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Public Statements

Hearing of the Senate Committee on Environment and Public Works - Oversight of the Economic Development Administration

Statement

By:
Date:
Location: Washington, DC

Chaired By: Senator Barbara Boxer (D-CA)

Witnesses: Sandra R. Walters, Acting Assistant Secretary of Commerce for Economic Development, Economic Development Administration, Accompanied by Dennis Alvord, Acting Deputy Assistant Secretary of Commerce for Economic Development; James Kennedy, Commissioner, Butler County, Pennsylvania on Behalf of the National Association of Regional Councils; Lavern W. Phillips, President, Woodward Industrial Foundation; Leanne Mazer, Executive Director, Tri-County Council for Western Maryland on Behalf of the National Association of Development Organizations

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SEN. BOXER: (In progress) -- in the record, but I'm going to go through it just in about two minutes. We know the EDA has a long history of helping economically distressed communities, and as my colleague has said, leveraging the funds in a magnificent way.

SEN. : (Off mike) -- come back.

SEN. BOXER: Oh, that's great and we can move this forward, all right. It was -- this program was created during the Johnson administration, so it certainly has been proven. I bet some of you in this audience were born well after that. Oh, but if I could say that about myself.

And as Senator Inhofe has said, from providing funding for water and sewer improvements, to helping manufacturers become more competitive in the global marketplace, the EDA provides valuable assistance to communities across the nation.

It's cost-effective. It has a very important role to play in economically challenging times. I went out to Sacramento to an area that has just made a proposal for EDA funding. It's like the perfect place. It's a redevelopment area.

They built a stadium there, a ballpark for the farm team. It's the biggest field there, and they really are just getting ready now to add housing and so on and so forth. It's just the perfect place to leverage those type of funds.

When the former deputy assistant secretary of commerce for economic development testified before us in September, he stated that from Fiscal Year '04 to '08 EDA awarded over ($)1.29 billion in investments, which were expected to create 392,000 jobs at an average cost of only $2,500 per job.

Now, I put that up against almost anything else that we do. We know the federal dollars spur large amounts of private sector investment, and it is estimated for every dollar in federal funding, $33 in private sector investment was created, it -- this is really a great success story.

And Congress recognized EDA's unique role in job creation in the American Recovery and Reinvestment Act, our stimulus bill by -- and I worked hard to get this $150 million, boy I had to work hard to get it. But we did get it.

And I want to thank Bettina Poirier and her staff on that one. That was -- (inaudible.) But I do look forward to hearing today about how those funds have been distributed, and I -- it may be that they're still being distributed. We want to know about that, and how those funds are helping our communities across the nation.

We also provided EDA with a total of ($)500 million in natural disaster assistance through supplemental appropriations in '08 and '09, and I'd love to hear about how those funds are being used to support long-term post disaster economic recovery in response to hurricanes, floods and other disasters.

So as was stated by my ranking member, EDA's authorization expired at the end of September '08, but the Agency has been able to continue operating through the appropriation of funds.

We do need to reauthorize, and I intend to do it, and so does Senator Inhofe. And when the two of us get our mind to something we do it, right Ruthie (ph)?

MR. : (Off mike.)

SEN. BOXER: And so we're going to do it, because we've got to push on this.

This is a win-win. So I'm going to call on our -- get this going and then -- Paul, will you tell me when there's like five minutes left to vote?

MR. : Okay.

SEN. BOXER: So Sandra Walters, acting assistant secretary of economic development, and accompanied By Dennis Alvord. So we'll start with you.

MS. WALTERS: Chairman Boxer, Ranking Member Inhofe, and members of the committee, thank you for this opportunity to testify on behalf of the Economic Development Administration.

EDA's mission is to lead the federal economic development agenda by promoting innovation and competitiveness, preparing American regions for growth and success in the worldwide economy. EDA's investments have two major goals, attracting private capital investment and creating higher-skill, higher-wage jobs.

EDA's investments are a reflection of our policy priorities to encourage collaborative regional economic development, to promote competitiveness and innovation, to cultivate entrepreneurship and to spur our economic development partners to take advantage of the opportunities of the worldwide marketplace.

As part of its 2010 budget request, the administration has emphasized two priority areas for EDA: regional innovation clusters and business incubator networks.

EDA is encouraged by this focus and finds it consistent with the results of recent EDA research, as well as best practice in the economic field overall. EDA has a history of investing in regional innovation clusters and business incubator projects.

Such as a $2.2 million investment to JumpStart in northeast Ohio, which has helped its clients create 650 new jobs and raise $43 million in private sector investments, and a $125 million investment in the Bioinnovation Center, in the New Orleans Medical District, which is assisting in the development of biotechnology related companies related to commercialized technologies from greater New Orleans area universities and research institutions.

Another critical element to our success is our focus on planning, which research shows that is essential for successful economic development. EDA is pleased that Congress recently provided the first funding increase in the planning program's contemporary history.

At the direction of Congress, EDA established the Global Climate Change Mitigation Incentive Fund in 2008 to advance the connections between economic competitiveness and environmental quality.

By using the U.S. Green Building Council's leadership in energy and environmental design, EDA is able to verify that each fund-related investment effectively contributes to sustainability and mitigates associated environmental impacts. EDA is pleased that the president's 2010 budget request provides for $16.5 million, which represents a $1.8 million increase.

Another key area for EDA is responding to sudden and severe economic dislocations. For example, EDA is on the frontline in assisting communities following natural disasters. Last year Congress allocated $500 million in two supplemental appropriations to EDA in response to natural disasters that severely impacted communities across the nation. To date, EDA has $411.3 million in projects in various stages of the application process.

Additionally, EDA received $150 million as part of the American Recovery and Reinvestment Act of 2009 to respond to sudden and severe economic dislocation and job loss due to corporate restructuring. We are ahead of the curve in implementation having published a Federal Funding Opportunity notice on March 11.

We allocated funds to each of our six regional offices to initiate the process of disbursing funds quickly to assist communities. To date, EDA has $100.3 million in projects in various stages of the application process.

Chairman Boxer, Ranking Member Inhofe, and members of the committee, thank you for your time today, and for inviting me to give an overview of EDA's programs. With me today is Dennis Alvord, the acting assistant secretary for commerce -- for economic development, who oversees EDA's six regional offices.

We look forward to answering any questions you may have, and working with the committee on legislation to reauthorize the Agency.

SEN. BOXER: Thank you so much, Sandra. Could I, Dennis, if he could raise his hand so, I know? Great, great.

And when I get to my questions, I'm going to ask you for examples of some of these projects that you're working on through the STEM (ph) and through the emergency. Okay, so be prepared, just to give us a couple of examples. Not right now, when I get to questions.

Now, we're going to hear from the Honorable James Kennedy, and what I'm going to do -- he's the Commissioner, Butler County, Pennsylvania on behalf of the National Association of Regional Councils.

After you finish, I'm going to go vote, if Senator Inhofe does get back, I'll ask him to convene, and he can just convene with Mr. Phillips, because I know he has a special interest in that. And then I'll come right back and we'll continue.

So go ahead, Mr. Kennedy.

MR. KENNEDY: Thank you, and good morning.

SEN. BOXER: And make sure you turn on your mike.

MR. KENNEDY: (Off mike.)

SEN. BOXER: Okay.

MR. KENNEDY: Good morning and thank you, Chairman Boxer and Ranking Member Inhofe and the distinguished members of the committee. I am honored to be before you today to testify in Economic Development Administration, EDA and its reauthorization, economic stimulus and the idea of sustainable and livable communities.

I am James Kennedy, a commissioner from Butler County, Pennsylvania, and I sit on the board of directors of Southwest Pennsylvania Commission, SPC. I am also an elected board member and past president of the National Association of Regional Councils, NARC and present president of the county commissioners' association of Pennsylvania.

I am also a lifelong resident of Butler County and served priorly as a commissioner. An avid regionalist and a dairy and grain farmer. On behalf of NARC and SPC I am here to stress the importance of EDA programs, funding activities, the need to immediate reauthorization, SPC's successes and challenges with EDA, and how EDA can revitalize to meet the growing needs of our communities and regions.

NARC advocates the most jurisdictional cooperation for most effective way to address communities planning and development. NARC is governed by the local elected officials like myself and represents regional planning organizations such as SPC, that work to improve America's communities, large, small, urban, and rural.

Regional planning organizations are important to our communities and for their delivery of funding and programs, planning support and technical assistance, especially during the economic crisis. My regional council, SPC, represents the greater Pittsburgh region, a 10 county area with diverse urban and rural make up of 2.6 million people and 7,000 square miles.

SPC is the MPO, the LDD, and the EDD, and is responsible for regional economic development priorities with a wide range of public services, including development and implementing of the region's comprehensive economic development strategies, which brings critical funding to our region for improved infrastructure, job opportunities and resources.

In a time of softening economy, declining federal and state funding, rising unemployment and there's a clear need for substantial investment in the county's infrastructures. We must revive our federal commitment to EDA's core mission and bring about more comprehensive regional planning activities.

For SPC, EDA recently provided a $150,000 to Pittsburgh Life Sciences for the expansion to the executive in residence, which provides capital investments, customized company formation, and business growth services in the region of life sciences.

One of my region's largest targeted industry clusters, the investment part of the $300,000 project was recently profiled in the Science Progress as an innovative way to create jobs and maintain long-term economic competitiveness.

Another EDA supported project in our region is Armstrong County Industrial Development Council in Kittanning, Pennsylvania, which received $2 million to construct a Northport (ph) technology center; it has advanced technology firms.

This is part of the $4.4 million project that will generate $20 million in private investment to help create 60 jobs, a typical return on investment for EDA funds. Based on my experience as a local elected official, I believe that the federal government should be reestablishing a strong role in urban and rural economic development and support local and regional efforts like those I mentioned, while providing sustained local and regional authority and increased funding to support these levels.

In order to establish -- to accomplish NARC's recommendation, EDA be authorized to minimize the ($)500 million to sufficiently provide funding operations for levels of agencies including increased funding for flexibility.

And EDA's core programs, which should be the primary focus of EDA's EDDs and have received the same 52,000 per year for the planning grants for the 25 years -- for the last 25 years and must be increased. These grants are vital to local government to address the economic development.

EDA funding is critical in my region, particularly, as we face 75 percent state budget cuts this year. We need to leverage as much federal funds, state and local funding as possible in order to work regionally, in order to get the biggest return on our investment. For federal or economic stimulus my region committed to stimulus funding opportunities to potential applicants through public participation panels.

SEN. BOXER: Sir, I'm going to have to -- because your five minutes is up, and I just ran out of time to vote. So we'll put the rest of your statement in the record. But I get your message loud and clear. And I'm with you. We're going to do this and we stand (in recess ?).

(Recess.)

SEN. BOXER: (In progress) -- I think that what probably happened is that Senator Inhofe's colleagues on armed services nabbed him away. But we'll see what happens. In any case, we had two excellent statements. We'll place the full statement in the record, Mr. Kennedy, and we'll move to -- should we move to Mr. Phillips now? Okay. We'll move to LaVern Phillips, President, Woodward Industrial Foundation.

Welcome sir.

MR. PHILLIPS: Thank you Chairman Boxer, Ranking Member Inhofe, members of the committee, for the opportunity to testify today.

I am here today to urge the Senate to reauthorize Economic Development -- the Economic Development Administration and to increase funding to this critical federal agency.

My name is LaVern W. Phillips. As President of the Woodward Industrial Foundation in Woodward, Oklahoma, I am an economic and community development specialist for Woodward and Northwest Oklahoma. I previously served as chairman of the governor's economic development team for the State of Oklahoma.

The EDA supports important economic projects affecting the citizens of the United States, and it also provides funding for the economic development districts that plan economic strategies for their areas. Many small rural communities simply can't afford to develop their own economic development plans.

The EDA supports a professional planner at the Oklahoma Economic Development Authority who brings the region together behind development of a comprehensive economic development strategy. In my position with the Woodward Industrial Foundation, I worked directly with the EDA district on this regional plan.

Madame Chairman, we know how important it is to preserve our rural American society, and the EDA is an essential funding resource and partner for rural communities in that endeavor. Our experience in Northwest Oklahoma is a good example.

Woodward is a regional hub of Northwest Oklahoma and community leaders have worked hard to expand and diversify financial opportunities for residents, especially our young people. Their diligence has paid off and our region -- had reversed the loss of population common in many rural areas. Now, we are taking the next step by providing easier access to higher education.

Intensive studies in 2000 and 2004 sponsored by the city of Woodward and coordinated by the Oklahoma Community Institute identified the need for a multipurpose higher education and conference center campus. The initiative is now called the Woodward Community Campus Project.

Within the next few months, the city of Woodward will begin construction on a 36,000 square foot multipurpose conference and educational center on 40 acres of prime land within the city limits, adjacent to the USDA Southern Plains Range Research Station.

Next door, Northwestern Oklahoma State University had just completed construction of a 22,000 square foot Woodward branch to provide higher education opportunities for full-time students and young married students working to support their families.

These two facilities will be linked together via interactive television and video conferencing with Northwestern Oklahoma State University's main campus in Alva. The Woodward Community Campus will offer academic, entrepreneurial workforce and economic development programs to address problems facing rural communities. The facilities will open up career options so people can remain in rural Northwestern Oklahoma.

The EDA is providing $1 million for the construction of public infrastructure needed by the Woodward Community Campus. This is only 15.5 percent of the cost of the conference and education center with the city of Woodward committing the remaining 84.5 percent or $5.4 million.

But this is the main point I want to make today that relatively small percentage of EDA funding was essential to the success of the project. Without EDA's help, the Woodward Community Campus and the creation of good new jobs simply wouldn't happen.

So let me use this forum today to thank EDA and to tell of the positive experiences I had working with the Agency. The EDA Austin regional office staff and their director, Pedro Garza, are true professionals dedicated to job creation and preserving rural America.

I respectfully urge this committee to fully fund the U.S. Economic Development Administration, and to adopt the five-year authorization bill that provides stability and policy direction for the Agency.

Thank you Madame Chairman, Senator Inhofe and members of the committee for the opportunity to testify and I welcome your questions.

SEN. BOXER: Thanks so much Mr. Philips. And our, last but not least, speaker is Leanne Mazer, Executive Director, Tri-County Council for Western Maryland on behalf of the National Association of Development Organizations. Welcome.

MS. MAZER: Good morning, Chairwoman Boxer, Senator Inhofe and members of the committee. My name is Leanne Mazer. I currently serve as immediate past president of the National Association of Development Organizations and executive director of the Tri-County Council for Western Maryland, an EDA designated economic development district serving the three westernmost counties in the State.

Thank you for the opportunity to testify in support of a multi- year reauthorization bill for the economic development administration as well as discuss the Agency's role in post disaster and stimulus recovery efforts.

I will limit my oral remarks to four main points. First, EDA has a proven track record in helping its local partners create and retain high quality jobs in distressed areas, including those suffering from chronic poverty and those suffering from economic dislocations caused by plant closures or downsizings, natural disasters or changes in global trade.

In reauthorizing the Agency, we encourage the committees to restore the local match rates for distressed communities to at least the pre 2005 agency rule changes. This is one of the most important legislative fixes needed to help the Agency to serve distressed areas.

SEN. BOXER: Could you repeat that sentence again?

MS. MAZER: Absolutely. In reauthorizing the Agency we would encourage the committee to restore the local match rates for distressed communities to at least the pre 2005 agency rule changes. This is one of the most important legislative fixes needed to help the Agency serve distressed areas.

Second, Madame Chair, we would urge Congress to strengthen local control of EDA's Revolving Loan Fund program. The RLF program is a proven economic development tool for addressing the credit needs in underserved areas. RLFs are managed by public and private nonprofit organizations to further local economic development goals by lending their capital and then re-lending funds as payments are made on the initial loans.

Locally managed RLFs have provided business capital to thousands of new and existing companies that have difficulty securing conventional financing. Over the years, EDA has provided grants to nearly 600 RLFs with net assets approaching $850 million.

EDA's RLF program has the unique distinction of being one of the only federal grant programs that never loses its federal identity. The initial RLF grant and any income or interest derived from it is considered federal property for ever.

RLF operators are forced to continually comply with expensive and burdensome reporting and audit requirements even those dating back to the late 1970s. Ownership of EDA RLFs should be fully transferred to local intermediaries once all of the initial funds have been loaned out, repaid and fully revolved.

Third, NATO and its members respectfully urge Congress to increase the minimum funding level for EDA's partnership planning program from ($)27 million to $34 million. This small yet highly effective program provides essential seed capital and matching funds for 378 economic development districts, numerous tribal planning partners and other state and local entities.

With an average annual grant of only $54,000 the EDA planning program provides matching funds to multi-county organizations such as Tri-County Council for Western Maryland to help local governments and others work together on a regional basis to develop solutions, partnerships, and strategies for addressing area-wide economic development issues.

EDA's on-time project completion rate, high rates of leveraging private sector investment and impressive job creation statistics are tied directly to the ground work and planning that precedes project development and implementation.

With the growing complexities of the global economy increased mandates by EDA and mounting local economic pressures, a modest increase in the annual EDA planning grants for economic development districts would make a significant difference.

Finally, Madame Chair, there is a need to provide broader incentives to foster regional collaboration and partnerships among local governments along with the private sector educational and nonprofit institutions.

While the EDA reauthorization bill established two new performance award programs, these incentives are very limited in scope and have demonstrated little impact. EDA would benefit from much broader and more aggressive policy incentives and approaches related to regional economic collaboration and cooperation.

Congress has urged to build upon the existing set of multi- jurisdictional EDDs to encourage and facilitate regional development activities including increasing the EDA share on projects with significant regional impact and collaboration.

Madame Chair and members of the committee, thank you again for the opportunity to testify today. And I would welcome any questions.

SEN. BOXER: Thank you so much.

Ms. Walters, I'm not going to ask you to respond to these ideas that Ms. Mazer put out, but could you be sure that you and your staff could, first of all, tell us if any of her ideas are ideas that you're thinking about, and if not, would you be willing to write us and let us know in writing, how you feel about her recommendations? Shall we call on, Mr. Alvord?

MR. ALVORD: Yes, Senator. In fact, these are ideas that we are considering internally and we are certainly open to exploring them further.

SEN. BOXER: Okay, excellent, because for Senator Inhofe and myself, we would love to get your feedback from the administration, and as well from Mr. Kennedy, Mr. Phillips, if they could take some time to look at these ideas and give us feedback. We would appreciate it, because if there are a few that are, you know, consensus ideas I would like to include them in the new -- in the new approach.

So Dennis Alvord, I've asked you, given the needs in this country and we know what they are, we've got credit problems, we've got jobless problems. Are there any barriers that will impact EDA's efforts to fully distribute the stimulus funds? Now, we had a report, it looked like a lot of them were already in the works, but do you have any concerns that you may not be able to get all those out?

MR. ALVORD: No, I think that we're quite confident that we'll be able to get the money out and obligated and we're working to do that as diligently and quickly as we can. We have been hampered in that -- up until this fiscal year, we had not received any additional salary and expense resources to support the administration in that funding.

Both the awards of the grant and then the administration and oversight of them having made the awards. This fiscal year, we were grateful that Congress recognized those needs and provided us some additional funding in the form of $3 million as part of the bureau's ARRA allocation as well as $4 million from its EDAP allocation that could be directed to meeting some of these needs.

As a result, we're in the process of advertising and filling a number of term positions that will help us with meeting those needs. In the interim, our regional office staff have really been doing yeoman's work to get these grants queued up and awarded, and I'm very pleased with the progress that they've been making.

SEN. BOXER: Good, so you feel you'll be able to send out those stimulus -- you will be able to spend out?

MR. ALVORD: I have complete confidence. In fact, we've set an internal stretch goal to have our $150 million in stimulus funding fully obligated by the end of this fiscal year, a full year in advance of the expiration of those funds.

SEN. BOXER: Well, I think it shows what a great program this is, and even despite the fact that there's a credit crunch and other problems, it's still doing what Mr. Phillips so eloquently said, it just -- it stimulates, it's a small amount, but it gets things really started. It's really, I think, a great program. Could you give us one or two examples off the top of your head of some stimulus programs that you've funded? I don't care which state; just to give us a sense of it.

MR. ALVORD: Absolutely. Well, I would say that, you know, I'm pleased to report that EDA investments related to the Recovery Act really run the gamut, you know, they're targeted to supporting near term recovery. And they range from traditional brick and mortar type investments of rail spurs water and sewer type investments.

Infrastructure to support port improvements, to really more cutting edge and leading edge economic development investments and things like business incubators, science and technology parks, green buildings and other activities. You know, we -- the focus is on investments that we can get started quickly and that are going to be --

SEN. BOXER: Could you give me an example of one or two?

MR. ALVORD: Sure. I mean, they run the range of things like capitalization --

SEN. BOXER: Just give me an example of a real program, not just they run the range. In Oklahoma you did this, in California -- just give me a couple of --

MR. ALVORD: Sure. In the Western United States, we're looking at capitalizing our revolving loan fund to assist with a region that's been impacted by natural resource depletion. That's going to help that industry to have the capital that it needs in this time of credit crunch to reform that.

SEN. BOXER: What states are those?

MR. ALVORD: There's one in the State of Montana that we're looking at right now as a prospective investment.

SEN. BOXER: Okay. Can you give me an example of something you already did?

MR. ALVORD: Well, we have not yet made an award related to ARRA; we are on the very cusp of being able to make an award.

SEN. BOXER: Okay.

MR. ALVORD: We have a pipeline of -- that represents about ($)100 million of the ($)150 million investments.

SEN. BOXER: Will you please do us a favor? Will you please give us a report when -- of your first -- let's say 10 grants. Would you do that for Senator Inhofe and myself, send us and we'll inform the committee. Would you do that?

MR. ALVORD: Absolutely. I would be happy to do so.

SEN. BOXER: Okay. Very good.

Senator Inhofe.

SEN. JAMES M. INHOFE (R-OK): Thank you. Madame Chairman, would -- I was a little confused as to your line of questioning that when you say give us an example of the grants, so you were talking about --

SEN. BOXER: From the stimulus.

SEN. INHOFE: From the stimulus --

SEN. BOXER: Well, I'm just talking about --

SEN. INHOFE: -- a part of the 150?

SEN. BOXER: Yes, yes.

SEN. INHOFE: Okay, okay. All right. Well, let me first of all, Ms. Mazer, you mentioned something about stronger incentives to reward regional collaboration, and I -- could you expand on what you mean -- what do you have in mind? Do you want to advise us as to something we should have that would -- it would promote the regional concept?

MS. MAZER: Yes, Senator, thank you. Research has shown that to be competitive in the global economy we have to work regionally. NADO would actually just like to work with the committee to explore some ideas to use match rates and maybe apply other types of incentives to reward those projects that create a real regional significant impact.

SEN. INHOFE: Good. Well, Mr. Phillips, I think -- you know, we could've had any number of people from Oklahoma. I'm glad we had you, you're very articulate. And we've made great progress. I think the example that he gave is as good an example as you can have. An example I -- in my opening statement, in talking about what $2.25 million did down there.

That actually has opened up $0.5 billion down in the part of the state, the southwestern part of Oklahoma as opposed to northwestern part. For the knowledge of our members up here, Woodward is kind of the gate of the panhandle for Oklahoma. And it's an area that is very much like Colorado, very -- it's very sparsely populated. But I really think that you're a good -- I've used your example, LaVern, several times as to the success of this kind of a program.

Is there anything else that you would like to say, because I want to make sure you get all the time possible on examples that we have done and that you're familiar with in Northwest Oklahoma?

MR. PHILLIPS: Well, thank you Senator.

SEN. INHOFE: And In the opening statement, I got in halfway through, did you cover all the windmills and other stuff that --

MR. PHILLIPS: No, I haven't.

SEN. INHOFE: I'll give you that opportunity.

MR. PHILLIPS: Okay.

SEN. INHOFE: I want to make sure the chairman knows that we are leading the way of all 50 states right now -- I want everybody to know that -- in terms of our wind generation --

SEN. BOXER: We did not know that.

SEN. INHOFE: And it's all right where he is --

SEN. BOXER: That's great.

MR. PHILLIPS: Thank you, Senator. You know we're very pleased, and I like to say -- I mean, we're definitely an oil and gas community and agriculture, and that those two entities have their ups and downs, and now we are leading the state and the region in wind power development. Right now, we have about 300 towers in our area, immediate area, and I think before too long we will be kind of like Sweetwater, Texas; it will be the epicenter for wind power.

And one of the things, it doesn't replace oil and gas, it's kind of like T. Boone Pickens says, is that we need to quit buying fuel or crude from people that don't like us. And we're doing that as a nation importing over 75 percent of our fuel right now. I think, we can help in our part of the state solve this nation's energy crisis by the natural resource that we have which is wind, and it's a huge investment by those companies that are coming in.

But when you do a wind farm of 80 turbines you're talking about, you know, $160 million in investment. It helps the landowner, it helps the public education by the ad valorem taxes. So it's a real benefit, Senator, and we're excited about being able to contribute to the nation's energy crisis.

SEN. INHOFE: Yeah, well that's true and of course there is some disagreement at this table, but I think in my position I've always said, we want all of the above. And certainly, Oklahoma is known so well for not just oil and gas, but also coal and -- but people are not aware of what we're doing right now.

The fact that OG&E right now is the major contractor and is using -- is using wind power, and we're leading the way there. And I like to use Northwestern Oklahoma as an example of how we can wean ourselves off of this to the obligations we have as you termed so accurately from people who don't like us.

Mr. Kennedy, the -- could you be more specific about the stimulus funding issue raised in your testimony? I don't think you really had a chance to elaborate on that.

MR. KENNEDY: Our comments on the testimony reflected SPC's support and establishment success of the coordinated process that SPC goes through in the EDA projects and funding. We know that the consultation of these types of things between the locals and their local or regional organizations and federal agency works.

We believe that is a better conduct of consultation of EDA and the applicant grants and SPC's established regional economic development committee, which composed of -- (inaudible) -- and local elected officials. Businesses then insure the projects, whereas the regional approved economic development plan. What happens over time is in the practice of grant seeking, has been done through contract -- contact through the (www.grants.gov ?).

Our preference, to best insure consistency in public transparency process is to meet the CEDS plan is EDA project submissions. Our applicants go through the first -- through the Regional Economic Development Conference committee type structure that works within our region, and so are so many others. This would -- may expedite project approval funding and implementation of the -- and ensure the consideration for these consistencies.

SEN. INHOFE: All right. Thank you, Mr. Kennedy.

And for the benefit of the rest of our committee here, I just want to make sure I'm on the record saying that we are very anxious and I think the chairman and I are both anxious to get this thing reauthorized and get it done, because it's one of the things where conservatives and liberals alike can really serve well.

And I'm very proud of what we've done in Oklahoma. So maybe we can get some deadlines to get the House lined up and get this done. I'm going to go with my second round of questions at Armed Services now.

SEN. BOXER: Thank you, Senator Inhofe so much. I look forward to marking this bill up in the very near future.

Senator Merkley, and we'll go Merkley, Udall, Cardin in order of arrival.

Senator Merkley.

SEN. JEFF MERKLEY (D-OR): Thank you very much, Madame Chair. And I would just want to say to Sandra Walters and Dennis Alvord that when my staff reached out to folks in Oregon they had nothing but praise for your regional staff and the cooperation you demonstrated with the grants underway, and so anytime that that type of robust praise gets expressed, I want to feed it back apparently you're doing some things very, very well.

One of the -- one of those partners is Vernonia, Oregon which had devastating floods and they received a grant to help a topographic study to try to avoid rebuilding in a manner that endangers them again. And they wanted to note that these funds are incredibly important since -- especially during this economic crisis, local funds and state funds are very hard to obtain.

In that light, they mentioned at some point in the past the match rate was one local dollar to three grant dollars, then it had been changed to a 1:1 ratio, and that that was extremely difficult for them to come up under the current circumstances.

I thought maybe I could just ask you all to give a little bit of history of when that changed and why it changed, and whether it's under consideration for economic distressed communities to change that ratio back.

MR. ALVORD: First of all, thank you very much for the kind words. It's always good to hear feedback about the good work that I know our regions are doing out in the field. With regards to the match rates, I think that there was a change in the grant rate structure that occurred during EDA's last reauthorization in 2004.

That change was driven, I think, largely by the economic conditions at the time and the amount of appropriations that EDA had and the need to do as much as it could with the available resources at its disposal. EDA is certainly cognizant of the very pressing economic conditions that we're facing nationally today and we do have a fair amount of flexibility under PUITA (ph) to address grant rate issues.

In fact, while the standard matching rate is 50 percent federal, 50 percent local, we do have the authority under statute to go to an 80 percent federal share on a sliding scale based on the economic distress in the region. And in some extreme circumstances can in fact go beyond that up to a 100 percent if the local community can demonstrate an exhaustion of taxing and borrowing authority.

We have taken great pains to ensure that we get out to our region's maximum flexibility with regard to dealing with these issues. And we have well-established procedures and can certainly work with them on grant rate issues as they arise.

SEN. MERKLEY: Thank you very much for clarifying that. And had you not already had that flexibility I was going to suggest that maybe that'd be appropriate, so you're way ahead. And a second issue that has come up with the university partners in Oregon. The -- those partners now participate in the Competitive Grants Program started under the Bush administration.

And the feedback from the universities was that this pits very different types of programs against each other in a single grant competition, something like apples and oranges; one stimulating manufacturing in one place versus development of tourism in another.

And so the universities thought as they were doing a tremendous amount more effort to do applications in a setting that really is very hard to score between these, and whether or not we should revisit the competitive nature of the university grant program, does -- any thoughts or insights on that?

MR. : Yes, I think that that's absolutely correct. Several years ago, EDA did make a shift to a competitive university center competition. We think that this has been very beneficial to the program that it's really helped us to reinvigorate the program. I am certainly sensitive to the issues that you mentioned, and that there is a very diverse mix of applicants for this program.

We have smaller learning institutions, large, you know, major research universities and really everything in between. We have tried to craft a federal funding opportunity notice that allows for those different types of institutions to compete on the level playing field, and to recognize that there are certainly significant economic differences across the country.

The needs of one part of the country may be very different than another. So an emphasis on manufacturing in one section of the country may need to be addressed by the university center applicant, whereas service industries, or some other type of economic issue may need to be addressed in another.

In crafting the program, we have tried to provide the maximum amount of flexibility available. It is a program for which the demand outstretches the resources. We think the competition has been beneficial in getting us the best possible applicants. We're certainly open to continuing to look at the criteria that we use in making those selections.

SEN. MERKLEY: Thank you very much. I appreciate that and my staff will follow-up with you with one more question. I'm going to hold it for now so that we can get onto some questions from my colleagues.

SEN. BOXER: Thank you so much, Senator Merkley.

Senator Udall.

SEN. TOM UDALL (D-NM): Thank you, Madame Chair. And I thank all the witnesses for being here today. Let me revisit one of the topics that I believe our chair brought up earlier on the issue of increasing cost share, I'm going to focus on a little bit different issue, but I'm also interested in what she mentioned.

When -- and I understand your desire to stretch your limited budget. And this question is really directed to Mr. Alvord and Ms. Walters. I understand your desire to stretch your limited budget as far as you can, but high cost shares can be an obstacle when we're dealing with economically distressed areas.

And I'm particularly worried about the ability of small rural communities and tribal communities to meet their cost shares to achieve positive economic development in New Mexico. Has there been any study on the impact of these higher cost share requirements on small communities or tribal communities? Heard any complaints, any -- that they're not able to meet these?

MR. ALVORD: I -- well, I'm not aware that there's been a study per se, either an internal study or an academic study of any kind.

I am aware anecdotally, you know, I have heard from regional office staff and practitioners in the field about the challenges that they're confronting in meeting these cost shares. And we have tried to be very responsive to meeting those needs by utilizing the flexibility that we have under statute to provide additional federal share whenever we can.

And in fact, in rolling out our natural disaster supplemental appropriations and our Recovery Act supplemental appropriations, we put specific internal guidance in place giving greater flexibility to our regional offices to make determinations about the appropriate level of cost share based on the conditions on the ground for those communities that met a certain threshold level of distress or a certain threshold level of demonstration that they're not able to meet that share.

SEN. UDALL: And you're willing to work with them if they come in and make the case that they're not able to meet the cost share.

MR. ALVORD: We absolutely are. I think part of -- you know, what makes our program so strong is that we'd look at every prospective grant investment on a case by case basis. We evaluate the distress and the particular nature of the investment and we try to account for that and work with grantees to the best of our ability.

SEN. UDALL: Now, you've also raised the issue of the American Reinvestment and Recovery Act monies that are out there. And I wanted to follow-up on that because I -- New Mexico is in the Austin region, and the way you allocated money raises some questions, I think, because New Mexico has the second lowest total of 13 million, just above the Denver region at 9 million, and both are less than half of what has been allocated to the four other regions.

So I'm wondering what was the economic and demographic criteria that were used to derive the formula for distributing the funding to the six regional offices?

MR. ALVORD: Well, EDA has different allocation algorithms that it uses to -- for all of its different sources of funding. So for our regular economic development assistance programs, we have different allocations that we use for say public works, economic adjustment, planning, technical assistance. Those are all based on different criteria.

Likewise, when we received the disaster supplemental funding we developed an allocation algorithm that was particular to other circumstances on the ground there. In that case, we're responding to counties that have had some type of natural disaster designation by FEMA.

In the case of the Recovery Act funding, the act charged EDA to respond to sudden and severe economic dislocation and job loss as a result of corporate restructuring. Well, we think that EDA's regular allocation formula for our public works and economic adjustment program do a pretty good job at getting at that.

They do, in fact, have what we think of as somewhat lagging indicators, and that they look at a 24-month unemployment, and they look at poverty levels as among the different elements in that allocation. So for the purposes of the Recovery Act, we thought that it would be prudent to really try to target those areas of the country that have the most acute economic distress at this time.

As a result, we decided to utilize the most contemporary snapshot of unemployment that we can capture and we fell back on utilization of three-month unemployment levels for the allocation of that funding. We think that that resulted in a good distribution across our six regional offices related to economic distress.

I should say that in comparing that to the standard EDA allocation there is not a significant difference in the way that funding would've gone out had we utilized the standard formula. It's really rather small tweaks around the edges, certainly not orders of magnitude differences in the allocation.

SEN. UDALL: Okay, well, I'd like my staff to follow-up with you, because I think on the unemployment front, I mean, we have three counties in New Mexico that have significantly higher unemployment than the national average. So we have a high unemployment. And then the poverty is -- the entire state would qualify for EDA assistance since our per capita income is 80 percent of the national level.

So I think there's a real argument for looking at the way you developed the criteria to do that, especially if we're going to do another round of this. So thank you very much. And thank you, Madame Chair.

SEN. BOXER: Senator Udall, I just wanted to let you and Senator Cardin know, before you got here this panel very strong support for EDA reauthorization and some ideas from Ms. Mazer about how we can make it better along the lines of your questioning Senator Udall and Senator Merkley.

Senator Inhofe and I are very anxious to get this done, there's very strong bipartisan support, which is great. So what I would urge you to do is, if you have and you and your staff want to make sure you communicate with senators, with my staff and with Senator Inhofe's staff as we go about the reauthorization, because I'd like to get it right.

I think the other thing is they also reported that they've got about a 100 million, am I right, of applications in the pipeline for the stimulus. And they haven't awarded anything yet, but they're going to send us their first 10 awards so that we can get -- keep up with what's happening.

This is an example of a great program that is working now when bank lending is so tight. We need the jobs and -- it's very important, so that's why Senator Inhofe and I want to move quickly. So please, you're so -- all of you are so helpful to us, let's get your advice in there now so that we don't have to face amendments and we can just get everything in the bill.

Senator Cardin.

SEN. BENJAMIN L. CARDIN (D-MD): Well, Madame Chair, thank you for having this hearing. And I appreciate your commitment on the EDA program in trying to have it reauthorized in the right way and to get the funding levels working with the appropriators that we can get the funding levels that the -- appropriate for the mission.

I want to particularly welcome Leanne Mazer to the panel, all of you I welcome, but Leanne is my constituent and does a great job in the western part of our state with the Tri-County Council. I know she's here for NADO this morning to talk on behalf of the organization, but we're very proud of the work that you do with the Tri-County areas, which EDA programs become particularly important in the western part of our state.

The economic challenges are very difficult to bring in jobs. It's -- it is not in a major population center, and when you're trying to create new job opportunities, a state like Maryland, many times people think, you know, you're in Baltimore-Washington corridor, it's where most people live; that's where jobs are created. But we have a major priority to create opportunities in all parts of our state and the Tri-County Council has done a fabulous job.

And the EDA program has been a valuable tool Madame Chair, for that part of our state -- for all of Maryland it's been very valuable. We had -- in a two-year period in Maryland we've had 14 projects that have created 1800 plus jobs, leveraging $160 million of investments. So it's a huge issue. And I saw in your testimony about the cost benefit ratios, which are very, very impressive, ($)2,000 to $4,000 for creation of a job that will double in a short period of time.

So that's an impressive number as far as the works -- I really do urge us to get the recovery money out quickly. I understand the responsibility that we have to make sure it's spent appropriately and all the requirements are met, but our effort right now is to create jobs.

And the EDA program can create jobs particularly in those parts of our community where it's difficult to get investments made. And I would just urge us, consistent with the requirements of federal law, to do everything we can to expedite the process so that we can get the benefits of the Recovery Act.

Ms. Mazer, I just want to ask you, there's been a lot of conversation about the match requirements, or the -- what the locals have to come in with in order to be able to qualify for an EDA. And there's -- in your testimony, that there has been a change in attitude in the agencies in the last several years that's made it even more difficult for distressed communities to be able to come up with the match, and Senator Udall has already talked about the need to modify.

Can you be more specific as to what you would like to see in the Reauthorization Act as it relates to particularly in distressed communities, their needs to match the, or to come up with the share of the EDA grant?

MS. MAZER: Absolutely. Thank you, thank you for the kind words, Senator. The match rates changed actually during the 2005 rulemaking process. It was not the intent of Congress to change the match rates, that was part of the rule making process that followed.

Particularly, given the current economic environment where things -- the economy changes so quickly -- we've mentioned the 24-month period where we look at those characteristics of distress.

I think, it would be our request to just to rollback EDA's match requirements to those pre-2005 levels that would -- and still maintain the flexibility that EDA has to go beyond that.

SEN. CARDIN: And are -- I should say, has EDA that -- the reason for change by regulation in 2005?

MR. ALVORD: I believe, Senator, that the change was made as a result of recognition of the current economic conditions and EDA's appropriation levels at that time. The desire to extend the EDA funding as far as we possibly could and address as many communities and areas as we could.

With the acknowledgement that we do have the flexibility under statute to fund on a sliding scale, you know, between 50 and 80 percent based on the level of economic distress, it was to really target that funding to those areas that had the most acute economic distress. That was the rationale, I believe, at the time that that was done. I was not involved in that decision making process.

SEN. CARDIN: It seems like the change in 2005 may make it -- made it more difficult for all communities including distressed communities and they may be in a better position on the discretionary provisions. But the overall requirements make it more difficult.

And of course, this economic recession makes it even more problematic for communities coming up with the matches. It's not unusual for us to waive totally the matches during these types of periods.

MR. ALVORD: We agree and are trying to be as flexible as we can in addressing match rates with the discretion that we have.

SEN. CARDIN: Well, we might have to help you a little bit there.

Thank you, Madame Chair.

SEN. BOXER: (Off mike) -- Mr. Kennedy, I thought maybe you could, because I wanted to hear a specific project, if you could, of how EDA has helped South-Western Pennsylvania. Can you give us an idea like Mr. Phillips did of his specific project?

MR. KENNEDY: (Off mike) -- on EDA projects that has been specific to Pittsburgh region, and these -- Pittsburgh Sciences, where we had once awarded some money, and we did do that in order to make sure that we would get that money flowing within that. It was a recognized project in a community and --

SEN. BOXER: Science center or --

MR. KENNEDY: Science center, yes.

SEN. BOXER: Okay.

MR. KENNEDY: And we did do that, and we can respond better and give you other investments that we have made forward. We would be glad to do that in writing.

SEN. BOXER: I would so appreciate that. Well, let me just thank the panel. You know, this isn't one of those issues that everybody comes in the door and is banging down the door to hear about, but it's such a quiet success story, the work that you do.

And I know it, because when I go around my state, and my state is suffering mightily from a economic downturn and high unemployment and pockets of unemployment, 15 percent, 25 percent, and this one particular county that just told me about EDA about a year ago, that it just came in and just saved the community. It rallied around, it leveraged the funds, it was fantastic.

I'd like to know under the rule-making what type of discretion you do have, if you could get back to me in writing, because to the extent that we want to -- that we will do our reauthorization, we want to know if you need more discretion, if the way to do it is to just give you full discretion in a high unemployment area, distressed area, so let us know.

But again, the fact that we didn't have a lot of penetrating questions from Democrats and Republicans shows me that this is a project, a program that they really, really support. So we thank you very much, EDA folks, for your -- you know, as President Obama likes to say -- your empathy or understanding what your job is, what your role is, and I think you can hear from the folks on the ground that it's working.

So this reauthorization is a priority for me, it's a priority for Senator Inhofe, and I think it's very key. I mean, we're not worried about program being zeroed out or anything, but it certainly is better to have an authorization, otherwise there's no guidance, and it's just not going to be viewed as a priority.

So we commit that we're going to get this done, and we look forward to hearing from all of you specific examples from your region and then from Mr. Alvord and Ms. Walters, the first 10 grants that are made. I really need to know, because I want to highlight those. And so we're waiting for that.

Do you think it'll be in the next 30 days that you'll do that funding?

MR. ALVORD: I suspect that it will, yes --

SEN. BOXER: Yeah, if you're saying you're getting it out the door, you know, then you probably got to start getting it out the door. So we're very excited to hear about those. And is there anything else?

Oh, I would ask unanimous consent that statements from the International Economic Development Council and the Educational Association of University Centers be inserted in the record. And since I'm the only one here, I see that there's no objection to that. So we'll do that, and we stand adjourned, and we'll work together with you on the reauthorization.

Thank you. (Sounds gavel.)

END.


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