports on the EZs' performance.  We were told they were not
available.  After receiving HUD's comments on this report, we talked
with the General Deputy Assistant Secretary, who provided an example
of a performance report from one EZ and told us that HUD's analysis
of the EZs' reports and the results of short-term reviews that are
being performed by a contractor were not yet available.  The section
of our report on evaluating the EZ program is not meant to detract
from the efforts that HUD and the EZs have already made in setting up
a system to track and measure activities in each zone.  On the
contrary, we believe that the steps taken so far are essential in
building a set of outcome-oriented performance measures.  We revised
the report to clarify our support for measuring the program in
results-oriented terms and to include HUD's position on outcome
measures. 

2.  We agree with HUD that the federal government obligated the EZ/EC
SSBG funds in a timely manner and have added language to that effect. 
Although HUD sent a letter to the EZs on the use of funds for
administrative operations, this section of the report restates
comments made by people involved in the program at the federal,
state, and local levels.  As we stated in the beginning of that
section of the report and in the appendix on our scope and
methodology, we did not independently analyze the factors identified
by the respondents or examine their applicability across all of the
EZs.  We believe the report accurately and sufficiently covers the
program participants' concerns about the lack of administrative
funding. 

3.  We chose not to include obligations in the table because there is
no standard definition for obligations below the federal level. 
Therefore, including the numbers in a table would invite comparisons
of amounts that are not comparable.  The EZs' definitions of
obligations range from obtaining approval for a project's funding
from the city council to awarding a contract.  However, we have
revised the report to indicate that higher amounts have been
obligated by the EZs. 

4.  As noted in comment 2 above, this section of the report restates
comments from people involved in the EZ program.  As we said in the
beginning of that section of the report and in the appendix on our
scope and methodology, we did not independently analyze the factors
identified by the respondents or examine their applicability across
all of the EZs.  Furthermore, in the background section of the
report, we acknowledged that HHS encouraged the states to carry out
their EZ funding responsibilities with as few restrictions as
possible under the law, a statement that we based on the same letter
that HUD quotes.  We also note in the background section of the
report that the state is fiscally responsible for the funds.  This
statement is related to another part of the letter from HHS that says
(1) the states will technically be subject to possible recoupment
actions by HHS if an EZ or EC uses the EZ/EC SSBG funds to finance an
activity not allowed by the authorizing statute and (2) the state can
hold localities accountable for the appropriate use of funds.  We
believe the report accurately and sufficiently covers the program
participants' concerns about the states' roles. 

5.  We revised the report to indicate that HUD identified these two
examples of programs that involve both the EZs and public housing
officials. 

6.  As noted in comment 2 above, this section of the report restates
comments from people involved in the EZ program.  As we stated in the
beginning of that section of the report and in the appendix on our
scope and methodology, we did not independently analyze the factors
identified by the program participants.  We agree that HUD has a
variety of methods for communicating with the EZs, a factor that was
included in our survey.  However, too few program participants
indicated that this factor helped implementation efforts to a great
or very great extent for us to include the factor in the report. 
Consequently, we feel that no change is needed. 

7.  We revised the report to include these suggestions. 




(See figure in printed edition.)Appendix V
COMMENTS FROM THE DEPARTMENT OF
HEALTH AND HUMAN SERVICES
========================================================= Appendix III



(See figure in printed edition.)



(See figure in printed edition.)



(See figure in printed edition.)



(See figure in printed edition.)



(See figure in printed edition.)


The following are GAO's comments on HHS' letter dated November 29,
1996. 


   GAO COMMENTS
------------------------------------------------------- Appendix III:2

1.  We agree that HHS is and has been an important partner in this
program.  Among other things, HHS has provided information to the EZs
to clarify the uses of and controls on the EZ/EC SSBG funds, advised
the EZs and ECs about other HHS grants that have been awarded or are
available to the EZs, and worked with HUD and USDA in preparing
guidance issued to the EZs.  We added some information on HHS to the
background section of the report. 

2.  Although the two segments of this zone operate autonomously for
the most part, they are still a single EZ.  Furthermore, the
administration of this EZ was not significantly different from that
of the New York EZ, which has split its operations between two
corporations covering distinct parts of the designated zone. 
Consequently, we believe that discussing the two segments of the
Philadelphia-Camden zone together is appropriate because they form a
single, bistate zone. 

3.  We have revised or added wording to the report to make the
changes, when appropriate.  HHS also felt that the report should
include additional background information about HHS' role in the
program and raised a number of editorial and technical comments on
the report.  We changed the wording of the report, when appropriate,
to address these comments. 

4.  We updated the report to include the amounts drawn down as of
October 31, 1996.  The amounts for Detroit and Chicago were provided
by the EZ.  A state official in Michigan verified that the drawdown
had taken place and that the state had provided the funds to the EZ. 
They added that the amount would not yet show up on HHS' records
because of the timing of the state's request for a drawdown.  An HHS
official told us that the process in Illinois was similar and that
HHS had received a request for a drawdown in November 1996. 


MAJOR CONTRIBUTORS TO THIS REPORT
========================================================== Appendix VI

RESOURCES, COMMUNITY, AND ECONOMIC
DEVELOPMENT DIVISION

Nancy A.  Simmons
Carole Buncher
Merrie Nichols-Dixon
Susan Beekman
Gwenetta Blackwell
Johnnie Barnes
Elizabeth R.  Eisenstadt
Alice G.  Feldesman
Mitchell B.  Karpman
John T.  McGrail


*** End of document. ***