Community Development: The American Community Renewal Act of 1998
(Testimony, 08/19/98, GAO/T-RCED-98-263).

GAO discussed the targeting of community development benefits included
in H.R. 3865, the American Community Renewal Act of 1998, as well as to
share lessons learned from the early implementation of the community
development program that created Empowerment Zones and Enterprise
Communities.

GAO noted that: (1) out of nearly 59,000 census tracts nationwide, 4,323
meet the bill's economic distress criteria, according to GAO's analysis
of 1990 census data; (2) of these distressed tracts, 1,354 are in rural
areas, 2,535 in urban areas, and 434 in mixed urban/rural areas; (3) 19
percent of these census tracts are located in an Empowerment Zone or
Enterprise Community; (4) more than half of the local, state, and
federal officials involved in implementing the Empowerment Zone program
who responded to a survey that GAO conducted in 1996 agreed on the
factors that had either helped or hindered their efforts to implement
the program; (5) for example, they identified factors such as community
representation within the governance structures and enhanced
communication among stakeholders as helping the program's
implementation; and (6) similarly, preexisting relationships among
Empowerment Zone stakeholders and pressure for quick results were
identified as hindering the program's implementation.

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

 REPORTNUM:  T-RCED-98-263
     TITLE:  Community Development: The American Community Renewal Act 
             of 1998
      DATE:  08/19/98
   SUBJECT:  Rural economic development
             Community development programs
             Urban economic development
             Economically depressed areas
             Census
             Economic analysis
             Unemployment rates
             Eligibility determinations
             Statistical data
IDENTIFIER:  HUD Empowerment Zones and Enterprise Communities 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


Before the Committee on Small Business, House of Representatives in
Chicago, Illinois

For Release
on Delivery
Expected at
1 p.m.  CDT
Wednesday
August 19, 1998

COMMUNITY DEVELOPMENT - THE
AMERICAN COMMUNITY RENEWAL ACT OF
1998

Statement of Stanley J.  Czerwinski, Associate Director,
Housing and Community Development Issues,
Resources, Community, and Economic
Development Division

GAO/T-RCED-98-263

GAO/RCED-98-263T


(385769)


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

  EC -
  EZ -
  HUD -

============================================================ Chapter 0

Mr.  Chairman and Members of the Committee: 

We are pleased to be here today to discuss the targeting of community
development benefits included in H.R.  3865, the American Community
Renewal Act of 1998, as well as to share lessons learned from the
early implementation of the community development program that
created Empowerment Zones and Enterprise Communities.  The bill we
are discussing today, H.R.  3865, was introduced in the House of
Representatives on May 14, 1998, and allows for the designation of
100 areas as "renewal" communities.  These communities would receive
incentives to increase jobs, form and expand small businesses, and
increase educational opportunities and homeownership.  To be eligible
for designation as a renewal community, an area must meet economic
distress criteria; specifically, its unemployment rate must be at
least 150 percent of the national unemployment rate; its poverty rate
must be at least 20 percent in each census tract; and, in urban
areas, at least 70 percent of its households must have incomes below
80 percent of the median income of households within the local
governmental jurisdiction.\1

Empowerment Zones and Enterprise Communities, authorized by the
Omnibus Budget Reconciliation Act of 1993 and the Taxpayer Relief Act
of 1997, seek to promote the revitalization of economically
distressed areas. 

In our statement today, we identify the number of census tracts that
meet the economic distress criteria of H.R.  3865.\2 We also discuss
the results of our prior report on six urban Empowerment Zones that
described the program's early implementation, including factors that
participants believed may have either helped or hindered efforts to
carry out the program.\3 These lessons from the early implementation
of the Empowerment Zone program may be useful when considering H.R. 
3865. 

In summary, we found the following: 

  -- Out of nearly 59,000 census tracts nationwide, 4,323 meet the
     bill's economic distress criteria, according to our analysis of
     1990 census data.  Of these distressed tracts, 1,354 are in
     rural areas; 2,535 in urban areas; and 434 in mixed urban/rural
     areas.  Nineteen percent of these census tracts are located in
     an Empowerment Zone or Enterprise Community. 

  -- More than half of the local, state, and federal officials
     involved in implementing the Empowerment Zone program who
     responded to a survey that we conducted in 1996 agreed on the
     factors that had either helped or hindered their efforts to
     implement the program.  For example, they identified factors
     such as community representation within the governance
     structures and enhanced communication among stakeholders as
     helping the program's implementation.  Similarly, preexisting
     relationships among Empowerment Zone stakeholders and pressure
     for quick results were identified as hindering the program's
     implementation. 


--------------------
\1 In addition to providing specific measures related to poverty,
unemployment, and income, the bill requires that the area be one of
"general distress."

\2 We previously reported on the poverty and unemployment criteria
included in H.R.  3865 and its predecessor, H.R.  1031, the American
Community Renewal Act of 1997, introduced in the House of
Representatives on Mar.  12, 1997.  See Community Development: 
Information Related to H.R.  3865, the American Community Renewal Act
of 1998 (GAO/T-RCED-98-196, May 19, 1998) and Community Development: 
Identification of Economically Distressed Areas (GAO/RCED-98-158R,
May 12, 1998). 

\3 Community Development:  Status of Urban Empowerment Zones
(GAO/RCED-97-21, Dec.  20, 1996). 


   BACKGROUND
---------------------------------------------------------- Chapter 0:1

On May 14, 1998, H.R.  3865 was introduced in the House of
Representatives to allow the Secretary of the Department of Housing
and Urban Development (HUD) to designate up to 100 areas as renewal
communities.  For these communities, the bill seeks to increase the
number of new jobs; form and expand small businesses; increase
educational opportunities and homeownership; and foster moral renewal
by providing federal tax incentives, regulatory reform, and
homeownership incentives. 

A renewal community under H.R.  3865 must have, among other things,
an unemployment rate equal to at least 150 percent of the national
unemployment rate and a poverty rate of at least 20 percent in each
of its census tracts.  Furthermore, in an urban area, at least 70
percent of the households must have incomes below 80 percent of the
median income of households within the local governmental
jurisdiction.  In addition, H.R.  3865 provides that a renewal
community be within the jurisdiction of a local government, have a
continuous boundary, and meet population requirements.\4

Empowerment Zones (EZ) and Enterprise Communities (EC), which also
are designed to promote the revitalization of economically distressed
areas, were authorized by the Omnibus Budget Reconciliation Act of
1993 and the Taxpayer Relief Act of 1997.  To date, 105 communities,
including both urban and rural areas, have been designated as either
an EZ or EC. 


--------------------
\4 Population requirements are that the area have (1) at least 4,000
persons if any portion of the area is located within a Metropolitan
Statistical Area with a population of at least 50,000 or (2) 1,000
persons in any other case.  There is no population requirement if the
area is entirely within an Indian reservation. 


   NUMBER OF TRACTS THAT MEET THE
   ECONOMIC DISTRESS CRITERIA OF
   H.R.  3865
---------------------------------------------------------- Chapter 0:2

To identify areas that could be part of a designated renewal
community, we analyzed the most recent data (1990 Census) from the
Census Bureau.  Using these data, we identified census tracts\5 that
met the economic distress criteria of H.R.  3865.  The Census Bureau
defines census tracts as small, relatively permanent statistical
subdivisions of counties. 

The term "community" is not defined by the Census Bureau and can take
many different forms.  However, a community would most likely include
more than one census tract.  For example, the "community" that is
participating in the EZ program in Atlanta includes 23 census tracts,
and the participating "community" in a Chicago EZ includes 96 census
tracts.\6

As shown in table 1, we identified 4,323 census tracts throughout the
country that meet the economic distress criteria of H.R.  3865 and
categorized these tracts as rural, urban, or mixed.  Using the Census
Bureau's data on whether persons lived in rural or urban areas, we
defined a tract as rural if more than 80 percent of its residents
were designated as rural.  If more than 80 percent of its residents
were designated as urban, we defined the tract as urban.  We defined
all other tracts as mixed. 



                                Table 1
                
                  Number of Census Tracts in Total and
                 Number of Census Tracts That Meet the
                Economic Distress Criteria of H.R. 3865

                                            Tracts              Tracts
                                            in the             meeting
                                          nation\a            criteria
------------------------------  ------------------  ------------------
Rural                                       13,719               1,354
Urban                                       40,173               2,535
Mixed urban/rural                            5,089                 434
======================================================================
Total                                       58,981               4,323
----------------------------------------------------------------------
\a We included census tracts in the analysis if they had at least 50
households.  Tracts with fewer than 50 households were not
included--there were 2,277 such tracts. 

Source:  GAO's analysis of 1990 census data. 


--------------------
\5 We use the term "census tracts" to include census tracts, as well
as Block Numbering Areas that are used by the Census Bureau for areas
where census tracts have not been established. 

\6 Under the EZ/EC program's rules, a participating area must include
whole census tracts.  The use of census tracts rather than existing
neighborhoods to draw EZ boundaries was identified as a factor
hindering EZ planning and implementation efforts. 


   GEOGRAPHIC DISPERSION OF TRACTS
   THAT MEET THE ECONOMIC DISTRESS
   CRITERIA OF H.R.  3865
---------------------------------------------------------- Chapter 0:3

Tracts that meet the economic distress criteria of H.R.  3865 are
located in the District of Columbia and all 50 states, including
1,140 counties (out of 3,141).  Figure 1 shows the dispersion of
eligible tracts among counties throughout the United States. 

   Figure 1:  Counties With Census
   Tracts That Meet the Economic
   Distress Criteria of H.R.  3865

   (See figure in printed
   edition.)

Note:  White areas represent counties in which there were no census
tracts that met the criteria. 

Source:  GAO's analysis of 1990 census data. 


   LESSONS LEARNED FROM THE EARLY
   IMPLEMENTATION OF EMPOWERMENT
   ZONES
---------------------------------------------------------- Chapter 0:4

Information we obtained from participants in the urban EZ program
about factors that helped or hindered the program's planning and
implementation are useful as "lessons learned" for future community
development programs, such as the one proposed in H.R.  3865. 

As part of our report on the status of urban EZs, we surveyed 32
federal, state, and local officials who were involved in planning and
implementing the EZ/EC program and asked them to indicate the extent
to which a broad set of factors had helped or hindered the program's
implementation.  Among those we surveyed were EZ directors and
governance board members, state officials, contractors who provided
day-to-day assistance to the EZs, and HUD and Department of Health
and Human Services employees.  While the survey respondents' views
cannot be generalized to the entire EZ/EC program, they are useful in
understanding how such a program can be improved. 

In the 27 surveys that were returned to us, the following five
factors were identified by more than half of the survey respondents
as having helped them implement the EZ program: 

  -- community representation on the EZ governance boards,

  -- enhanced communication among stakeholders,

  -- assistance from HUD's contractors (called generalists),\7

  -- support from the city's mayor, and

  -- support from White House and Cabinet-level officials. 

Similarly, the following six factors were frequently identified by
survey respondents as having hindered their efforts to 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. 

In closing, Mr.  Chairman, our analysis shows that areas throughout
the nation, both urban and rural, could be part of the "renewal
communities" envisioned in the American Community Renewal Act of
1998.  Some of these areas are also part of designated EZs or ECs. 
In addition, our prior report on the EZ program\8 shows lessons
learned that may be applicable to the implementation of other
community development programs. 

Mr.  Chairman, this concludes our prepared remarks.  We will be
pleased to respond to any questions that you or other Members of the
Committee may have. 


--------------------
\7 Generalists were private-sector community development specialists
who acted as liaisons to specific communities within a geographical
area.  They provided the EZs and ECs with a single point of access to
various types of technical assistance, provided information about
federal programs and private-sector initiatives, and fostered
community involvement in implementing strategic plans. 

\8 GAO/RCED-97-21. 


*** End of document. ***