[House Hearing, 111 Congress]
[From the U.S. Government Publishing Office]
EDA: LESSONS LEARNED
FROM THE RECOVERY ACT
AND NEW PLANS TO
STRENGTHEN ECONOMIC DEVELOPMENT
=======================================================================
(111-91)
HEARING
BEFORE THE
SUBCOMMITTEE ON
ECONOMIC DEVELOPMENT, PUBLIC BUILDINGS, AND EMERGENCY MANAGEMENT
OF THE
COMMITTEE ON
TRANSPORTATION AND INFRASTRUCTURE
HOUSE OF REPRESENTATIVES
ONE HUNDRED ELEVENTH CONGRESS
SECOND SESSION
__________
February 25, 2010
__________
Printed for the use of the
Committee on Transportation and Infrastructure
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COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE
JAMES L. OBERSTAR, Minnesota, Chairman
NICK J. RAHALL, II, West Virginia, JOHN L. MICA, Florida
Vice Chair DON YOUNG, Alaska
PETER A. DeFAZIO, Oregon THOMAS E. PETRI, Wisconsin
JERRY F. COSTELLO, Illinois HOWARD COBLE, North Carolina
ELEANOR HOLMES NORTON, District of JOHN J. DUNCAN, Jr., Tennessee
Columbia VERNON J. EHLERS, Michigan
JERROLD NADLER, New York FRANK A. LoBIONDO, New Jersey
CORRINE BROWN, Florida JERRY MORAN, Kansas
BOB FILNER, California GARY G. MILLER, California
EDDIE BERNICE JOHNSON, Texas HENRY E. BROWN, Jr., South
GENE TAYLOR, Mississippi Carolina
ELIJAH E. CUMMINGS, Maryland TIMOTHY V. JOHNSON, Illinois
LEONARD L. BOSWELL, Iowa TODD RUSSELL PLATTS, Pennsylvania
TIM HOLDEN, Pennsylvania SAM GRAVES, Missouri
BRIAN BAIRD, Washington BILL SHUSTER, Pennsylvania
RICK LARSEN, Washington JOHN BOOZMAN, Arkansas
MICHAEL E. CAPUANO, Massachusetts SHELLEY MOORE CAPITO, West
TIMOTHY H. BISHOP, New York Virginia
MICHAEL H. MICHAUD, Maine JIM GERLACH, Pennsylvania
RUSS CARNAHAN, Missouri MARIO DIAZ-BALART, Florida
GRACE F. NAPOLITANO, California CHARLES W. DENT, Pennsylvania
DANIEL LIPINSKI, Illinois CONNIE MACK, Florida
MAZIE K. HIRONO, Hawaii LYNN A WESTMORELAND, Georgia
JASON ALTMIRE, Pennsylvania JEAN SCHMIDT, Ohio
TIMOTHY J. WALZ, Minnesota CANDICE S. MILLER, Michigan
HEATH SHULER, North Carolina MARY FALLIN, Oklahoma
MICHAEL A. ARCURI, New York VERN BUCHANAN, Florida
HARRY E. MITCHELL, Arizona ROBERT E. LATTA, Ohio
CHRISTOPHER P. CARNEY, Pennsylvania BRETT GUTHRIE, Kentucky
JOHN J. HALL, New York ANH ``JOSEPH'' CAO, Louisiana
STEVE KAGEN, Wisconsin AARON SCHOCK, Illinois
STEVE COHEN, Tennessee PETE OLSON, Texas
LAURA A. RICHARDSON, California
ALBIO SIRES, New Jersey
DONNA F. EDWARDS, Maryland
SOLOMON P. ORTIZ, Texas
PHIL HARE, Illinois
JOHN A. BOCCIERI, Ohio
MARK H. SCHAUER, Michigan
BETSY MARKEY, Colorado
MICHAEL E. McMAHON, New York
THOMAS S. P. PERRIELLO, Virginia
DINA TITUS, Nevada
HARRY TEAGUE, New Mexico
JOHN GARAMENDI, California
VACANCY
(ii)
?
Subcommittee on Economic Development, Public Buildings, and Emergency
Management
ELEANOR HOLMES NORTON, District of Columbia, Chair
BETSY MARKEY, Colorado MARIO DIAZ-BALART, Florida
MICHAEL H. MICHAUD, Maine TIMOTHY V. JOHNSON, Illinois
HEATH SHULER, North Carolina SAM GRAVES, Missouri
RUSS CARNAHAN, Missouri SHELLEY MOORE CAPITO, West
TIMOTHY J. WALZ, Minnesota Virginia
MICHAEL A. ARCURI, New York MARY FALLIN, Oklahoma
CHRISTOPHER P. CARNEY, Pennsylvania BRETT GUTHRIE, Kentucky
DONNA F. EDWARDS, Maryland ANH ``JOSEPH'' CAO, Louisiana
THOMAS S. P. PERRIELLO, Virginia, PETE OLSON, Texas
Vice Chair VACANCY
JAMES L. OBERSTAR, Minnesota
VACANCY
(Ex Officio)
(iii)
CONTENTS
Page
Summary of Subject Matter........................................ vi
TESTIMONY
Dooley, Charlie, County Executive, St. Louis County,
International Economic Development Council..................... 28
Fernandez, Honorable John R., Assistant Secretary of Commerce for
Economic Development, Economic Development Administration...... 5
Masingill, Chris, Director of Intergovernmental Affairs, Office
of Governor Mike Beebe, on Behalf of Delta Regional Authority.. 5
Molnar, Larry, President, Educational Association of University
Centers........................................................ 28
Newcomb, Jay, Council President, Dorchester County Council....... 28
Norton, Michael, Executive Director, Northwest Arkansas Economic
Development District, National Association of Development
Organizations.................................................. 28
PREPARED STATEMENTS SUBMITTED BY WITNESSES
Dooley, Charlie.................................................. 49
Fernandez, Honorable John R...................................... 68
Masingill, Chris................................................. 76
Molnar, Larry.................................................... 82
Newcomb, Jay..................................................... 87
Norton, Michael.................................................. 90
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HEARING ON EDA: LESSONS LEARNED FROM THE RECOVERY ACT AND NEW PLANS TO
STRENGTHEN ECONOMIC DEVELOPMENT
----------
Thursday, February 25, 2010
House of Representatives
Subcommittee on Economic Development, Public
Buildings and Emergency Management,
Committee on Transportation and Infrastructure,
Washington, DC.
The Subcommittee met, pursuant to call, at 2:30 p.m., in
Room 2167, Rayburn House Office Building, the Honorable Eleanor
Holmes Norton [Chairwoman of the Subcommittee] presiding.
Ms. Norton. My apologies to all of you and certainly to our
Ranking Member. I have been in meetings with the leadership of
our Committee on legislative matters that could not be delayed,
but I certainly don't want to delay this very important
hearing; it is the second hearing of its kind and it is a
hearing about an important priority and reauthorization of this
Subcommittee.
So I want to welcome all of today's witnesses and all of
you who are in attendance. We look forward to important
testimony on the reauthorization of the Economic Development
Administration, or EDA, as part of its on the ground activities
under the American Recovery and Reinvestment Act and its other
activities. Today's hearing is actually the second Subcommittee
hearing on proposals for the reauthorization of EDA and, in
addition, this hearing will provide the Subcommittee the
opportunity to hear from EDA on the ARRA, American Recovery and
Reinvestment Act, or stimulus grant activity. This Subcommittee
has conducted vigorous oversight of ARRA funds under its
jurisdiction, including oversight of EDA use of these funds in
four stimulus tracking hearings, and we intend to maintain the
pace we have established to make sure that the taxpayer funds
are used to create jobs now and to get the best value for the
taxpayer.
This Subcommittee has jurisdiction over authorization and
oversight of programs promoting economic development in
communities suffering long-term economic distress, including
jurisdiction over the EDA, which is part of the U.S. Department
of Commerce. The Public Works and Economic Development Act of
1965, which created EDA, authorizes partnerships between the
Federal Government and State and local development entities to
alleviate substantial and persistent unemployment in
economically distressed areas and regions. A more critical
partner, even, than the State and local development agencies is
the business community in a given State or locality. One of the
most important goals in national economic development
activities is to enhance community success in attracting
private capital investment and long-term job opportunities. The
work of the EDA is relatively small, but highly visible, as a
part of Federal efforts to enhance economic opportunity
nationwide because it does so by leveraging a rather small
amount of Federal funds with private and local and State
funding to increase the overall productivity of economically
distressed and poor communities and their share of the
Country's general prosperity.
I represent a highly urbanized district, the District of
Columbia, which received some EDA project funding to help in
the reconstruction of the historic Eastern Market, so I know
firsthand the importance of economic devolvement, including the
job benefits associated with strong, vibrant economic
development programs. As of January 2010, for example, the
District of Columbia had an unemployment rate of 12.1 percent
while the national rate was 9.7 percent, but many EDA districts
have even more serious and more persistent unemployment. EDA,
however, not only helps create new job opportunities, but also
helps sustain the gains made in distressed communities across
the Nation.
EDA was created to address issues of poverty, high
unemployment, and geographic isolation by identifying
distressed counties and setting aside the bulk of investment
dollars to ameliorate these very drastic conditions. Under the
EDA standard definition, distressed counties generally have an
unemployment rate of at least 1 percent greater than the
national average for the most recent 24-month period, or per
capita income of 80 percent or less than the national average.
By leveraging relatively small amounts of money, the Federal
Government has allowed EDA to engage private businesses, as
well as States and localities, to reduce persistent poverty.
An important part of EDA's efforts are grants for public
works and development and access to technical assistance and
planning. This Subcommittee is particularly interested in the
revolving loan fund and its ability to assist local development
authorities, as well as EDA administration of the program. The
revolving loan fund finances investments that capitalize an
intermediary to make loans to local businesses that otherwise
cannot access commercial credit.
In today's troubled and uncertain economic times, the nuts
and bolts of economic development for undeveloped areas are of
even greater importance. EDA projects are essential for job
creation through the support of facilities and infrastructure,
such as water and sewer lines, for industrial parks and
expanding business incubator facilities. The EDA has built a
track record for leveraging public investment into such private
development and necessary infrastructure.
EDA's ability to deliver to America's most distressed areas
recently was on display with the ARRA. EDA received $150
million for projects across the Nation. On September 25, 2009,
EDA, to its credit, awarded its final ARRA project. According
to Committee records, EDA has awarded 68 grants in 37 States
totaling $147 million. That is all of it; the rest of it is for
administration of the funds. In a recent report, EDA indicated
it had broken ground on 20 of these projects, totaling $45
million, representing 31 percent of the amount allocated to
support these investments. Among the wide-ranging grants were
$2.3 million in Accomac, Virginia, for construction of 66 miles
of fiber optic broadband network lines; $2 million to the
Georgia Ports Authority to enhance the port's service capacity;
$1.5 million to help build a food incubator facility; as well
as multiple grants across the Nation for the expansion of
industrial parks.
Today we will hear from local government officials,
economic development professionals, and industry experts about
the ARRA and what it has done to improve the economic fortunes
of distressed communities across the Nation. After four decades
now of EDA's work in job creation, this Subcommittee is in a
position to analyze the Federal role in the extent to which EDA
is building and sustaining relationships with States and
localities and, importantly, with businesses, citizens, and
Economic Development Districts. We will consider increasing our
focus on regions that cross State lines as well, with special
emphasis on economic development that produces jobs. We will
examine existing grant programs for economic development
assistance, university centers, research and evaluation, global
climate change mitigation, and technical assistance. And, of
course, we will scrutinize how funding decisions are made and
how past funding decisions reflect on the efficiency of EDA.
This afternoon we are pleased to hear from witnesses with
deep experience with EDA and from policy makers and grant
recipients who can help this Subcommittee ensure that we can
maintain the past success of EDA and garner further support for
its reauthorization.
I am very pleased to ask the Ranking Member if he has any
opening remarks.
Mr. Diaz-Balart. Thank you very much, Madam Chairwoman. Let
me first thank you for this hearing. Obviously, as you well
know, you do not need to excuse yourself for being just a few
minutes late, because we all know what the crazy schedules are
in this place.
I also want to thank the witnesses, who are obviously the
stars of any hearing. Thank you for being here today.
I don't want to be repetitive of what you have just said,
Madam Chairwoman, but I think a couple things need to be
repeated. We do know that the EDA received $150 million of the
Recovery Act and, as of September 1st of last year, 93 percent
of those funds were allocated for 68 projects. Now, we all,
again, know that EDA was established pursuant to the Public
Works and Economic Development Act of 1965, and at the time
Congress recognized that there were areas in the Country that
were experiencing chronic high unemployment and all sorts of
other issues, low per capita incomes, etcetera. In addition,
Congress also recognized that there were communities impacted
by sudden and severe economic dislocations because of plant
closings and natural disasters and such events. So EDA was
created to help spur job growth in these economic distressed
areas of our Country.
Given the number of studies out there--and there have been
so many studies over the years--EDA has a really good track
record, and stories reveal that EDA's programs create jobs at
an average cost of $4,000 per job. When was the last time we
heard that? Except for the EDA, when have we heard that about
stimulus money? Four thousands per job created. And of every $1
million of EDA funding, it attracts $11 million of private and
other public funding. Those are, I think, impressive numbers.
EDA grants have assisted communities devastated by natural
disasters. I can tell you that one of those was Homestead in
South Florida, which is a district I represent. Those grants
facilitated private sector investment and helped to create
hundreds of jobs. What is critical to point out here is that
the EDA funds are not just intended to be the sole source of
the funding, but that, again, attracts other funds, making
those jobs, frankly, long-term jobs, not just provisional. So,
rather, EDA's investments are put to work with private sector
and local funding. When the Federal funding is gone, those
jobs, then, hopefully won't go away. So this ensures that they
are real investments, that they are real jobs and these are
real long-term investments of taxpayers' money.
The EDA, despite having a good record, they still didn't
conduct business as usual when identifying projects under the
Recovery Act, and some would have said, why not? You have a
success record, so why not just do that? Well, they still
thought outside the box. It obligated its funds a full year
ahead of schedule and modified its process to ensure that most
recent data on unemployment and poverty rates were used. And,
again, they have to be commended for this as well.
So obviously there are always ways that things can be
improved, but I believe that the EDA is a model and should have
been one of the models that other agencies should follow when
allocating their Recovery Act funding.
I hope that today we can hear from the witnesses on lessons
learned from the Recovery Act process and how EDA's programs
have worked, how they can be improved, and what suggestions
they will have for us. I also hope that we will be able to--by
the way, Madam Chairwoman--move forward on reauthorizing the
EDA in the near future.
So, again, I want to thank you, Madam Chairwoman. I want to
thank the witnesses, and I look forward to hearing from you
today.
Thank you, Madam Chairwoman.
Ms. Norton. Thank you very much, Mr. Diaz-Balart.
I am pleased to recognize Mr. Carnahan of Missouri, if he
has any opening remarks.
Mr. Carnahan. Just very briefly, Madam Chair and Ranking
Member. Thank you for having this hearing.
I want to welcome our witnesses. We got to see Assistant
Secretary Fernandez recently in St. Louis for some important
announcements with funding that is going to help clean up and
market an empty Chrysler plant that has left a big economic
hole in the St. Louis region, and was part of an important
strategy going forward. We think that is one of the tremendous
assets of the St. Louis region and one that those funds are
going to help, I think, package and get that back into use,
back to be economically productive, and back with good jobs. So
you can come back as often as you like, Secretary Fernandez,
with news like that.
We look forward to hearing from our witnesses and also
pleased to have our St. Louis County executive here on the
second panel, Charlie Dooley, with his economic team, Denny
Coleman. They do great work and we are honored that they are
here to share their story with the Subcommittee.
Thank you.
Ms. Norton. You ought to be very proud of them and we will
hear from them on the second of two panels.
We are going to begin with the Assistant Secretary of
Commerce for Economic Development at EDA, John Fernandez; and
then we are going to hear from Charles Masingill, who is
Director of Governmental Affairs for the Office of Governor
Mark Beebe of the Delta Regional Authority.
Mr. Fernandez.
TESTIMONY OF THE HONORABLE JOHN R. FERNANDEZ, ASSISTANT
SECRETARY OF COMMERCE FOR ECONOMIC DEVELOPMENT, ECONOMIC
DEVELOPMENT ADMINISTRATION; AND CHRIS MASINGILL, DIRECTOR OF
INTERGOVERNMENTAL AFFAIRS, OFFICE OF GOVERNOR MIKE BEEBE, ON
BEHALF OF DELTA REGIONAL AUTHORITY
Mr. Fernandez. Thank you very much, Madam Chairwoman and
Ranking Member.
And to Congressman Carnahan, I really appreciate the
opportunity to be here today to testify on behalf of our
agency.
As a former mayor, I certainly know how important the EDA's
work can be. The EDA was an important partner of mine when my
community faced a plant closing of a consumer electronics
business.
Now, as the leader of EDA, I am proud of the agency's
reputation fostering sustainable economic growth. EDA's success
is due in no small part to its focus on job creation and the
program's flexibility.
EDA works directly with local economic development
officials through a bottom up approach that both supports and
relies upon a well established network of national and regional
economic development professionals. This collaborative approach
results in grant investments that are well defined, timely, and
linked to longer term sustainable strategies. Linking EDA's
investments to a community's strategic economic development
plan enables the Federal Government to better leverage public
and private sector investments.
Rather than a one size fits all approach, EDA can fund
customized solutions developed by our local partners, ranging
from traditional infrastructure investments, revolving loan
funds, and planning grants and other resources. And by quickly
responding to the often changing economic needs, EDA is able to
help speed the transition to a more entrepreneurial innovation-
driven economy.
For example, EDA invested $2 million in Renton, Washington
to mitigate the economic impact of the loss of Airbus
manufacturing jobs. The investment there supported the
redevelopment of a 46-acre mixed use site for businesses that
focus on commercial services, high technology, and life
sciences, and in the process help diversify their economy.
EDA also invested $920,000 in the Institute for Advanced
Learning Research in Danville, Virginia. EDA's assistance to
the IALR has aided in the start-up or expansion of 30 companies
through successful technology commercialization.
Now, EDA is an integral part of the Administration's effort
to implement a new national innovation policy. A few months ago
the White House announced a blueprint for this new agenda, and
the importance of long-term strategies and collaboration are at
its core. This collaboration will help regions assess their
competitive strengths, design a strategy to bring together the
technology, the human capital, and the financial capital it
will take to compete.
Our projects reach every region and every segment of the
population, from those with GEDs to those with Ph.Ds. In the
Great Plains, communities are adding thousands of jobs thanks
to the new wind power industry. I just returned from a visit to
Duluth, Minnesota, where the community colleges are partnering
with the region's aircraft manufacturing industry. In
Blacksburg, Virginia, the local science park is attracting an
average of 20 new companies a year to a distressed part of the
Appalachian region.
We are extremely proud of the role that EDA has played for
the past 45 years in creating strong and sustained economic
growth in regions all across America. However, as the world
changes and our global economy grows more complex, EDA must
reinvigorate itself to rise to these new challenges.
Reauthorization presents a window of opportunity to allow EDA
to align its priorities and program structures to improve the
competitiveness of American communities. The enormous
challenges we face today require a deliberate effort to ensure
that EDA works even more effectively. The goal of EDA is to not
only usher in new expansion, but to make sure it is more
enduring, rewarding, and broad-based.
Chairwoman Norton, Ranking Member Diaz-Balart, and Members
of the Subcommittee, I want to thank you again for inviting me
to testify today, and I look forward to answering any questions
you might have.
Ms. Norton. Thank you, Mr. Fernandez. I compliment the
Administration for sending us someone who had on-the-ground
experience with the Act--that has been particularly useful in
FEMA as well--so that whoever gets appointed is not reinventing
his own wheel.
Mr. Fernandez. Thank you.
Ms. Norton. I appreciate your testimony as a former mayor.
Mr. Fernandez. I appreciate that.
Ms. Norton. Mr. Masingill, who is testifying on behalf of
the Delta Regional Authority. Mr. Masingill.
Mr. Masingill. Thank you, Madam Chairwoman. Let me say how
grateful I am for the opportunity to testify on behalf of the
Delta Regional Authority to you, Madam Chairwoman, Mr. Ranking
Member, and Members of the Subcommittee, and also Assistant
Secretary Fernandez.
The DRA represents a region that is culturally rich, which
we have suffered from some of the greatest poverty in our
Nation in too many areas and by the objective measures our
education attainment levels are too low. Too often our
community infrastructure is old and decrepit; our health
outcomes from birth onward impede the best development of our
human capital. Lastly, the placement in the use of technology
is clearly more from the last century than the past.
This independent Federal agency, the first of its kind in
40 years, was to become a Federal-State-local nexus of economic
development in this part of the Country. The purpose of the DRA
has been very simple: to help reduce and mitigate the poverty
so pervasive throughout the region, to reduce the fragmentation
and duplication of development services, serve as a regional
planner and coordinator working with and reporting to other
development agencies, and administer a congressionally funded
grant program which would concentrate on transportation and
public infrastructure, particularly now with information
technology, including business development that emphasizes
entrepreneurship and job training.
Today I would like to just report real quickly on some of
our successes through the Federal grants program.
In the eight grant cycles, 510 projects, $75 million
leveraged more than 350 from other government agencies, almost
a 5 to 1 leverage ratio, more than $1.5 billion from the
private sector, which is a ratio of 20 to 1 private dollars to
DRA dollars. That means in an overall eight year context,
investments made and pledged total almost $1.9 billion, with an
overall ratio of 25 to 1.
What are these dollars delivering to the region? Well,
since the inception of the DRA's Federal grant program, 294
projects have been completed with the following results: more
than 11,000 jobs created or retained, almost 12,000 families
with new water or sewer, more than 3,000 individuals trained
for jobs. Even in today's economic climate we can give you
those results.
Further, DRA now has 140 projects which are active with
project outcomes including more than 23,000 families that will
receive improved water and sewer, about 24,000 jobs which will
be created and/or retained, and almost 6,000 will be trained.
I might add that most of our active projects cited include
participation agreements, participation agreements between the
grantee and the Authority, such that if the outcomes promised
by the grantee do not materialize, then the DRA would require
the pro ratio share of that shortfall be remitted back to the
DRA. In other words, if a grantee promises 10 jobs and they
create only 6, then the grantee will repay 40 percent of its
grants back to the Authority.
Additional DRA initiatives include the Delta Regional
Development Plan, which is the Authority's plan to strengthen
and help save both the small and rural towns within our region;
the iDelta broadband plan for the region, how our communities
can reduce technology deficits between themselves and the rest
of the Nation; our Multi-Modal Transportation--Assets, Needs
and Recommendations is the Authority's report to Congress and
the Administration that was presented in 2008 to bring the
basics for local transportation logistics and distribution
development more succinct within the region. Over 600 community
leaders in 17 different meetings throughout the region were a
part of that. And as our region traditionally maintains some of
the lowest health outcomes and therefore maintains one of the
least healthiest workforces, clearly hindering economic
development, our Health Delta initiative works to improve
health outcomes throughout all cohorts--age, race, and gender.
We combine that with some USDA funds to help with a three
multi-county diabetes mitigation pilot and demonstration
projects; working in partnership with the Department of
Defense's Innovative Readiness Training, whereby communities
receive two weeks of free medical and dental care; and we work
with the State Department's J1-visa waiver program, which we
call the Delta Doctors program, whereby we assist more than 100
foreign-trained physicians to practice at least three years in
some of our medically underserved areas.
In short, DRA is working to improve local communities in
ways they need it done, and that help is certainly not limited
to water and sewer projects. DRA works to deliver its outcomes
through multiple, flexible, adaptable, and timely approaches,
where success can be built on.
As it speaks specifically to the Recovery funds, DRA did
not receive any funds specifically, although we collaborate
with projects all throughout the region. For example, in
Arkansas, where I represent, the Dumas Technology Center. We
combined our current DRA resources with Recovery resources from
the State to help move that project forward in job training
specifically.
I would like to add, though, that since the Recovery's
implementation and in the context of DRA's future plans to
continue strengthening our Nation's foundation through building
job growth and sustainable regional economies through the EDA,
we think the future is bright between DRA and EDA, particularly
as we work to enhance our joint coordination and collaboration
on economic development matters. Initial conversations have
begun between the Authority and EDA's regional office about
emerging projects and endeavors which we think will eventually
bring more resources into our region and help to better more
sustaining environment we need, especially in our most
economically distressed communities.
I would also point out to the Assistant Secretary that
Pedro Garza and Phil Paradice are some of the best, and we have
a close working relationship with your two regional directors.
Further, during the past 12 months, DRA has worked to
better ensure that its programs are better synchronized with
those in other Federal agencies, EDA included. And from our
perspective maybe even EDA in particular we have found EDA
staff to be extremely accessible and extremely helpful as they
provide us with much needed insight and counsel. The Authority
is ready to participate more broadly and more often with this
cabinet level agency, and from that perspective we believe our
ability to mitigate our region's poverty through improved
health and economic outcomes, while reducing fragmentation and
duplication is now more in hand than ever.
We appreciate your opportunity to speak with you and we
appreciate the support of this body. Thank you, Madam
Chairwoman.
Ms. Norton. Thank you, Mr. Masingill. Mr. Masingill, before
I begin questioning, I would like to ask another Member who has
joined us, Mr. Michaud, if he has any opening remarks before we
begin questioning. All right, he will wait for questions, then.
Mr. Michaud is from the State of Maine.
Mr. Fernandez, you heard me say how pleased I am that your
funds have been all obligated. Now, let's talk about outlays,
because that was mixed up. When people go to find their jobs,
they will look to who is being paid. This Subcommittee
recognizes fully that even with shovel-ready projects there is
some lead time to start a project. But in light of the depth of
the recession, I must ask you when EDA expects to outlay all of
the ARRA funds, and were you required to outlay them all by the
end of this fiscal year?
Mr. Fernandez. Madam Chairwoman, I think it is a very
important point, because when we obligate people actually start
spending money. It may be their money, but they are spending
money, creating jobs.
Ms. Norton. Which then you have to pay back.
Mr. Fernandez. Yes. Our construction grants are all handled
on a reimbursable rate. So the work actually does begin and
then we reimburse. To date, as you had mentioned, I think our
number is up to actually 24 projects that have broken ground.
It is my----
Ms. Norton. Now, that means that every week or even two
weeks somebody is being paid some money to do something.
Mr. Fernandez. And some people are being paid even before
them, Madam Chairman, because they are designing, they are
acquiring right-of-way, they are doing all the kinds of
technical stuff that you have to do when you go build roads or
whatever the infrastructure might be.
Ms. Norton. It is very hard to capture that, because it is
part of what we call start-up. But it may make the program look
like no money is being expended because these are fairly
technical construction and preconstruction matters, design
matters, but it is the way it works. We try to use these
hearings to educate people as we educate ourselves so they
understand something is happening in these regions.
Mr. Fernandez. Well, I can tell you from my experience as a
mayor, when I get that Federal commitment to fund a project, I
start doing work on it, and that means hiring the firms that
may be finalizing design. Real money is being spent, jobs are
being saved or created to move those projects forward, even
though I know I am not going to get reimbursed until I complete
my work. So there is a difference and a distinction between
disbursement and allocation, but it is that allocation and
commitment up front that really is the green light for job
creation and for investment to happen.
We will be at the point, I believe, where the vast majority
of our projects will break ground by July 1st of this year. So
we are moving quickly as you can on these kinds of construction
projects.
Ms. Norton. Now, you are here, Mr. Masingill, as part as a
kind of case in point for the various authorities----
Mr. Masingill. Yes, ma'am.
Ms. Norton.--the EDA districts under our jurisdiction,
because there are a number of them. I am particularly
interested in something that is somewhat new certainly in the
President's budget, to direct a substantial amount of--I don't
know if this is in the President's budget or not--I guess this
is my question--because it was in the Recovery Act to give a
substantial amount of the funds to green and blue jobs, by
which I think we mean blue collar jobs. I wonder how that kind
of directive gets executed and whether or not you, Mr.
Masingill, received or any part of your jurisdiction received
Recovery Act funds with this same mandate.
Mr. Masingill. To my knowledge, ma'am, the DRA did not
receive any of the Recovery dollars for these purposes, but we
certainly stand ready to do that and we are happy to do that
with any of the Federal agencies that would like to partner
with the DRA.
Ms. Norton. Now, green and blue jobs, explain if there is
any difference or why the Administration put both colors in it
directive.
Mr. Fernandez. Is that question for me, Madam Chairwoman?
Ms. Norton. You, Mr. Fernandez. It was directed to EDA.
Mr. Fernandez. Yes. Green and blue. We use blue in
reference to the oceans and lakes and the waterways.
Ms. Norton. Do you think that is what it meant?
Mr. Fernandez. Yes. It does in our world. Department of
Commerce with----
Ms. Norton. So tell me, then, how it worked out. What blue
jobs, as opposed to green jobs?
Mr. Fernandez. Well, we have not specifically, to date,
invested in a blue project, but we are certainly coordinating
with our colleagues at NOAA----
Ms. Norton. So what would be a blue project?
Mr. Fernandez. You know, there is research and aquiculture,
development of aquiculture, transitioning some of the work on
our coastal communities with the fishing communities and other
kinds of development related to the ocean.
Ms. Norton. Now, I want to just note for the record--
because we are looking at regional cross State ways to capture
the EDA. Of course, this would take more funding. I will get to
that in a minute. After this question, I have a number of other
questions, but I am going to the two Members who are here.
But what we are talking about when we say distressed areas,
areas of persistent unemployment, Appalachian Regional
Commission, which I think was the first, the Delta Regional
Authority, the southwest border--that is Arizona and I think
Louisiana, parts of those States--northern border, Maine and
parts of New York; the northern Great Plains and the southeast
crescent. Almost every part of the Country wants to be a part
of this program, even with this relatively small amount of
funding.
One way to capture what we are doing is to understand how
jobs are created. For example, this is not, and never will be--
it is a rather prosperous region--but if we were trying to
create jobs in the District of Columbia, we would be foolish
just to look to the District of Columbia. We would look to the
national capital region. The District of Columbia is a big
city. It is suitable for certain kinds of jobs. Private
business is more likely to go to parts of our region for other
jobs. So State lines don't mean much. Our own Metro crosses all
the borders. Yes, there are individual projects in the District
of Columbia. I was able to get EDA projects for part of the
historic--actually, reconstruction--it burned to the ground--of
the oldest open market I think left standing in the United
States. But it happened to be in a lower income district on the
border of districts that are beginning to burgeon, and it was
contributing to that.
Now, I would like to get some sense from you, as we look to
reauthorization and into the many parts of the Country that
want to be a part of EDA, what you think--I don't know if you
would call them regional innovation clusters--how you believe
the Subcommittee should go about looking for cross-border
authorization for EDA.
Mr. Fernandez. Thank you. As you noted, we are very
committed to the notion of regional collaboration, regional
innovation clusters, in large part because we think economies
don't always follow some of the arbitrary borders that we have
to create for political reasons.
You know, you mentioned the District----
Ms. Norton. And, of course, even if they didn't, it
wouldn't make a lot of sense----
Mr. Fernandez. No.
Ms. Norton. --to recreate an industry just across the line
to compete with another industry, instead of trying to do
business together. No antitrust laws would keep you from doing
that.
Mr. Fernandez. Well, the mantra that I use often is that we
need to look at those communities across the border not as
competitors, but as collaborators, because it is those regional
economies that are going to create the kind of competitive
strength we need not to compete with the city across the street
or across the river, but to compete with the region across the
ocean; and it is the strength of these regional economies, I
believe, that are going to give us the kind of competitiveness
we need.
You mentioned the District. Another exciting project that
we are working on at the very earliest stages right now are the
St. Elizabeth initiative, and as we work with a newly
established White House interagency group, the focus on the new
DHS headquarters, all investment that is going on in that part
of the District, there is a tremendous opportunity to look at
that as part of a regional cluster focused around some of the
technology related to Homeland Security, FEMA, and some of the
other agencies that are going to be there. So there are
tremendous opportunities to do the very kind of work----
Ms. Norton. Are there any kind of natural regional clusters
in operation now, and what are they?
Mr. Fernandez. There are many regional clusters that exist,
some which were funded by the EDA at their beginning and some
that were not. For example, there is the Prosperity Partnership
which is in the Puget Sound area. That initial group was funded
by a $200,000 EDA planning grant and it has evolved into a
strong association of a number of clusters, some around
biomedical, the biomedical industry as well. We focused on--
there is an auto cluster that we have been supporting in
Alabama. So there are a number of these kind of broad regions.
Existing economic development districts can collaborate, and we
want to strongly encourage that kind of collaboration as well.
Ms. Norton. Well, I think encourage is the word, because we
don't want to make the mistake of deciding where the borders of
economic development are.
Mr. Fernandez. Right.
Ms. Norton. I mean, we know where the borders of the State
are, but we have to go where the economic development is.
Now, Mr. Masingill, yours is called something that sounds
like a very big region.
Mr. Masingill. Yes, ma'am.
Ms. Norton. Delta Regional Authority.
Mr. Masingill. Yes, ma'am.
Ms. Norton. Have you had an occasion to have regional
clusters that go outside of the State or the county of
jurisdiction, and how have you kept rivalries or conflict from
developing when you go out and one says, no, it has to be done
my way because it is really in my county or most of it is in my
county? How do we keep that from happening?
Mr. Masingill. Well, that is actually a very good question
for the Delta Regional Authority. Actually, in Congress's
wisdom, one of the things that you provided the Delta Regional
Authority to do is we can use our money, our Federal dollars to
leverage other Federal dollars because we can use our Federal
dollars as local match money. We are one of the few Federal
entities that can do that. So we can take our money, EDA money,
and we can leverage that for even additional dollars across
county lines or across State lines. Many of our projects that
we actually use as a priority, because of our Delta Regional
Plan, which we use as a benchmark for trying to encourage
communities to work across their own county lines, one of the
examples is I had mentioned where we collaborate with Recovery
dollars and our DRA money, is the Dumas Technology Center,
which is being used in Dumas, Arkansas to serve multiple
counties and multiple communities that would normally, a few
years ago, couldn't even be in the same room together. But now
we have taken both Federal dollars, State dollars, and recovery
dollars, and we are creating a center where people will get
trained, where we can have additional job creation
opportunities and work across county lines and community lines.
DRA is really, at the heart, that is what we try to convince
communities to do all the time.
Ms. Norton. So you see what is happening: it has grown like
top seed, because that is how the economy grows, and you follow
the economy. And we have to make sure, in the reauthorization
bill, we reauthorize it; not telling it where to grow, but say
go where the money is. And I appreciate what you have just
indicated, that the carrot and the stick, here is a little bit
of Federal money.
Mr. Masingill. That is right.
Ms. Norton. So if you all will come to the table across
county lines, across State lines, maybe you can get this little
bit of Federal money, and the business community wants you to
take this little bit of Federal money because then they will
come with funds as well. With enough Federal money and State
and local money, this is how you grow a little bit of money
into funds where everybody is at the table and therefore has a
stake.
I am going to move to the other Members before I ask
anymore questions. I see Mr. Cao has come in.
Mr. Cao, of Louisiana, I will ask you if you have any
questions.
Mr. Cao. Yes, I do, Madam Chair.
First of all, thank you for being here. I know that your
time is extremely valuable. I just have a couple of questions
to ask you.
The EDA offered to the City of New Orleans the public-
private partnership in the amount of $1 million, based on my
understanding. The present mayor has not taken an interest;
however, we do have a mayor-elect and he does show an interest
in the $1 million public-private partnership. And my question
to you here is are you still prepared to commit the $1 million
to the public-private partnership in New Orleans?
Mr. Fernandez. Congressman Cao, let me get back to you on
that. I am not sure----
Ms. Norton. Is your microphone on, Mr. Fernandez?
Mr. Fernandez. Yes, it is.
I am not sure exactly what the status of that proposal is
right now, but I will certainly get back to you and your office
as soon as we wrap here and talk to our regional director. I am
not sure what the nature of that agreement was.
Mr. Cao. After Hurricane Katrina, there were many Federal
agencies that came down to assist in our recovery, but there
was a lack of coordination between the different agencies and
we have looked at legislation to establish a Federal
interagency disaster recovery task force with the purpose of
ensuring Federal agencies are coordinated in the recovery
roles. How is interagency coordination progressing and what is
your role in this effort?
Mr. Fernandez. That is a great question. President Obama
has made a huge commitment to ensure that this Administration
works very closely on our long-term recovery disaster recovery
work, established a high level interagency working group led by
the Secretary of HUD, as well as Homeland Security. EDA, along
with our colleagues at NOAA, were designated as the lead
agencies within the Department of Commerce to participate in
that activity. We have been very involved in that.
I believe there is going to be a report published very soon
on some of the best practices and action, how we are going to
move forward. You know, at EDA, we really take this seriously.
We view our role as second responders after disasters, but that
second response is critical to work with communities to rebuild
in a strong, sustainable way, and I think the work and the
commitment of the President in this regard is just as high
level as it needs to be; it is a big priority.
Mr. Cao. Can you provide me with some information with
respect to what available fundings are there still in
connection with hurricane recovery for Orleans and Jefferson
Parishes?
Mr. Fernandez. I will have to get back to you on that. I
know that with our last supplemental from 2008, in total we are
on track to spend the last $200 million out of the total $500
million by June 1st of this year, but I would have to look at
how it breaks out by region. But we will certainly get back to
you on that.
Mr. Cao. And how do you go about in assessing regional
needs to arrive at a determination?
Mr. Fernandez. Could you clarify in terms of the need for
the types of projects or the----
Mr. Cao. To arrive at your determination with respect to
funding priorities.
Mr. Fernandez. Okay. We work with the Committee to come up
with a spend plan, and part of that includes the estimates in
terms of the economic impact of the various disasters, with an
overlay of economic conditions as well. But it is really driven
by the magnitude of the damage, and then we allocate those
resources across our six EDA regions, and then, of course, we
respond to requests on a typical basis of our other programs.
Mr. Cao. One of the most devastated areas in the City of
New Orleans is the area of New Orleans East, where I live,
which presently lacks health care; there isn't a hospital
around for 30 miles. And I know that we are looking for
potential fundings to rebuild a hospital. I am just wondering
whether or not there is any kind of Federal fundings under the
EDA to address that issue.
Mr. Fernandez. Well, depending on the nature of the
hospital, there would likely be an eligible applicant for EDA
funds, if it is a nonprofit. But, again, the short answer is
yes. The magnitude of the resources, I would have to look at
the extent of the request and how much funds are in that
particular region.
Mr. Cao. Thank you very much.
Thank you, Madam Chair.
Ms. Norton. Thank you very much, Mr. Cao. Your question on
the role of the EDA in long-term disasters is apropos, one of
the important matters that we believe needs clarification in
the statute. Now, in the statute, EDA does have a role for
long-term recovery in disasters, but I must tell you, in the
FEMA hearings, by now I think it is fair to say--at least since
I have been Chair, countless FEMA hearings--I don't think we
have ever had the occasion to call EDA forward one time.
There is something wrong with that, since we have been
mostly concerned with long-term recovery for a long time. Part
of it may have to do with how few funds EDA has, but let me
tell you what it does have: it has expertise that FEMA does not
have in long-term recovery. Now, I know there is a White House
long-term disaster recovery working group, and we know you are
in there with giant agencies like FEMA and HUD, and I am not
sure what role you are playing in that working group.
Before I go to Mr. Carnahan, since it has been raised by
Mr. Cao, can I ask you what role are you playing? Is it a minor
role, is it no role at all? Are you at the table with this
White House long-term disaster recovery working group that is
supposed to have recommendations this spring on what the
Federal Government ought to be doing with long-term recovery of
the kind Mr. Cao just addressed?
Mr. Fernandez. The short answer is yes, we are definitely
at the table. Despite our size, we like to think of ourselves
as the little agency that can, and I am very pleased to report
that the work we have been doing with other agencies in regard
to this initiative, as well as others, I think has been
unprecedented in terms of the level of cooperation and the
spirit of how we are going to work together. And despite our
size, our sister agencies in that group have looked to the EDA
for leadership on these long-term recovery strategies. So while
I have not read the draft of the report, it is my sense that
you will see a very clear strong role for EDA in moving
forward.
Ms. Norton. Well, Mr. Fernandez, you need to carry this
message back to the White House: we are going to reauthorize
EDA this year. We have to get this bill through this House and
get it through the other body, where you have to raise your
hand in order to go to the john. It is very difficult to get a
bill through two bodies now. Not so hard here, where we have
regular order.
So that if the White House long-term recovery disaster
working group wants to have any influence on reauthorization,
where we intend to clarify what we have been saying in this
hearing, and certainly EDA's role, they have got to get this
Subcommittee something tout de suite, or as soon as possible,
or else it will be another set of recommendations that are
lying on the shelf.
I want to go next to Mr. Carnahan.
Mr. Carnahan. Thank you, Madam Chair. I want to
acknowledge, as I begin, the 45th anniversary of the EDA and
that it has been one of the most successful economic tools that
we have had at our disposal here, and also acknowledge that it
also is a primer for additional private dollars to get to where
they are needed. We have seen those in the St. Louis region. I
already mentioned the Chrysler plant in Fenton, but over the
years we have also seen aid through EDA when there was defense
downsizing in the 1990s that really hit the St. Louis region,
and we also saw EDA efforts after the Midwestern floods. So we
have been very thankful for working with the agency through the
years.
I wanted to ask a couple specifics from some of the users
of EDA back home and get your thoughts. Under the economic
adjustment program, the use of funding is mostly limited to
building construction program planning grants. I have heard
some suggest that this is unnecessarily limiting. I wanted to
ask your thoughts about that and what do you think about
expanding the eligibility of the use of these funds to include
support for innovation in entrepreneurism.
Mr. Fernandez. Thank you. The economic adjustment
assistance program historically has been primarily used for
construction, but under the existing legislation we do have the
flexibility to use it for other non-capital investments. For
example, that is the source of our revolving loan fund
investments, and we use it for some strategic planning and
other types of support for incubators, accelerators.
On an annual basis we encourage the Congress to support the
Economic Adjustment Program. It is our most flexible fund and
it is certainly well aligned to be a catalyst for the kinds of
investments that are critical to drive innovation-led economic
development. It, frankly, gets down to just a matter of
resources and that limits us in terms of the EAA.
Mr. Carnahan. Next I want to ask about the revolving loan
program. Under its current structure, companies must start to
pay back the loans very quickly, in fact, sometimes before they
have the capital to do so. What do you think about
restructuring the program so that it would not have to be
repaid so quickly? Specifically, what do you think about the
idea of a royalty payment or some other capture of profits and
eliminating personal guarantees?
Mr. Fernandez. We are very interested in looking at the RLF
program, and I stressed in my opening comments about how we can
modernize and fine-tune some of the great programs we have to
make them even better, particularly in today's economy. So I
think we would be very happy to work with the staff and our
stakeholders, and we get suggestions from our stakeholders all
the time for areas of improvement, particularly with the RLF,
the revolving loan fund. Another suggestion we hear often is to
also have more flexibility for our intermediary organizations,
the grant recipients, to even include non-debt finance
structures as part of their program.
Everywhere I go, one of the biggest issues that I hear
about are access to capital, and particularly in the context of
our innovation economy, where we have seen such a complete
realignment of where money comes from particularly in regard to
start-up businesses, early stage companies. Everyone talks
about the so-called valley of death. Well, it has become a
whole lot broader and a whole lot deeper, and an agency our
size certainly isn't going to solve all those problems, but I
think we can be very interested in working with the Committee
to look at ways that we can fine tune that program to help
solve that problem where appropriate.
Mr. Carnahan. Well, I would very much be interested in
doing that. I know many of the economic development officials,
some of whom are here today from St. Louis, but also some of
the folks from our incubators back home, have, I think, some
really good ideas, and we would like to share those with you in
terms of going forward. Thank you.
Mr. Fernandez. You are welcome.
Ms. Norton. Thank you very much, Mr. Carnahan.
Mr. Michaud.
Mr. Michaud. Thank you very much, Madam Chair.
I want to thank both of you for coming this afternoon, as
well.
Mr. Masingill, in your experience--and I heard you talk
about EDA a little bit earlier--have you found EDA to be very
helpful in working with the Delta Regional and are there any
things that you think that they should be doing differently
that would actually be more assistance to what you are doing in
your commission?
Mr. Masingill. Thank you, Congressman, for that question.
We have found the EDA to be a good partner and we are actually
trying to find ways to strengthen that partnership. We do think
that there are many more opportunities where we can collaborate
in strengthening our resources and their resources for local
investment.
The Chairwoman mentioned regional partnerships. Well, the
Delta Regional Authority, at its core, is a regional
collaborator, is a regional planner, and is a regional economic
developer, and we see ourselves playing a role with bringing in
more Federal resources and opportunity to collaborate and to
make good investments and stronger partnerships. We have had
some great relationships.
I mentioned two with Pedro Garza and Phil Paradice. We want
to strengthen that relationship and we want to be in the best
position to do that so we can show, through what we have
already done with our investments in the number of private
sector investments that we have been able to bring to the table
with over 20 to 1 with projects that we have had over some of
our successes, we can strengthen that relationship.
But we look to the future and hope that that future is
bright with EDA and we stand ready to make them look good and
make us look good.
Mr. Michaud. Thank you.
Mr. Fernandez, as you know, this Subcommittee and Congress,
during the last session, actually established three new
regional commissions. One, actually the President nominated a
former EDA employee Sandy Blitz, to the Northern Border
Regional Commission, which is actually the only one that he has
nominated anyone to as a Federal co-chair. What do you see the
role of EDA in getting these commissions up and running and
working collaboratively with the new commissions?
Mr. Fernandez. Thank you, Congressman. I think our role can
be as just described, as a true collaborator and partner. We
have technical assistance we can provide; we have other kinds
of resources that we make available to local economic
development or regional economic development organizations to
assist them in their work, and I think there is a lot of those
types of assets. I think our folks on the ground in our
regional offices are a tremendous asset to work with these
commissions as they share a lot of ideas and identify projects
that we can collectively work on and fund.
Mr. Michaud. You were at the full Committee hearing the
other day when we were talking about how the Recovery money has
been moving forward, and one of my concerns I raised is we are
talking about jobs and trying to maximize the amount of money
that Congress--try to get jobs moving. The concern, however, is
what appears to be the Administration, on one hand they are
saying one hand; on the other hand they are doing others. And
it was more specific to the United States trade representatives
encouraging Mexico to qualify under WTO for the government
procurement act so they actually can access some of the
stimulus money, which is contrary to what Congress wanted.
What is your agency and, more specific, the Department of
Commerce doing to ensure that the Administration is moving
forward in one direction versus what seems to be competing
directions?
Mr. Fernandez. Thank you. Candidly, I am not familiar with
the specific proposal in terms of the U.S. trade rep, but I can
tell you specifically for EDA, by law, those kinds of entities
would not even be eligible for our funding.
Mr. Michaud. You had mentioned access to capital is
important, and I have heard a lot of small business say that
access to capital is still a huge problem. I know it is not
within your jurisdiction, but do you feel that your agency
should actually recommend to the President or the Small
Business Administration ways that we can actually free up some
capital, i.e., I know the credit unions actually have a lot of
capital available; however, the law--there is a cap on giving
loans for businesses. Do you think that we ought to increase
that cap to help free up the capital for small businesses?
Mr. Fernandez. Candidly, I am not sure I have an answer for
that. I mean, I know that there is a role and we do have
opportunities to discuss these issues. I think EDA can help
play a role in solving some of those issues. I can tell you I
have only been in this job for a few months, and in my prior
life as a private investor trying to help companies grow, it is
a very real issue and it is extremely difficult to get
financing in today's environment. Very good projects are
sitting on the shelf ready to go, and we need to collectively,
all of us, work to figure out ways to accelerate a lot of this
innovation and business expansion that is ready.
Mr. Michaud. Well, thank you very much.
And thank you, Madam Chair. I look forward to working with
you and hopefully the Administration--different agencies within
the Administration will work collaboratively, as well, in the
same direction so that we can get the jobs and the economy
moving once again. So thank you.
Ms. Norton. I will go to the Ranking Member when he gets
his bearings, so, if he will allow me, I will ask just one or
two questions I think would be of interest to the entire
Subcommittee.
I was shocked, frankly, when you consider the productivity
of EDA and where the money goes, to find out that your fiscal
year 2001 budget was $438 million and today--I had to hold my
breath--it is $293 million. That kind of reduction is
breathtaking, especially since--this has just been handed to
me, so I don't believe all of you have it, but if you can see
the colors, you will notice something about the EDA budget that
you won't see in lots of other Federal budgets. Not only has
the amount gone down precipitously and disastrously, cut not
quite in half, but it is being bled to death, but look at who
was really bleeding.
The blue represents the funds essentially that go out to
the districts and for projects. That is the color you see. The
red, by the way, represents funds that they got on a basis of
Louisiana, when they were pulled in for long-term recovery in a
few instances. So the blue is what the States get. Now, look at
how little money of the goes to personnel costs. You have to
look at the top for that yellow to find how much of it goes to
people in Washington or in the regions pushing paper, paper
that is necessary.
I don't know where you will find a Federal program where so
much of the program just goes straight out to the States and
localities, and yet the cuts make me really wonder about the
future of this program, whatever authorization we do. We know,
for example, from our own records, that 30 to 40 percent of the
folks who are left in this very small cluster at the yellow top
are eligible for retirement this year or next. So I have to ask
you a survival question, and that is the $293 million, that
what is in the President's budget for this year, was that
increased from the prior year?
Mr. Fernandez. No. Our budget proposal for 2011 is
essentially----
Ms. Norton. Say that again, please.
Mr. Fernandez. Our budget proposal for fiscal year 2011 is
flat-lined. It is part of the Administration's focus on dealing
with the deficit. So in many ways we think the fact that it is
not being reduced and that there continues to be support at the
current funding level does represent the Administration's
understanding of the capacity of the agency to be in important
and the work we do is important.
Ms. Norton. I understand the Administration's--I am sorry,
what?
Mr. Fernandez. Our request for 2011 is for funding at the
same level we requested for 2010.
Ms. Norton. Which is, of course, a reduction, because----
Mr. Fernandez. You all gave us a little bit more money than
we asked for.
Ms. Norton. Well, if we don't, I really wonder if you are
going to be in business. These Federal workers can leave. The
only reason you are holding them, Federal workers around the
Country who are not doing the work that would have been done by
many more people, if you see the difference.
Mr. Fernandez. I can tell you, though--and you know this
probably better than I--but the folks at EDA are incredibly
committed to the work they do.
Ms. Norton. Well, they are not only committed. I think you
couldn't hold such people who have Federal pensions if you were
not in the deepest recession since the Great Depression. These
people are staying at work to continue earning a living even
though they would have a rather nice pension if they went out.
That does show tremendous devotion to their work, but it really
makes me wonder, when you have this colossal reduction, in a
few years, about the future of the agency.
You testified, I think it is, Mr. Fernandez, $1 million
gets you what, $12 million from elsewhere? Was that your
testimony?
Mr. Fernandez. I think that may have been the Ranking
Member's comment.
Ms. Norton. Just let me ask. What you get, how can you
assure this Subcommittee that what you are getting isn't what
you would have gotten anyway? How do we know that what is
happening in the economic development districts wasn't about to
happen even if we hadn't come in with our little carrot that
produced what you say are the results we see?
Mr. Fernandez. Well, that has always been one of the most
central questions around investments in economic development.
When I was mayor, you see it at a State level, certainly here.
It is the whole ``but for'' discussion. And from my experience
as a recipient, you know, certainly but for the EDA investment,
we couldn't have built the new access road to facilitate the
redevelopment of a closed factory. I mean, we just simply
couldn't do it. There are other examples that I think the
grantees can speak even more clearly about than I.
When I was in Minnesota last week, I met a town whose total
population is 981. Not thousand; 981. But they are part of the
Iron Ridge Region. And it just so happens because of their
location, the need to expand a water line to facilitate the
major investment in a new steel mill required an investment
from or at least an expansion of that town's assets. I can tell
you they do not have $1.4 million. So we provided that grant
for $1.4 million. The private sector is investing $1.6 billion,
and there is going to be tremendous job creation.
Now, one might argue, well, if they can do $1.6 billion,
why didn't they go $1.6 billion and $1.4 million? There are
always those questions, but I think that the reality is that
the town was responsible for the water line, to fund, and there
was no way they were going to be able to get that done without
our support.
People will always argue about it. I think that one way to
look at it is are we getting a good return on investment, I
think there is evidence strong for that in terms of the job
creation.
I think the Ranking Member's comments, just to be clear, in
terms of the 4,000 per job were specifically related to the
investment in incubators in rural areas. It is a very strong
number. Our overall numbers in 2009 are very close to that.
If you look at the return on investment in terms of private
sector investment that is leveraged, it is a very strong return
on investment. So while I can't swear that every single project
only happened but for that last dollar, our recipients will
tell you it is that commitment of Federal money through the EDA
is the catalyst to get other people to commit. So I think it is
essential and it is a very important way for us to leverage a
small investment into something that is very meaningful.
Ms. Norton. Yes, and may be penny wise and pound foolish
for somebody who is ultimately going to put up most of the
money not to move until somebody with a little bit of money
comes forward, but that is how the world operates.
Mr. Fernandez. Right.
Ms. Norton. And I do think your track record does show that
somehow, especially with the Federal Government--something
magic about that--is willing to come forward with some
understanding of some kind of oversight, some kind of
insistence upon return for the dollar, some kind of overall
protection, bringing State and local governments into it, and
you get a partnership that catalyzes.
Last dollar money is outsize money, and we better
understand it. It is the puniest part of the money, often, but
it often is the biggest bang.
I am going to ask Mr. Diaz-Balart if he has any questions
at this time.
Mr. Diaz-Balart. Thank you, Madam Chairwoman. I will
actually be brief. I have a couple to Mr. Masingill, if I may.
You mentioned that most of your active projects include
participation agreements?
Mr. Masingill. Yes, sir.
Mr. Diaz-Balart. And that these agreements, as you point
out, require that the grantees meet the outcomes promised and,
if they don't, they have to repay a portion of the funding.
Talk to me a little bit about how you enforce that. What is the
enforcement mechanism? If you can kind of elaborate on that----
Mr. Masingill. Sure.
Mr. Diaz-Balart.--because it is a wonderful thing to hear,
actually.
And also if you could let me know do you have projects that
have not met those goals and have you had to go after that, and
how successful have you been? If you could just elaborate a
little bit on that.
Mr. Masingill. Yes, sir, be happy to. Fortunately, from
what I have been educated, we have not had to initiate that
effort except for a couple of times.
Mr. Diaz-Balart. Well, possibly because you have in the
contract. I am sure that is a little of an incentive to submit
real applications, right?
Mr. Masingill. Yes, sir. And they also know we will audit
and we will monitor those projects as they go along. There is a
project actually right now in one of our States that it looks
like we are going to have to go in and do that. They started a
project knowing that the project wasn't going to be fully
completed, knowing that they had a participation agreement, in
the time they communicated to us, they had already spent our
money.
They know that we will, through legal methods, through our
methods that we have, go in and reclaim that. We have only had
to do it, to my knowledge, once or twice, but I will make sure,
Mr. Ranking Member, we get that information specific back to
the Committee so you will have those in detail.
But from my information, we have only had to do that once
or twice, and we try to do a lot of work on the front end. We
use our local development districts; they are our front-line
project developers and they are a key partner with the Delta
Regional Authority, and we use them to help at the local level
as we are putting the grant agreements together and the
participation agreements together.
And it is not always easy; we have to go to the Committee
and we have to go to the private sector and go this is what
this document means, this is how important it is, because we
want to be very clear not only with the local officials, but
also when we come back and report back to Congress the
investments that we have made into this project and what the
return is going to be. So when I tell you that we have 13 jobs
created and 9,000 jobs retained, then I can speak to you and
tell you those are real numbers, because we go into those
projects, we audit those projects, and they know if the private
sector does not produce those numbers, then we go back after
our resources.
Mr. Diaz-Balart. It would be fair to say that none of those
jobs, therefore, would be in Congressional districts that don't
exist, for example.
Mr. Masingill. No, sir.
Mr. Diaz-Balart. Mayor, Mr. Secretary--I don't know which
one you would rather have, because I know that once a mayor,
always a mayor, correct, sir?
Mr. Fernandez. I prefer John.
Mr. Diaz-Balart. Do you all do something similar to that or
is that something you have all looked at doing to----
Mr. Fernandez. You know, I have asked that question a
couple times, and there are some complexities related to it. We
do have the ability to terminate agreements and get Federal
share reimbursement. I don't believe it is as clear as a
clawback provision that we use in Bloomington and many other
communities, and in part that is because we give grants to
organizations to make investments that often I guess the--I am
not sure what the analogy--almost like the chain of custody, it
is maybe two or three entities removed from the direct
investment from EDA, so it gets a little bit more complex in
terms of how to do that specifically. But we are certainly very
mindful of the need to get what we invest in and, if not, we do
have the ability to have those funds repaid.
Mr. Diaz-Balart. Again, you have a very good track record,
but it would be interesting to see if there is any way to kind
of look at that model.
Mr. Fernandez. I think your point is well taken. By having
those authorities in those agreements, it often encourages
folks to under-promise and over-deliver.
Mr. Diaz-Balart. Right. A little bit of an editorial note,
not for you all to necessarily comment on, but if that was the
case in the rest of the stimulus, the American people would
probably have billions of dollars back.
Anyway, thank you for being here today.
Ms. Norton. How do you know that, Mr. Chairman? The money
is still being--it has been authorized, it is still being
outlaid.
Mr. Diaz-Balart. That is true.
Ms. Norton. Even Mr. Fernandez said--which has authorized
all of his money, has outlaid only--what is it? And he
explained while you were in the back----
Mr. Fernandez. The money that has actually gone out the
door is around 30 percent of the total.
Ms. Norton. But that much of the money is being spent in
start-up. That doesn't show until reimbursement----
Mr. Fernandez. All of our grants are reimbursable, so the
entities are spending that money.
Mr. Diaz-Balart. I am not referring to this area, because
this area is----
Ms. Norton. I know, but it is the same thing with stimulus
funds.
Mr. Diaz-Balart. Well, Madam Chairwoman, we have all seen
the reports about stimulus money going to campaign consulting
firms, going to congressional districts that don't exist, going
to--I mean, we have all seen that. This is not the time or the
moment or place, but----
Ms. Norton. The fraud ratio in the stimulus funds is de
minimis. I wish I could say that--and I am talking stimulus
funds now, not funds for EDA. We can differ on these funds, but
part of what we have been doing and that we tried to get Mr.
Fernandez to explain how fund spending comes online, and the
construction field is fairly technical, but it is certainly the
case that you don't say to a contractor you have a $4 million
contract to hire 100 workers, here is $4 million. That is what
gets you fraud.
You say, okay, you are authorized for $4 million and we are
going to monitor you--this is ordinary practice, now--we are
going to monitor you, and as you produce you are going to get
this $4 million per week or per receipt, and you are not going
to get a dime from us until you are able to show you deserve
reimbursement. Otherwise, there would be wholesale fraud in
funds for, for example, transportation and infrastructure.
So it is important to place all of this in context to
understand your concern, because I would join you, Mr. Ranking
Member, Mr. Diaz-Balart, in whatever has been found. Nobody
thought that you were going to authorize almost a trillion
dollars and, for the first time ever in the Congress of the
United States, keep track of it online without having some of
it end up going in the wrong place.
What I am pleased about is that you do not have enough
fraud in this program to shake a stick at, and the reason you
don't is because it is online, everybody can look at it; we can
look at outlays, we can look at authorization. So we better
watch out. We are trying to get some more of this money out for
our transportation and infrastructure funds.
Mr. Diaz-Balart. Madam Chairman, if I may.
Ms. Norton. Yes, sir, of course.
Mr. Diaz-Balart. Clearly, clearly, where we obviously
always have concurred is the fact that--and you and the
Chairman and everybody has been very vocal about the fact that
we never thought--we always thought that more money should go
to infrastructure.
Ms. Norton. Precisely.
Mr. Diaz-Balart. Because that is the place where----
Ms. Norton. We could track it.
Mr. Diaz-Balart. We could track it, jobs are created; it is
non-recurring money and you have the projects there for a long,
long time. I think the debate obviously goes in other areas,
and, again, we can have that debate for another day. Obviously,
these two gentlemen are in areas where not only can we track
it, but their record is as good as it gets.
Ms. Norton. And the Subcommittee is in bipartisan agreement
about their record.
Mr. Diaz-Balart. Absolutely. But I would take it a step
further. I think the Committee has been very vocal about, in
transportation projects, that that is money well spent. That is
clearly money well spent. When you go outside of
transportation--and this is not the time to debate and you are
always very generous with your time and allow me to speak, but
there we will agree to disagree as to, yes, the money is
tracked, but even when the money is tracked we have seen that
the money has gone to places where it, frankly, shouldn't. But
that is for another day. Thank you, Madam Chairwoman.
Ms. Norton. Of course, Mr. Diaz-Balart.
Before I end with one or two questions, could I ask Mr.
Michaud if he has any further questions?
Mr. Michaud. Yes, just one. And I want to thank you, Madam
Chair, for bringing that chart up as far as the funding as it
relates to EDA and once again I want to thank Mr. Fernandez.
When you look at the return on investment, you are absolutely
right, there is a huge return on investment.
However, I do have a concern, being a Democrat, of how
committed this Administration really is as far as creating
jobs, and I am just wondering if it wasn't for the
Massachusetts election, whether we would be talking about jobs
at this point in time. But that being said, EDA does a great
job and I would like to actually know what the amount of money
request of projects that are out there that should be funded.
If you don't have it now, later on. Because what I am thinking
about, Madam Chair, is I think we have to move forward and
reauthorize EDA. I don't think we can wait for the
Administration to come onboard.
But I also--getting back to your previous Ranking Member
and your conversation, I would also be very interested in
probably reprogramming some of the stimulus money that has not
been spent and to put that money towards EDA, where we can
actually get our good return for investment. I don't think
spending money to China is a good return on investment, and I
think EDA definitely could use that money more effectively here
in the United States and would hopefully work with you, Madam
Chair, to get the reauthorization done, as well as having a
bigger increase in EDA funding, and I am willing to support
redirecting some of the stimulus money to where it actually
will have a positive impact on economic development and jobs.
That is how committed I am to making sure we move forward.
So, with that, I will yield back. I would be interested, if
you know off the top of your head or later on for the
Committee, what is the request out there for funding.
Ms. Norton. Mr. Masingill seems like he wanted to respond
to your inquiry.
Mr. Fernandez?
Mr. Fernandez. First of all, there are a lot of things we
can agree on, but I think I would take exception with the
notion that this Administration is not committed to job
creation. I think there is no question about the President and
his cabinet's commitment to moving this economy forward,
rescuing it, rebuilding it as well, and there are numerous
examples of the work all of us are doing to move forward on job
creation.
Mr. Michaud. If I might right there. I didn't say wasn't
committed, I said how committed. Because I talked to the
President directly over a year ago about how we were going to
move forward with a manufacturing policy. And I can answer your
question in regard to demand, if you will, at least in regard
to 2009. In 2009, we received 1,338 applications for EDA
funding. The total amount of funds requested were approximately
$1.7 billion. We were able to fund 936 of those projects for a
total investment of about $578 million. So we were able to fund
about 54 percent of what was requested.
Now, I am not saying the other 46 were projects we would
want to fund. Because it is a competitive process, and some of
those may not have simply been good projects. But there is
clearly demand. Prior to this hearing, we had asked our
partners at NADO to just do a quick survey for me, some of the,
what our EDDs and other organizations think are out there. I
think they can speak for themselves. There is clearly a
pipeline and a demand for our work. That is something we
certainly learned during the Recovery Act work.
Ms. Norton. Well, thank you, Mr. Michaud. Mr. Michaud and a
number of us are working very hard on jobs, and we are
concentrating on that more than anything else now. But I don't
want you to misunderstand what Mr. Michaud was urging. Mr.
Michaud comes from the State of Maine. What always amazes me
about Maine is the size of the State versus the size of the
population. What is the population in Maine, Mr. Michaud?
Mr. Michaud. About 1.3 million.
Ms. Norton. Now, let me make my point this way. You have
1.3 million and one of the largest land masses. You can
imagine, if those people are throughout the State, wherever
there happen to be resources, the best places, you have a very
large State with pockets, really deep pockets of persistent
poverty. Its own version of a kind of Appalachia, only in a
very expansive area.
What Mr. Michaud asked you about, in my mind, echoes a
corollary complaint of the Congressional Black Caucus. They
weren't saying that all this money spent for job creation
wasn't absolutely essential. This President found a depression
on the doorstep, stopped it in its tracks and the economy is
growing for the first time, with the last part of the economy
always to grow, jobs, far behind and too far behind. But nobody
now says we are in the same recession we were in before. Very
tough steps that were taken.
Step two. Now that we know that we are in a collapse of the
financial system of the United States, not simply an economic
recession of the kind that almost comes back by itself, we have
to look to the issue of targeting. Or else in Maine and in
Missouri and even, I indicated that there is 12 percent
unemployment in this city. Imagine what it is in some other
large cities, because this is not by any means the worst off.
What we are going to see is gradually coming back in other
places and hardly any bite taken out of unemployment where
unemployment is highest.
Well, what can the Administration do about this? Every time
he talks about jobs, every time we talk about jobs, somebody
screams deficit. Something that we must work on, except anybody
who reads history knows that in 1937 Roosevelt responded to
concerns about the deficit during a depression. Indeed,
attended in his budget to some deficit. And he went into a
double dip recession that historians now say that the
newspapers called the Roosevelt Depression.
And I hate to remind everybody of this, but I went back and
read this history. I hope you understand how we got out of the
Great Depression, that it wasn't by a jobs bill or even by the
great creation or the wonderful creation of the programs we are
depending on essentially now, unemployment, Social Security,
all the rest of it. We got out of the Great Depression because
of World War II. We took a huge part of the workforce known as
men, drafted them, thereby leaving a labor shortage, made guns
and tanks in Detroit, not shipping it to all parts of the world
and getting parts there and getting most of it from other parts
of the world. Voila, we got out of the Depression.
So those of you who think that what we are doing now with
this under a trillion dollars is going to get us out of this
have to know that what we are doing now is going to keep us, at
least job poor, for a number of years. So what does Mr.
Carnahan do in the meantime? What does Mr. Michaud do? Indeed,
Mr. Diaz-Balart comes from a very rich State. But he has got
some of this in his State. What do people in the big cities do?
Now they have to go back and say, yes, continue to make jobs
for everybody. But you have got to target some of this money to
the people who are worse off, and not think that if you do jobs
in the public sector, for example, as we have with Mr. Diaz-
Balart and our pulling together to get more and more of this
money. We got too little of it in the stimulus bill.
You can't believe with that per capita funding that Maine
or Missouri or the great cities are going to be better off. The
only way to target it is to look at what mechanisms do you
already have. Mr. Fernandez, you have to take back the message
from this Subcommittee that unless one of the few mechanisms,
there may be others, there are poverty programs, there are
things like that in all of our districts. But unless you find a
way to target money in that way, using what we already have,
these districts are going to continue to be the ones with 17
percent, 20 percent, 25 percent unemployment. And there is no
other way to do it. So just putting more money in the pipeline
does not do it.
So when you tell us level funding for EDA, which means a
cut in funding, another cut in funding, I understand it went
from almost half a million dollars in 2000 to where you are
today, but we expect this Administration, that is what you are
hearing here on this side of the table, to target more of this
money. So in desperation, you hear a Member that I can't say I
disagree with saying, look, we have programmed some money to
target it to the people who are worse off in the United States,
perhaps through EDA, or maybe Members of this Subcommittee on
both sides of the aisle should write to the Appropriations
Committee to ask them since they still have the final say on
appropriation, to put more money into EDA and condition it on
going to only the highest unemployment parts of the United
States through EDA.
I can't think of anything else to do. Before I go further,
if Members want to indicate whether you join with me in asking
appropriators to relieve us of this targeting problem, I would
be glad to work with all of you.
Finally, let me just ask you, look, what changes do you
want in the statute that we haven't gotten to? We are going to
reauthorize it. You heard the Members say, we are ready to go,
White House, ready or not. We are not going to get through this
year, have us come to the end of 2010 and say, I am sorry, we
are still getting our act together. This is the second hearing.
What do you want in the statute that is not there now?
Mr. Fernandez. As I talked about earlier in our discussion
today, I think the areas that we are most interested in working
with the Committee and others to enhance are in the Revolving
Loan Fund program, to make sure that it is in line with the
current needs. We want to make sure that our infrastructure
investments are broad enough to support many of the innovation
infrastructure needs of science parks, research parks, et
cetera. And we certainly want to look for opportunities to
incent and encourage the kind of broad cross district and other
kinds of regional initiatives.
I think the global climate fund is something we would like
to talk about as well.
Ms. Norton. What kind of funding?
Mr. Fernandez. The Global Climate Mitigation Fund. When it
was first enacted, it was fairly narrowly conceived in the
context of green buildings and LEED construction. The report
that was included in our fiscal 2010 budget, the Congress
encouraged us to look at a broader application of that program,
and green manufacturing, other kinds of alternative energy
support. We agree with those recommendations and would like to
continue to work on how we modify that program as well.
I think you will have from us, and you understand the
process, but we will have detailed language to share with you
in terms of our recommendation here in very short order.
Ms. Norton. When do you think you will have that language,
Mr. Fernandez? Because I am telling you, this ship is leaving
the port.
Mr. Fernandez. As fast as we can get through the vetting
process.
Ms. Norton. You tell OMB for us, because I know the vetter
is, that we are talking about a statute here. We are not so
much talking about money. We are talking about reauthorization.
When a statute is not reauthorized, this has not been
reauthorized for some years, it suffers in all parts of the
process.
Mr. Fernandez. There are other people involved in this. But
I want to be real clear that part of the delay, it is my
responsibility, not others. When I came on in September, we
discussed greatly the notion of reauthorization. And the truth
of the matter is, our authorizations, we have a nice statute.
There is tremendous flexibility, we can do a lot of really good
work. We wanted to make sure we had input and a lot of
conversations with stakeholders. Certainly our grant recipient
community, local officials and others.
So while there is a process that often is slower than we
would like, I want to make it clear that the initial delays are
mine. Because I wanted to make sure that our recommendations
were the right recommendations, not just the quickest.
Ms. Norton. I recognize the statute is very--we don't
authorize, even initially, statutes that are not very broad. We
depend upon reauthorization based on what we have learned from
how the statute operates to bring us to reauthorization, to add
to it.
But let me tell you how it works up here. When a statute is
not reauthorized, it doesn't get funding. The appropriators are
quite willing to leave you even when the Administration, even
if the Administration were to request more funding, it looks
and sees whether or not it has been reauthorized, and then it
says, you know what, the authorizing Committee hasn't told us
anything about whether or not this statute ought to remain as
it was. So this is giving money in the blind.
So I can tell you that you are not going to be taken
seriously by the appropriators, and even by what I hope will be
a letter to them, just by telling us you have a broad statute.
Everybody has a broad statute. The appropriators want to know,
are they spending their money correctly, are the authorizers
saying no changes whatsoever are needed. We don't think broad
changes are needed. But you yourself have run down a list of
changes that are needed, or at least clarified in the statute.
So let me tell you what, Mr. Fernandez, by the end of
March, we need to hear from you, if not in the specific
language, at least from what it is you most desire. Because we
are looking to the end of an election year. And what we don't
get done by September 30th in both houses is likely not to be
done at all.
Mr. Fernandez. I can assure you it will be sooner than
that. The language has been drafted. So I hope you will have it
very soon.
Ms. Norton. That is very reassuring. Let me thank you both
for coming forward. This is very, very helpful to us. I thank
all our last panel. Thank you.
And the second panel, we are very anxious to hear, they are
on the ground. Would you please come forward, the three. I will
call your names and ask for you to speak in this order. Mr.
Charlie Dooley, County Executive, St. Louis County
International Economic Development Council; Larry Molnar, the
President of the Educational Association of University centers;
Jay Newcomb, Council President, Dorchester County Council; and
finally, Michael Norton, no kin, of the Northwest Arkansas
Economic Development District and the National Association of
Development Organizations. We are very anxious to hear from all
of you.
Why don't we begin with Mr. Dooley?
TESTIMONY OF CHARLIE DOOLEY, COUNTY EXECUTIVE, ST. LOUIS
COUNTY, INTERNATIONAL ECONOMIC DEVELOPMENT COUNCIL; LARRY
MOLNAR, PRESIDENT, EDUCATIONAL ASSOCIATION OF UNIVERSITY
CENTERS; JAY NEWCOMB, COUNCIL PRESIDENT, DORCHESTER COUNTY
COUNCIL; MICHAEL NORTON, EXECUTIVE DIRECTOR, NORTHWEST ARKANSAS
ECONOMIC DEVELOPMENT DISTRICT, NATIONAL ASSOCIATION OF
DEVELOPMENT ORGANIZATIONS
Mr. Dooley. Good afternoon, Chairman Norton, Ranking Member
Diaz-Balart, and Members of the Committee. Thank you very much
for the opportunity to be here today.
My name is Charlie A. Dooley. I am the County Executive of
St. Louis County, Missouri. Today I am speaking on behalf of
the International Economic Development Council, the world's
largest organization for the economic development profession.
First, please allow me to commend Chairman Norton and the great
work the Committee is doing. I would like to thank and
acknowledge our Congressman, Russ Carnahan, for his great work
and support in our region with EDA.
We also would like to acknowledge Chairman James Oberstar,
a champion for EDA, and a recipient of the 2005 IEDC Federal
Leadership in Economic Development Award, and acknowledge
Assistant Secretary of Commerce, John Fernandez, and Deputy
Assistant Secretary, Brian McGarvin, for the great work they
have done in the short time they have been in office.
Nationwide, the struggling economy has placed great
challenges on our communities. Tight credit markets have
prevented businesses of all sizes and industries from growing
and accessing capital. As the flow of credit has slowed to a
trickle, we have seen too many businesses forced to scale back.
We need resources of EDA to help dig out of this economic
slump.
EDA and St. Louis County have a history of partnership and
success. That partnership dates back to the early 1990s when a
shift in the defense industry in St. Louis hit us very hard.
Just last week, when Assistant Secretary John Fernandez
traveled to St. Louis, he helped us launch a plan for
revitalization of the closed Chrysler plant.
I would like to share with you the importance of EDA to the
recovery of my county and communities across the Country.
Entrepreneurial development: our region established an
incubator system which provides small businesses with low-cost
space and shared support services. Revolving loan fund: EDA
helped us create a revolving loan fund for small businesses.
One of the great success stories of this special loan program
is the company, World Wide Technology. It is now the largest
privately-held, minority-owned company in the Country.
International trade development: EDA has been vital in
helping foster international trade through creation of the
World Trade Center in St. Louis. EDA has continued to support
our efforts in global trade, by providing Federal grants to
form the U.S. Midwest-China Hub Commission. The goal is to make
St. Louis a cargo hub for U.S. Midwest-China trade.
The MET Center: St. Louis County built the Metropolitan
Education and Training Center with EDA funding. This high tech,
hands on facility trains displaced and disadvantaged workers.
EDA has enabled our region to maintain competitiveness in
technology and commercialization. The creation of the Center
for Emerging Technologies and the soon to open Mid-County Plant
Sciences Incubator are both at the cutting edge of plant and
life science innovations, which ultimately creates jobs and
economic development for our region.
Whether it has been in response to defense down-sizing,
national disasters or plant closures, EDA has been at the
forefront of a Federal response to grow a stronger and more
diverse economy. EDA is a vital partner in economic
development.
On behalf of IEDC and communities around the Nation, we
express our strongest possible support for the Economic
Development Administration. We urge the Committee to swiftly
complete reauthorization of a funding level of $500 million for
EDA.
We look forward to a continued partnership with EDA in
making our communities and Country stronger and more
competitive. In these difficult times, it is all about jobs,
jobs, jobs. Economic development means jobs for our
communities. And EDA is our strongest Federal partner in
helping to create jobs and opportunities for our citizens.
Thank you, Madam Chairman.
Ms. Norton. Thank you very much, Mr. Dooley.
Mr. Molnar?
Mr. Molnar. Thank you, Madam Chairwoman and Members.
As you consider the lessons learned for the Economic
Development Administration from its Recovery Act investments
and new plans to strengthen economic development through this
important agency, I testify to you today as President of the
Educational Association of University Centers. This is the
advocacy organization that represents the higher education
infrastructure in our Country and its economic development role
in economic recovery and economic development, including the
EDA University Center program that has operated for over 30
years in a very important role in our Nation's economy.
The higher education infrastructure in our Country is very
much taken up with innovation, technology transfer, technology
commercialization, entrepreneurship, new venture creation,
business incubation. Those elements of our future economy are
well known and are much experienced in the university
community.
In regard to the universities' participation in ARRA
Funding, I can speak of my institution, the University of
Michigan, that has received over $150 million from a number of
Federal agencies. One of the initiatives is the establishment
of a Department of Energy sponsored, Energy Frontier Research
Center, that will explore new materials to more efficiently
convert solar energy to electricity. Dr. Stephen Forrest, our
Vice President for Research at the University of Michigan, has
stated ``People at the University have enormous ability to grow
new materials at the nano scale and bring new products to
market.''
We have also received ARRA funding for our business
assistance program at the University of Michigan. We are
working with Michigan manufacturers, over 100 of them. We are
going into several years of our work and of companies that we
have been working for more than a year, 24 percent have
actually added employees during this economic environment. So
here you have a university that is working with private sector
companies to help them diversify, help them create new jobs and
hire new people.
As this Committee considers the reauthorization of EDA,
there are some modest proposals that we would like to make on
behalf of the University Center program that we think will
increase its effectiveness. There are just over 50 EDA
University Centers but there are eight States, including the
District of Columbia, that do not have University Centers. This
should be rectified. All States should have access to this
important program.
University Centers have been receiving an average of
$125,000 a year in Federal funding for over 20 years now. We
think that it is high time that that amount be increased. We
know we are not Appropriations here, but we would like to
recommend that that amount be increased to $250,000. Another
thing that EDA might consider that would help the University
Center program is to reduce the local cost match, or the
university's responsibility from a one to one to an 80-20,
given the constraints on the higher education system and
universities economically.
One final thing that might help the program, currently we
have to undergo a competition every three years, which means
every University Center only has a funding cycle for three
years. We think that a five year cycle would be more
appropriate. We even think that reverting to a peer review
process that we had prior to the last Administration, which
worked very effectively in the higher education system might be
a model to look back upon that would make the program more
effective.
Certainly, the economic security, national security, global
competitiveness of our Nation are increasingly bound with the
higher education system, with colleges and universities and
community colleges. We are undergoing a fundamental economic
transformation as we know, from an industrial economy to a
post-industrial economy. Again, that is where the universities
play a role with new inventions, new technology, and producing
class after class of well-educated, eager young people who want
to contribute to our economy and want to play a role in our
Nation and its global competitiveness.
In closing, I think the EDA is essential to our economy
moving forward. The University Center program is an important
program within EDA. We think that it can be enhanced and
improved. But most of all, we support the reauthorization of
EDA and will continue to do that. I am speaking broadly for the
higher education infrastructure in the United States. Thank you
for the opportunity to testify.
Ms. Norton. Thank you very much, Mr. Molnar.
Mr. Newcomb, of the Dorchester County Council.
Mr. Newcomb. Thank you, Chairwoman Norton and Members of
the Subcommittee.
Thank you for this opportunity to testify on behalf of the
Dorchester County Council and the citizens of Dorchester
County, Maryland, on the lessons learned from the Recovery Act
and new plans to strengthen economic development.
Dorchester County is shaped like the heart of the Eastern
Shore. And with this money, it has kept our county growing. It
is a great project. We have been awarded in this from EDA, to
spur growth and prosperity, a $3 million grant. This will lead
the Federal economic development agenda by promoting innovation
and competitiveness and preparing American regions for growth
and success in the world-wide economy, as was stated by
Assistant Secretary Fernandez.
Dorchester County has 1,500 miles of shoreline. It is one
of the largest land/water masses in Maryland, nearly 600 square
miles of land and 70 square miles of water. The County has
currently 790 businesses employing 9,460 workers, of which
approximately 12 percent of these businesses have 100 workers
or more. We have been traditionally dependent upon food
processing, light manufacturing and high tech assembly to fuel
the economy. Now since the recent downsizings and offshore
manufacturing trends that caused a major loss of jobs. Even in
times of economic boom, we have lost our economic growth.
Current unemployment is 12.1 percent as of December 2009.
Between 2007 and present, Dorchester County with its
population of 30,000 has lost nearly 1,000 jobs. With this EDA
grant award, the County will now be able to diversify its
industry mix to include value-added agriculture, innovative
aquaculture and high tech manufacturing. We also have existing
companies that are working on green initiative sand bio-mass
projects
As an elected official, I can testify first-hand that
successful economic development is achieved by investing in
local economic, human and physical infrastructure. The recent
2009 American Recovery and Reinvestment Act funding awarded to
Dorchester County to develop the new technology park will be a
great spur in growth and prosperity, not only county-wide, but
regionally. The use of these funds will serve as a major
catalyst for implementing economic strategy and career
awareness beginning at our elementary level through high
school.
To prepare the youth of our community for jobs, Dorchester
County recently approved local funding to build a new Career
and Technology School in joint venture with the State of
Maryland, which is another $32 million project. One we got the
money for this tech park, we feel as though the Technology
School would be a big asset. This will also ensure growth of
our own industry leaders as well as attract new talent to our
county. Additionally, college-bound students will have another
opportunity to receive career training in technology, because
we have Chesapeake College, which is also in my home town of
Cambridge, and another one in Wye Mills.
We are also in a joint venture with Germany, with a new
prospective opportunity for international companies coming to
Dorchester. Also, the Federal funding we got from the Federal
Government helped create a fiber optic superhighway through the
NASA facility on Wallops Island through the Eastern Shore and
Southern Maryland will increase the potential of our technology
park. Also, we have the Maryland Department of Environmental
Science, at Horn's point, which is great for our oysters, which
is a great thing for Maryland the Chesapeake Bay, to try to
develop a disease-free oyster and the expansion of our crab
industry. And also with this money and tech park, the FAA has
given us money to extend our runway at our airport, which is
just adjacent to the new technology park.
Also, we have the Hyatt Regency golf resort in Cambridge,
Maryland, which has brought a lot of business and guests and
tourism to the county, which we are greatly known for. Also, we
are now starting, with Federal and State help, the Harriett
Tubman Park and Museum, which will be in Dorchester County. And
you talked earlier about the things we do with the oyster, like
I said, the Department of Science at Horn's point is going to
try to do the disease-free oyster.
Green industry, also, we have a company looking at power,
taking our chicken manure and our tree waste to generate
electricity. The job at the tech park we will are going to be
bid, hopefully within a couple of weeks. We have gone through
all the studies and all the environmental, everything is ready
to go. We are to get the proceeds to start the project by May
15th. So this is a shovel-ready project.
Also, we were talking about jobs, we just now went to a bid
on a landfill cell. We got 20 bidders for that one landfill
cell. So that shows how much we need these jobs, if we had that
many bidders to bid on just the expansion of our landfill. We
feel it will help create jobs in our county.
Again, Ms. Norton, thank you for letting us speak today in
regard to the lessons learned from the Recovery Act. If you
have any questions, I would be pleased to answer them.
Ms. Norton. Thank you, Mr. Newcomb.
And finally, Mr. Michael Norton, of the Northwest Arkansas
Economic Development District and also representing the
National Association of Development Organizations. Mr. Norton?
Mr. Michael Norton. Good afternoon, Chairwoman Norton,
Ranking Member Diaz-Balart and Members of the Subcommittee,
Congressman Carnahan and Congressman Michaud.
My name is Mike Norton. I currently serve as the President
of the National Association of Development Organizations and
Executive Director of the Northwest Arkansas Development
District, an EDA-designed economic development district,
serving nine counties in the northwest corner of the State.
Thank you for the opportunity to testify in support of a multi-
year reauthorization bill for the Economic Development
Administration.
I will limit my remarks to four main points. First, EDA has
a proven track record of helping its local partners create and
retain high quality jobs in distressed areas, including those
suffering from chronic poverty, economic dislocation caused by
plant closures or downsizing, natural disaster or changes in
the global economy. This has been reinforced with the agency's
recent performance in making sound use of its $150 million in
American Recovery and Reinvestment Act funding and $500 million
in post-disaster recovery assistance.
In reauthorizing the agency, we encourage the Committee to
restore the local match rates for distressed communities to at
least the pre-2005 agency rules changes. This is one of the
most important legislative fixes needed to help the agency
serve distressed areas.
Second, Madam Chair, we urge Congress to strengthen local
control of EDA's Revolving Loan Fund program. The RLF program
is a proven economic tool for addressing the credit needs in
under-served areas. RLFs are managed by public and private non-
profit organizations to further local economic development
goals while lending their capital and then re-lending funds as
payments are made on the initial loans. Local management of
Revolving Loan Funds have provided businesses capital to
thousands of new and existing companies that have difficulty
securing conventional financing.
Over the years, EDA has provided grants to nearly 600
revolving loan funds, 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 interest derived from
it is considered Federal property forever. RLF operators must
comply with expensive and burdensome reporting requirements
forever, including my own, which began operating in 1978.
Ownership of EDA's RLF should be fully transferred to local
intermediaries once all the initial funds have been loaned out,
repaid fully, revolved.
Third, NADO's members urge Congress to increase the minimum
funding level for EDA's partnership planning program from $27
million to $34 million. This 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.
EDA's planning program provides matching fund to multi-
county organizations, such as the Northwest Arkansas Economic
Development District, to help local governments and others work
together on a regional basis to develop solutions, partnerships
and strategies for addressing regional economic development
issues. EDA's on-time project completion rate, high rate of
leveraging private sector investment and impressive job
creation statistics are directly tied to the groundwork and
planning that precedes project development and implementation.
Finally, there is a need to provide new incentives that
foster regional partnerships among local governments, private
industries and educational and non-profit institutions. While
the 2004 EDA reauthorization bill established two new
performance award programs, these initiatives are very limited
in scope and have demonstrated little impact.
EDA would benefit from broad, more aggressive policy
incentives and approaches related to the regional economic
development collaboration and cooperation. Congress is urged to
build on the existing national network of economic development
districts, regional development organizations, council of
governments, local development organizations, whatever you want
to call them, to facilitate and encourage collaboration among
regional development.
Madam Chair and Members of the Committee, thank you again
for the opportunity to testify today. I would welcome any
questions or comments.
Ms. Norton. Thank you very much, Mr. Norton.
I am going to ask Mr. Newcomb a question, then I am going
to go to the Ranking Member and the other Members before I ask
further questions. We are particularly interested in your from
the ground, on the ground reports to us as we try to be
responsive in a reauthorization.
It is Mr. Newcomb who has ARRA funds, isn't that correct?
Mr. Newcomb. Yes, ma'am.
Ms. Norton. Did you have any EDA fund before this funding?
Mr. Newcomb. No, ma'am, not for this project.
Ms. Norton. What?
Mr. Newcomb. Not for this project, no, ma'am.
Ms. Norton. Not for this project, but the jurisdiction did
have it?
Mr. Newcomb. Yes, ma'am.
Ms. Norton. Now, I am trying to test the leveraging effect
of funding. Is this technology park that drew that funds, and
you got them competitively, is the entire $3 million grant that
your county, Dorchester County received for the technology
park?
Mr. Newcomb. Yes, ma'am. It is going to be for the
infrastructure inside the park, water and sewer, streets and
some of the infrastructure for the water and sewer from
existing city limits to our tech park.
Ms. Norton. Was there any non-Federal share?
Mr. Newcomb. Yes, ma'am. The county bought the land, the
State bid a project with this, we are dealing also with the
FAA. We have a rail line involved. So we have several different
agencies, and yes, the locals did put a lot of money into it.
Ms. Norton. Do you have any sense of what is the entire
package for this technology park?
Mr. Newcomb. If I could ask Ms. Keisha, she is with me,
could I just ask her, please?
Ms. Norton. Is there staff who knows? There is $3 million
from----
Mr. Newcomb. That is from EDA, yes, ma'am.
Ms. Norton. But I don't have a sense of----
Mr. Newcomb. This is our economic development person. She
can tell you exactly.
Ms. Hayth. If I may, do you mind if I come to the podium?
Ms. Norton. Yes, surely. You have to give your name.
Ms. Hayth. My name is Keisha Hayth. I am the economic
development director for Dorchester County. It is an $8 million
project.
Ms. Norton. Eight million dollars.
Ms. Hayth. Yes, $8 million total. We have, local share is
about $2 million, USDA commitment of $1.7 million and State
commitment of $1.7 million as well.
Ms. Norton. What is the private sector involvement, if any,
in this project?
Ms. Hayth. Well, the private sector involvement will be,
once we sell the lots in the technology park, that involvement
will be about $40 million, I believe.
Ms. Norton. And because of what? What is the technology
park?
Ms. Hayth. The technology park will be an area, it is 113
acres where we have 14 lots divided to sell to individual
businesses, to develop their own business.
Ms. Norton. Why would they want to develop a business in
Dorchester County?
Ms. Hayth. Because we have the available labor force, we
are growing our technology base right now. We have commitments
from the University of Maryland, Horn Point Lab, where they do
research studies on the Chesapeake Bay. So we have a niche,
currently, that truly supports technology businesses in
Dorchester County.
Ms. Norton. So you see from $3 million we can yield a $40
million technological park with of course State and local fund
also involved. But all told, that is still just $8 million.
And jobs, would you say there is an available workforce
with the skills to do the jobs that these technology companies
would come? They are not coming unless there are some folks who
can do it and have shown they can do it. They are going to stay
close to the University of Maryland, they are going to stay up
here near where D.C. is unless you show them there is a
workforce that is trained to do it.
Mr. Newcomb. Yes, ma'am, and also we have had very much
interest from even outside of the D.C. area, people who are
interested in relocating. We had a gentleman who was in the
office yesterday who was very excited about the tech park and
can't wait until it is done.
Ms. Norton. What we are looking at, I think, is not only
the leveraging, or listening to is not only the leveraging
effect of a little bit of money. But we are looking at how
business looks to where it should go. It is looking for labor
that doesn't cost as much as around the University of Maryland,
for example, which is helping you as well here. And these areas
precisely because they have had persistent development
problems, if they can produce the workforce, have a much better
chance that those closest to home here do of getting those
jobs.
I am going to go to Mr. Carnahan and ask him if he has any
questions for this panel.
Mr. Carnahan. Thank you, Madam Chairman, and thanks to all
the panel. I want to direct my remarks to county executive
Dooley and again welcome him and his team from St. Louis.
The St. Louis region, like many others, has been hit with
this economic recession. I have been working with other elected
leaders like yourself, business community, labor community, to
put together a regional economic plan that links together some
of our Federal initiatives, State initiatives, local
initiatives and the private sector, to continue to help our
region to grow. The Federal initiatives have been a key
component of that. EDA has been a long-time and strong partner
to leverage this private investment that we need so much now to
grow jobs.
I do have concerns, as the Chairwoman expressed, about the
lack of a reauthorization and about the decrease in funding
that has come from the Administration. I want to really
compliment you being here on behalf of International Economic
Development Council, and really the points that you raised in
your full written testimony, number one, in terms of increasing
funding, Chairwoman Norton and I sent a letter out supporting
increased funding, like the Senate Committee had put out $500
million for EDA.
I think that is very important in these tough economic
times, augmenting EDA staff, positioning EDA as a lead
organization for economic recovery following disasters,
reviewing the definition of distressed communities to assure it
is up to date with today's economic realities. And also, I
think of particular importance in these economic times,
lowering or weighting the local match requirements. When some
of this money is laying around and communities may be short or
struggling to come up with those local match dollars, now is
not the time to be holding that bar too high, so communities
and projects can't reach these funds that are already out
there.
So again, I just want to say thank you for the work that
you have done locally. And give us a sense of how you think
some of these changes that you have presented here today and
that the organization, the International Economic Development
Council, have presented, how do you think those would impact
the St. Louis region and St. Louis County in particular, where
you serve as county executive?
Mr. Dooley. Thank you very much, Congressman. I think that
is a good question. Let me say by frameworking that, St. Louis
County is the largest county by population in the State of
Missouri, 1 million people. So we look at ourselves as the
economic engine of the State and the region. If St. Louis
County does not do well, we believe it has a negative impact on
the entire State.
So I believe the State and the region look to St. Louis
County for leadership in creating jobs and opportunity for our
community. If we look at the MET Center, for example, for the
displaced workers and disenfranchised workers, how do you get
people back to work? We believe people want to work. But they
need work that is meaningful and they can support their
families. The MET Center is doing just that.
EDA money, we believe, is seed money which has actually
been talked about earlier, it is just a small bit of money that
can make a big difference in people's lives. When you talk
about the World Wide Technology Company, in the early 1990s,
they borrowed $200,000. And today they are the largest
privately-held company, minority-owned, in the Country. That is
tremendous success. That is the type of success we are looking
for.
We are talking about now, when the Assistant Secretary was
in St. Louis on last week, about the closure of the Chrysler
plant, they granted us $1.575 million. Our match from the
State, from county and from the city of $575,000, that is going
to leverage us to how we can best use 295 acres of land, which
is probably about 5 million square feet of space. That is a lot
of space, Congressman.
Additionally, an additional 2 million square feet in
supplying space. So we have a great opportunity to move our
community forward. What is best is we can create those green
jobs for the future, but we need jobs today. We are talking
about the incubator specifically for green jobs. So that is an
opportunity.
And working closely with Washington University, which is
one of the top five universities in the country when it comes
to green technology and opportunity. So it is a great resource
opportunity. The plant and life science down at Danforth Place,
we are going to be partnering with them as well, another
opportunity at creating real jobs for real people right now.
And one of the things I think that was most satisfying to
me, when you go to some of these centers' ceremonies and see
those individuals graduate, and then Washington University is
right there to say, I have a job for you, that is tremendous.
They have hope, but they have a real job, real success and that
can make a difference in our community.
Mr. Carnahan. Great. Thank you very much, and thank you for
the work that you do with me and my office and our leaders
throughout the St. Louis region.
Mr. Dooley. Thank you, sir.
Ms. Norton. Mr. Michaud?
Mr. Michaud. Thank you.
I, too, want to thank all of you for coming out this
afternoon to give your testimony. I look forward to working
with you as we reauthorize EDA's programs. My question is, and
we heard Mr. Fernandez earlier when I asked a question about
the requests out there, that he said that they got requests for
approximately $1.7 billion, not saying that all $1.7 billion
would actually qualify, but that is what the request was.
What do you think that we should authorize the funding
level for EDA, having been involved in this type of work for
some time? What do you think would be the appropriate level?
I will start with Mr. Dooley.
Mr. Dooley. Again, we have asked, in my statement earlier,
for $500 million, but if they actually were going to give us
$1.7 billion, let's take it all. Can you imagine what we can do
with $1.7 billion, when what we have done with just the little
smidgen that we have right now? We could really make a
difference, and we are talking about jobs and opportunity for
our Country.
I mean, I think that is a wise investment. It is about
investing in ourselves, and I am all for it.
Mr. Molnar. From the higher education perspective, we get
about $7.1 million, $7.3 million a year annually to support
these 50 or 53 universities, each getting $125,000 a year. If
you tripled that, just in the University Center Program, the
return on investment would be tremendous. So I think that is an
entirely appropriate figure, especially given the discussion
of, Madam Chairman, in this budget relative to other huge
agencies. And when you look on a performance basis, you know,
we are getting a lot of bang for our buck.
Mr. Newcomb. Yes, with the infrastructure of this, I mean,
this project has been going on now for like eight years, so now
with this final stage of money from all the agencies put
together, we finally can make this project reality. And we
would also like the next phase to probably have an incubator
put in one of the lots, on our lot that we still own as a
county, to help get up and going the companies to expand into a
tech park.
So all the money, additional money, whatever you all can,
we would be glad to get more of our percentage of it.
Mr. Michael Norton. Well, regional development
organizations, of course, are asking for $34 million. They had
an increase in 2004 of $10,000 per district, the first increase
for the 378 organizations since 1972.
Now, the public works projects, I think if you look at the
$150 million that came through the American Recovery and
Reinvestment Act and also the $500 million that was post-
disaster, that was put out the door pretty quickly. That was
because EDA has a delivery system which is the regional
development organizations.
In a survey that we have done recently, with just one-third
of the member organizations responding, we are looking at $1.3
billion, $1.5 billion in potential projects. EDA's investment
in that, for $235 million, could have a return of an additional
private leverage of $4.77 billion. So there is a good return on
the investment. There is a delivery system in place.
So if you put the money out there, we will find projects
for it.
Mr. Michaud. Thank you. And it does sound like it is a very
good return on investment.
My next question, if you look at a lot of the programs at
EDA, and we heard Mr. Fernandez talked about mill closures and,
you know, industrial parks and training, retraining of
employees, that deals with job loss. Part of it is because of,
you know, unfair trade policies or other unfair policies.
I guess my question would be for Mr. Dooley or the other
three, if you can respond, looking at your organization, you
said you have members in six different continents and primarily
most in the United States. Rather than, you know, spending
money to help create jobs, which I think is very important, but
I also think it is important that we keep what we currently
have. Have any of your organizations, and I will start with Mr.
Dooley, focused on some of the reasons why we are losing some
of the jobs? And can we actually probably focus on how we can
keep those jobs, as well as create new jobs?
A good example, although it is not EDA, is at the
Department of Commerce, there has been a group that has
actually asked the Department of Commerce to investigate
China's currency manipulation and unfair subsidies in coated
paper, and what that is going to do for the paper industry here
in the United States.
Have your organizations looked at what you might be able to
do prospective to help prevent loss of jobs, versus just trying
to create the jobs that are not there?
We will start with Mr. Dooley.
Mr. Dooley. Well, Congressman, that is an extremely good
question. Let me start by saying this. First of all, we looked
at we are in a global competition, and not just a regional
competition or a State to State competition. It is a global
competition, how to retain those good-paying jobs, how can we
be competitive.
And one of the things we looked at is our costs of labor,
our cost to do business, our tax structure, our skilled
workforce, our quality of life. All those things attract
business and opportunity for our community.
So you just can't work on just one front. It is many fronts
you have to work on. It is about, for example, how do you
attract young people to your community? St. Louis metropolitan
area have great universities, Washington University, St. Louis
University, University of Missouri-St. Louis, a lot of great
opportunities for talent to come to St. Louis, but how do we
keep those young people there?
And one of the ways we think about is an entrepreneur
program. We have three incubators about ideas, young ideas,
fresh ideas. If you have an idea, we want to support you. We
want to mentor you. We want you to be successful. But we have
to create an activity, an excitement about what is going on in
our community. If you create that excitement, that possibility
that if you have an idea you can make a difference, we believe
that is the first step in moving our community forward.
But we have got to have that excitement about what is going
on. We have got to have that competitiveness. We have got to
have that skilled workforce, that quality of life, the tax
base, all those things works on concert that make sense, and
have appropriate incentive programs for businesses as well to
keep them there. Sometimes other areas of the States, of the
Country has incentives that we have to adjust to. We have to
deal with that as well.
So it is a combination of things. It is a very difficult
thing, but we believe we are up to the task, given the right
tools. EDA is one of those great tools that we have to work
with. It can make a difference not only in attracting
businesses, but keeping the existing businesses there, but
encourage them to expand their base.
Thank you.
Mr. Molnar. Four things in the higher education system.
Number one, helping communities retain what they have. EDA is
funding the University of Michigan. We are partnered with Ohio
University, Cleveland State, and Purdue University, working in
Michigan, Ohio, Indiana, Illinois, Wisconsin and Minnesota in
plant closing communities.
So EDA is in about 50 communities with a program that
universities are involved in, helping these communities find
their way back to economic health.
Second of all, the trade impact. Although not authorized by
this Committee, it is Ways and Means, but there is the Trade
Adjustment Assistance Program for firms and now for communities
that EDA is funding. So that is a response to adverse economic
impacts of imports. So there is a program there.
The program I mentioned in Michigan, where almost 24
percent of the companies that are in the program, is modeled on
the Trade Adjustment Assistance Program. So almost 25 percent
of those companies are adding new jobs based on the Trade
Adjustment Assistance model.
And then finally, many universities are involved in
business incubators. I am the President of, and the University
of Michigan hosts, the Michigan Business Incubation
Association. So we are there for that.
EDA is currently funding my university to do a national
study of business incubation. We are studying hundreds of
incubators to correlate best practices in incubators with the
success of the companies once they move out of the incubators.
So what do you do in the incubator that makes the company
successful later on?
Mr. Newcomb. Just Monday, I went to Baltimore. We had a
seminar with Senator Mikulski and Senator Ben Cardin, and the
topic was, Save Small Businesses: What can we do to keep the
business in our community? Just like J.M. Clayton has been
there, a seafood processing plant that has been there for over
100 years, and he was at the seminar, what can you do to help
me? You give all these tax breaks, incentives to new companies.
What can you do for me?
So a major topic on one of our agendas coming up, meetings,
and try to meet with the local business that has been here for
so many years. And that is a problem. When kids graduate, they
go. We do not have good jobs there. That is why I am hoping
with this tech park and a new school of technology we are
building, hope we can keep our young people stay there and grow
and make some businesses, and also keep our old businesses.
Mr. Michael Norton. Workforce and capital. And I would
probably go back to the Revolving Loan Fund when we talk about
capital. When the Revolving Loan Fund was created in 1978, it
was intended to encourage financial institutions to inject
money into more risky projects or startup businesses or job
growth expansion of businesses.
Well, in today's world, where you have more non-traditional
type loans, you have college incubators, but the ones coming
out of these that you are trying to fund in many cases are like
I.T., software development, robotics. And those are the things
that we are trying to fund through RLF, but they are not
traditional. They don't bring brick and mortar collateral. So
the financial institutions have a real difficult time
partnering.
Well, in the RLF loans, in many cases, you are required to
have a portfolio 50-50 with a financial institution. It makes
it very difficult. And we really want the technology-type jobs
in our area. That is where we need to grow the jobs. And we are
also working, in addition to that, to workforce. We need a
workforce that is with the university systems, is trained or
has the ability to be trained.
Mr. Michaud. Thank you, Madam Chair and Mr. Ranking Member,
for having this. I really appreciate your commitment to
economic development and creating jobs and keeping what jobs we
currently have. So thank you very much, Madam Chair.
Ms. Norton. Well, thank you, Mr. Michaud. In light of your
penetrating question about China and where some of this money
may have gone despite our best efforts, I was curious about Mr.
Dooley's Midwest China Hub and how it helps the region. When
you see China connected to something in the Midwest, which is
associated with jobs going the other way, you want to learn
more about it.
Mr. Dooley. Madam Chair, I would be glad to talk about
that. First off, we think that in St. Louis, we call it the
U.S. Midwest China Hub. We believe it is an opportunity for the
St. Louis metropolitan area, specifically the Midwest, not just
St. Louis, will be the hub, but the Midwest itself is the
gateway.
We hold the opinion that if we are talking about doing
business with 1.5 billion people, why not St. Louis? There is
an opportunity not only for the Midwest-China, but they have
got to do business with us. But even more so, it can help the
Lambert Airport, our metropolitan airport, as well, which is
right now is only operating at 45 percent of its capacity. We
have got to improve that opportunity as well.
Ms. Norton. So how would it work? So how does China get
into this mix?
Mr. Dooley. Well, again, China, I will give you an example.
We talked about, and some in our region, we said that if the
cargo goes to Chicago, there is a lot of delays, an hour delay,
two hours delays. Sometimes it is like 87, it is like it is 82
percent on-time. We are saying in St. Louis, we have the
capacity, that would not exist.
Ms. Norton. So this is important, because everybody knows
what it takes to go through Chicago.
Mr. Dooley. Yes.
Ms. Norton. Now, how do you get China or companies that do
business with China, let's say Wal-Mart. God knows it does a
lot of business with China. How do you get Wal-Mart to assist
the St. Louis area by bypassing Chicago? I would think that a
company like that would already know not to go to Chicago.
Mr. Dooley. The challenge on us is not getting the business
to St. Louis, but once they get there and unload, what goes
back.
Ms. Norton. Back to where?
Mr. Dooley. To China. Our goods and services, what do we
have that, if it is agriculture or if it is----
Ms. Norton. That you want to trade with China?
Mr. Dooley. They have to trade with somebody. It might as
well be with us.
Ms. Norton. Well, can you give me some examples of how the
Midwest China Hub has reversed the process so that you now get
China to buy stuff instead of our buying all of China's stuff?
Mr. Dooley. What we are saying is that if they having
delays in Chicago or some other airports, the delay would not
be in St. Louis. Right now, for example, China is not using
their own airplane. They are using foreign airplane. And
eventually, they want to use their own. If they use that, and
come to us, again, with initiative, they can come to St. Louis,
unload their cargo there.
At the same time, St. Louis and the Midwest States can
guarantee things being sold, going back to them, if it is
agriculture or some kind of plants, things of that nature; low
technology or electronics. It can go back to them as well, and
it can be a two way street. It is not a one way street.
Ms. Norton. Is this in existence now? And if so, how long?
Mr. Dooley. Right now, we in the process of developing this
process, and we just got an EDA grant where we have the
opportunity to investigate it, to review it. Right now, we
hiring an individual to look at the world markets and see what
the possibilities are, and we will know something by November
of this year if it is possible to create that connection.
Ms. Norton. I wish you would share with this Subcommittee
what you find in November so that we can see whether or not
this is fruitful to be done in other China-stealing parts of
the Country as well.
Mr. Dooley. We believe, Madam Chair, that, you know, again,
you have got business on the East Coast and the West Coast, but
the Midwest is left blank. We believe it is a tremendous
opportunity. We call it a game change, the big idea.
Ms. Norton. Well, we will be very interested, so anything
in writing you get in November, please share with the
Subcommittee.
Mr. Norton, I want to get straight what, if anything, we
can do about this Revolving Fund. And you have some of it in
your testimony. Now, you say that Revolving Fund in a business
deal encourages businesses because they know that they are the
lender of first resort in the event of a default. Now, part of
the reason that they feel so secure is this very paperwork. And
I want you all to indicate what the Subcommittee can do. It
might not even take a statute. It may take something less than
that.
But when they see the Federal Government in the picture,
they feel a certain level of security as well. From the field,
we hear, because they know we are watching, and they know we
require all this paperwork. And I am one who hates paperwork. I
think that is what gives Government a bad name. But I also know
that if there are issues, you saw the Ranking Member say, you
know, even when he saw a little bit of something that wasn't
going right, his job is to call it out.
So there is great reluctance to just say, here is some
money, you folks. And let's see if you will do the right thing
and we will monitor you a little bit. So I would like to hear
from any of you, but especially you, Mr. Norton, speaking for
the Association, if we were to adopt the proposal you put
forward of turning over the revolving funds after the first
round of repayment, how would that affect private investment?
How would that affect the private lenders? And how would that
aid the program? And how would that ensure that we wouldn't
have difficulties with the program?
Mr. Michael Norton. I think all that we were asking for is
that we not have to report twice a year with respect to it.
Ms. Norton. As opposed to what today?
Mr. Michael Norton. Well, we do report annually and
semiannually each year on our revolving loan fund programs.
Ms. Norton. So what would be different?
Mr. Michael Norton. Well, when it was originally developed,
we received a grant, our organization, I will speak for the way
that we did. In 1978, we received a grant in the amount of
$720,000. And we have taken that money and used it, loaned it
out, and they repaid it, and we would re-lend that money back
out.
We have made since 1978 more than $4 million worth of loans
with that initial seed capital.
Ms. Norton. With that little bit of money. Yes.
Mr. Michael Norton. And that program has now grown to about
$850 million nationally. So it is not that we are not going to
be responsible or that it is not going to meet any of the
Congressional requirements. The issue is taking the time to
report and having to comply.
We would ask that it be more flexible because we do need to
fund more non-traditional type loans, those that don't bring
collateral.
Ms. Norton. Well now, why wouldn't the Federal monitors let
you do that?
Mr. Michael Norton. Well, right now, we work with the
financial institutions to try to make loans and encourage them.
Now, if we take a second position, obviously, they are going to
take a first position, and so we are not as protected. So if we
make a loan, in many cases, in a first position, we have a
better investment than we would working with a financial
institution.
But that is where the types of jobs creation, and that is
what we are talking about. We are not talking about traditional
loans. We are talking about trying to create jobs. We are
talking about trying to expand jobs within our regions. And we
are certainly not going to let that money get away. Because if
they don't pay it back, we can't re-loan it or lend it back out
again, and it affects our portfolios.
Ms. Norton. I wish that all of you would submit proposals
for streamlining that we could sell, so that we could assure
all of those concerned when there is Federal money that goes to
localities and to States and to Economic Development Districts
that there is no risk to the private sector or to the
government, because I am very interested in--I think paperwork
starts because bureaucrats are risk-averse.
Now, when you have had a program that is going on this
long, it does seem to me there ought to be some basis, at least
for some who have been involved in the program, maybe there is
a way to get it or to graduate to it. I just don't know. But
anything you could offer, Mr. Norton, or any of the rest of
you, would be very useful to us as we go to reauthorization,
because this is a constant concern from the field.
Mr. Michael Norton. We will do so.
Ms. Norton. Mr. Molnar, I had a question for you on these
university centers. They don't cost the Government a lot. And
you are from the University of Michigan, isn't that correct?
Now here, this is one of the great public or private
universities in the United States. And I am trying to find out
how a little community somewhere in Michigan, which sends very
few students to the great flagship university or even perhaps
to some of the other universities in the State system, how you
are able, you are doing a study of the whole darned thing for
the Government.
But I would like some indication of how you are able, with
your extraordinary global status, to somehow reach to
communities which have very little to do with the flagship
university.
Mr. Molnar. It is a good question. I will give you a good
example. We have just finished up a study. We do a lot of work
with business incubation on campus. We do what we call market
and feasibility analyses. First of all, is there a market for
what we are proposing to invest in? Is there enough of a
critical mass of entrepreneurs in the region so if you open the
door, they would come and who would they be and what do they
need? Second of all, is it feasible to meet that demand?
So we survey hundreds and hundreds of entrepreneurs, home-
based businesses, spinoffs from existing companies, to make
sure that there is a need for----
Ms. Norton. Now, where do you get the money to do that?
Mr. Molnar. EDA often funds that.
Ms. Norton. So all of that comes from the EDA.
Mr. Molnar. Not all of it. No, the community chips in.
Rural Development at USDA chips in a little bit. EDA will chip
in a little bit.
Ms. Norton. Because in return for that, you are helping
them to target where the money does the most good.
Mr. Molnar. Exactly. We just finished a study up in Clare,
Michigan, which happens to be Senator Stabenow's, our
Senator's, home town. We identified a critical mass of about 55
entrepreneurs who said if you open the doors today, we would be
there.
We are going to EDA now for the $1.3 million it is going to
take to acquire an existing facility and revitalize it. In the
meantime, we are helping the community identify lawyers and
accountants and people with packaging, marketing, distribution
expertise in the region that will help that group of companies
who's going to have to wait a couple of years until the doors
are open, but they are ready to go right now.
So we are in effect building a program for them, and
basically handing it off to them, giving the tools that they
need to run it themselves. And I am doing that in five rural
communities in Michigan as we speak.
Ms. Norton. Now, how much funding do you get from the EDA
annually?
Mr. Molnar. One hundred sixty-three thousand dollars.
Ms. Norton. And how much is your total budget?
Mr. Molnar. It is double that.
Ms. Norton. And that comes from where?
Mr. Molnar. That comes from the university.
Ms. Norton. So the university, having seen the EDA put in
its $160,000 or so budget, feels that it is worth it to
actually put university funds into this pot, and that is what
enables you to do it.
Mr. Molnar. Yes.
Ms. Norton. And of course, that means that is a lot of
State funds, too, I guess as well.
Mr. Molnar. There are some State funds, but Michigan is in
dire straits economically, so we try to survive on our own
resources and what we can leverage.
Ms. Norton. So the university feels it important enough to
take it right out of university funds.
Mr. Molnar. Absolutely.
Ms. Norton. Not in extra State funds to the university.
Mr. Molnar. Right.
Ms. Norton. This is very important to know, because this
leveraging shows even here.
Mr. Molnar. Sure. And this is going, you know, across the
United States, the 50 or so centers. And we would like to see,
as we said, one here in the District and then the other eight
States that don't have them.
Ms. Norton. Yes, don't think I am not listening.
[Laughter.]
Ms. Norton. Peer review. Make me understand. I am still a
tenured Professor of Law at Georgetown. So I only know peer
review when it comes to how things get measured in the
university community. But I was confused when you said the
three-year funding cycle makes an unstable environment, but it
used to be peer review. So what was it like in funding,
competitive funding, but funding from the Federal Government,
who was the peer reviewer? How does that work as opposed to the
three-year funding cycle that you are involved in now?
Mr. Molnar. Right, right. I was involved in a number of
peer reviews of other institutions, a representative, a
university center director from another university center
within the region, the Chicago region in my case, so the
University of Minnesota might come down to the University of
Michigan; a university center director from a State other than
Michigan or outside the region, so maybe somebody from
California would come in; somebody from the regional office in
Chicago, and often somebody from headquarters here at EDA.
It would be a two-day review. The first day would be in the
office looking at clients and what have you. And the second day
would be going out and actually making site visits and what
have you. And at the end of that, a two or three-hour session
where we would go down and we would actually grade and rank the
performance. Usually, we would meet with university officials,
the president or the provost. And from that, there is always
room for improvement, so we would always leave them with
something that we thought that they could work on.
Ms. Norton. Well, how does the funding work? If you are
funding now on a three-year cycle, does that leave something up
in the air, because then you have to come back to continue it?
I just don't know how that works.
Mr. Molnar. Well, if it is a three-year cycle, when you get
the 18-month point, you are going down hill and so you have
only 18 months of assured funding. As you know, economic
development takes a little--you know, it takes a little bit of
time to come to fruition. So are you really going to make a
commitment to a community when you have 18 or 12 months left
and don't know if you will be able to finish out the project?
So we think continuity is an important thing.
Accountability is, too, so through the peer review process, if
you make a determination that this program is not performing
the way it should be, maybe they have six months or 12 months
to get it in order. And if it is not up to par, then the
funding should be----
Ms. Norton. Oh, the peer review occurs every what--used to
occur. See, I am asking about this because apparently that is
the way it used to be.
Mr. Molnar. Yes.
Ms. Norton. Was it----
Mr. Molnar. Every three years.
Ms. Norton. Why was it abolished?
Mr. Molnar. It was a decision made by the prior
Administration when they were in the leadership at EDA.
Ms. Norton. Do they give a reason?
Mr. Molnar. Well, competition is a good thing and we agree
competition is a good thing. We compete all the time with NSF
and NIH grants. We are used to that. But we are not just a
project. This is an ongoing program where we develop
relationships and networks and make commitments. And if you
don't have the time to do those and you are doing a good job--
--
Ms. Norton. But they may be interested in making sure that
more entities get the funds.
Mr. Molnar. And we think that that is a worthy goal and we
support if 100 percent.
Ms. Norton. So do you think the five-year notion is better?
We get the notion of competition, and that above all, we are
for competition given these grants and how little money there
is. Do you think a five-year period as some kind of compromise
would----
Mr. Molnar. It would be a great improvement and we would
support it.
Ms. Norton. Could I ask Mr. Diaz-Balart if he has any
questions?
Mr. Diaz-Balart. Thank you, Madam Chairman. No more
questions.
Ms. Norton. I think I have really only one more question.
It is really for Mr. Dooley.
And that is, to ask you if EDA has been of any help in the
shutdown of the Chrysler plant in Fenton. You were one of those
communities that suffered very substantially.
Mr. Dooley. Yes, Madam Chair, they have. They have given us
a $1.575 million grant. The State has given some money as well,
and the City of Fenton has given money, and St. Louis County
has given money, totaling $2.1 million.
Ms. Norton. For use how?
Mr. Dooley. That is to be used to how best to market and to
use that existing space of 295 acres of land.
Ms. Norton. Are you finding a way with all of that land----
Mr. Dooley. Trying to figure out a way.
Ms. Norton. And in this economy, this is such a big
mountain to climb. You suffered such a huge loss. This quick,
could you fill that space?
Mr. Dooley. The idea is----
Ms. Norton. Some kind of park or divide it up or----
Mr. Dooley. That is what the money is for is to figure out
what is the best use. But here is the critical problem is if we
sit on our hands and do nothing, nothing will happen. We are of
the opinion we have to start doing something in order for
something to come to us. That is key.
Ms. Norton. Well, let me tell you why I believe in that.
The land is cheaper, labor is cheaper than I hope it ever will
be again. We saw part of the District of Columbia clear out
when the District of Columbia went into some real decline in
the end of the 1990s because it was carrying State functions
and it was the only city in the United States carrying State
functions. It got to be too much for it, and all kinds of the
Federal Government didn't put any money in, but a whole
reorganization of the way things were done, and the city has
been really quite better off than many cities for that matter.
But as a result of that, lots of people began to move out
of the District of Columbia. We now have our population rising.
Why did it rise and what happened as a result of this terrible
period when people were moving out? Well, over in the lowest
income area of the city, you had old plots of land just like
the land in Fenton, where nobody would do anything on. And
there is would lie there. We never thought we would see Ward 8,
as we call it, ever come back because there is that cheap land
over there. There are all these dwellings that nobody can do
anything with.
Lo and behold, almost all of the housing startups have been
in this lowest income area. And we used some of the funds for
mixed-use housing so that you have people in--single--we have
whole huge communities of single family housing. Some of those
people are subsidized. You wouldn't know who they are. They are
screened to a fare-thee-well, but they are right alongside
their more naturally funded middle class neighbors.
But what enabled us to do it with Fannie Mae, when there
was a good Fannie Mae, but remember, this is market-based
housing, except for what subsidies we put in, was that the
place cleared out.
So if you had some money when the place was gone, and you
are in business in a market economy, the first thing you do is
to look at that cheap land and at the fact that there is less
competition to get a hold of it, something of the kind that I
think is happening in Mr. Newcomb's area. You know, and because
they now have a labor force--in his case, it is jobs. In the
case of Ward 8, it was land for homes and for apartment
housing. We saw the area bounce back the moment there was
anybody with any money.
Mr. Dooley, you are very wise when you say, well, if you
don't act like you are going to do something with the area,
then nothing in fact is going to happen. I am going to get
myself a university center here real quick so that, Mr. Molnar,
somebody can help us with areas like to repeat what happened in
the 1990s very naturally.
Remember, the word is naturally. It is a market economy. It
doesn't need much help from you. There is money out there. Look
at what is happening on Wall Street. Everybody has come alive
there. Where are they going to put that money? Well, they are
not going to put it in the middle of the District of Columbia
or in the middle of New York City. They are going to look for
cheap land and a workforce that can do what has to be done. And
we are trying our best with some of the development funds in
the community, college funds, to make those two match up.
I will tell you what we are going to do. You see that we
have marvelous unity here on this Subcommittee about the worth
of this program. We sit on a number of agencies. You know, Mr.
Diaz-Balart and I sit on FEMA. You know, we had the worst of
the worst circumstances, and we have seen it come back. We sit
on GSA, a very complicated agency.
And recognize that EDA is small, more compact, but we know
this much, that doesn't account for why it is so efficient and
why we have this tremendous bang for the dollar.
So you can expect that this Subcommittee will proceed
forthwith, the fastest reauthorization. The Senate is already
looking at the bill, already has its own amendments, its own
version of the bill. It is not as if both sides are not raring
to go. I do not think that Democrats or Republicans can face
the people in 2010 with an outstanding EDA reauthorization. We
know where the people are. We know what they want. If whatever
money EDA has, I think I speak for you, Mr. Diaz-Balart, when I
say you have our commitment to do all that this Subcommittee
can do to get this bill reauthorized this calendar year.
Thank you very much. Your testimony has been most useful to
us.
We are adjourned.
[Whereupon, at 5:12 p.m., the Subcommittee was adjourned.]
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