Table Of ContentRENEWING THE ECONOMIC DEVELOPMENT
ADMINISTRATION: NEW APPROACHES TO
ECONOMIC DEVELOPMENT
Y 4. B 22/1:103-125
Reneuin) the Ecoaonic Developnent: A...
HEARINGS
BEFORE THE
SUBCOMMITTEE ON
ECONOMIC GROWTH AND CREDIT FORMATION
OF THE
COMMITTEE ON FINANCE AND
BANKING,
URBAN AFFAIRS
HOUSE OF REPRESENTATIVES
ONE HUNDRED THIRD CONGRESS
SECOND SESSION
MARCH 15, 17, and 22, 1994
Printed for the use of the Committee on Banking, Finance and Urban Affairs
Serial No. 103-125
AUG R <
RENEWING THE ECONOMIC DEVELOPMENT
ADMINISTRATION: NEW APPROACHES TO
ECONOMIC DEVELOPMENT
HEAKINGS
BEFORE THE
SUBCOMMITTEE ON
ECONOMIC GROWTH AND CREDIT FORMATION
OF THE
COMMITTEE ON FINANCE AND
BANKING,
URBAN AFFAIRS
HOUSE OF REPRESENTATIVES
ONE HUNDRED THIRD CONGRESS
SECOND SESSION
MARCH 15, 17, and 22, 1994
Printed for the use of the Committee on Banking, Finance and Urban Affairs
Serial No. 103-125
U.S. GOVERNMENT PRINTING OFFICE
77-352CC WASHINGTON : 1994
ForsalebytheU.S.GovernmentPrintingOffice
SuperintendentofDocuments,CongressionaJSalesOffice,Washington,DC 20402
ISBN 0-16-044544-2
HOUSE COMMITTEE ON BANKING, FINANCE AND URBAN AFFAIRS
HENRY B. GONZALEZ, Texas, Chairman
STEPHEN L. NEAL, North Carolina JAMES A. LEACH, Iowa
JOHN J. LaFALCE, New York BILL MCCOLLUM, Florida
BRUCE F. VENTO, Minnesota MARGE ROUKEMA, New Jersey
CHARLES E. SCHUMER, New York DOUG BEREUTER, Nebraska
BARNEY FRANK, Massachusetts THOMAS J. RIDGE, Pennsylvania
PAUL E. KANJORSKI, Pennsylvania TOBY ROTH, Wisconsin
JOSEPH P. KENNEDY II, Massachusetts ALFRED A. (AL) McCANDLESS, California
FLOYD H. FLAKE, New York RICHARD H. BAKER, Louisiana
KWEISI MFUME, Maryland JIM NUSSLE, Iowa
MAXINE WATERS, California CRAIG THOMAS, Wyoming
LARRY LaROCCO, Idaho SAM JOHNSON, Texas
BILL ORTON, Utah DEBORAH PRYCE, Ohio
JIM BACCHUS, Florida JOHN LINDER, Georgia
HERBERT C. KLEIN, New Jersey JOE KNOLLENBERG, Michigan
CAROLYN B. MALONEY, New York RICK LAZIO, New York
PETER DEUTSCH, Florida ROD GRAMS, Minnesota
LUIS V. GUTIERREZ, niinds SPENCER BACHUS, Alabanw
BOBBY L. RUSH, Illinois MIKE HUFFINGTON, California
LUCILLE ROYBAL-ALLARD, California MICHAEL CASTLE, Delaware
THOMAS M. BARRETT, Wisconsin PETER KING, New York
ELIZABETH FURSE, Oregon
NYDIA M. VELAZQUEZ, New York BERNARD SANDERS, Vermont
ALBERT R. WYNN, Maryland
CLEO FIELDS, Louisiana
MELVIN WATT, North Carolina
MAURICE HINCHEY, New York
CALVIN M. DOOLEY, California
RON KLENK, Pennsylvania
ERIC FINGERHUT, Ohio
SUBCOMMnTEE ON ECONOMIC GROWTH AND CREDIT FORMATION
PAUL E. KANJORSKI, Pennsylvania, Chairman
STEPHEN L. NEAL, North Carolina THOMAS J. RIDGE, Pennsylvania
JOHN J. LaFALCE, New York BILL MCCOLLUM, Florida
BILL ORTON, Utah TOBY ROTH, Wisconsin
HERBERT C. KLEIN, New Jersey JIM NUSSLE, Iowa
NYDIA M. VELAZQUEZ, New York MARGE ROUKEMA, New Jersey
CALVIN M. DOOLEY, California PETER KING, New York
RON KLINK, Pennsylvania
ERIC FINGERHUT, Ohio
(II)
CONTENTS
Page
Hearingsheldon:
March 15, 1994 1
March 17, 1994 45
March 22, 1994 87
Appendixes:
March 15, 1994 141
March 17, 1994 195
March 22, 1994 415
WITNESSES
Tuesday, March 15, 1994
Atkinson, Robert, Senior Analyst, Industrial, Technology and Development
F*rogram, Ofiice ofTechnologyAssessment 4
Croft,Thomas, Executive Director, Steel ValleyAuthority, Pittsburgh, PA 16
Dabson, Brian, President, Corporation forEnterprise Development 6
Kutler, John, President, Quarterdeck Investment Partners, Inc., Los Angeles,
CA 9
LeRoy, Gregory, Principal, GLRAssociates, Chicago, IL 10
Oden, Michael, Research Fellow, Project on Regional and Industrial Econom-
ics, RutgersUniversity 12
APPENDIX
Prepared statements:
Kanjorski, Hon. PaulE 142
Atkinson, Robert 145
Croft, Thomas 186
Dabson, Brian 156
Kutler, John 163
LeRoy, Gregory 171
Oden, Michael 180
Additional Material Submitted for the Record
The Midwest Center for Labor Research, "Industrial Retention: Proven Local
andState-Level Initiatives," submittedbyMichael LeRoy 174
WITNESSES
Thursday, March 17, 1994
Codey, Raymond, Director of Development, New Community Corp., Newark,
NJ 61
Glasmeier, Dr. Amy K., Associate Professor, Department ofGeography, Peim-
sylvama State University 49
Montgomery, Michael, Deputy Secretary for Business Development, Penn-
NPaeclsisyoolcnvc,aon,MiaaRroDybee,rptPa,rretEsmxieedencnuttt,oifvBeCeotDhimermelectNrocere,wMLiidfe-,EaCshitcaCgoom,miIsLsion, Washington, NC . 655486
Phillips, Ronald, President, Coastal Enterprises, Inc., Maine 52
Plosila, Dr. Walter H., President, Suburoan Maryland/Montgomery County
Technology Council 46
(III)
IV
Page
APPENDIX
Preparedstatements:
Karyorski, Hon. PaulE 196
Codey, Raymond 340
Glasmeier, Dr. AmyK 201
Montgomery, Michael 332
Nelson, Marv 328
Paciocco, Robert 406
PPlhoislililpas,,DRr.onWaalldteLr. H 210967
Additional Material SuBMnrED for the Record
Codey,Raymond:
New Community Corp., Development Department, 1993AnnualReport ... 347
"AgainstThe Tide,"The New CommunityCorp., 1968-1993 357
Phillips, Ronald L.:
Charts 215
Maine Small BusinessEconomic Conversion LoanPool "ARevolving Loan
Fund Proposal," submitted to The Economic Development Administra-
tionbyCoastalEnterprises, Inc., February2, 1994 222
Coastal Enterprises Inc., 1993AnnualReport 269
Various correspondence relatingtotheRevolving Loan Fund 296
Arkansas Enterprise Group, letter dated December 17, 1993, from Brian
Kelley [AEG], to Vicki Stein, Raporza and Assoc., re possible EDA
304
TheNepwrojYeocrtks Timesmagazine, Feb,ruary 13, 1994, "Lettersto the Editor" 413
WITNESSES
Tuesday, March 22, 1994
Atkinson, Dr. Robert, Senior Analyst, Industry, Technology and Employment
Program, Office ofTechnologyAssessment 97
Frisby, Greg, ChiefExecutiveGfiicer, FrisbyTechnologies, Freeport,NY 101
John, DeWitt, Director, Center on Competitive, Sustainable Economies, Na-
tionalAcademyofPublicAdministration 92
McManus, Patrick J., Mayor of Lynn, MA, representing the U.S. Conference
ofMayors 88
MUler, Paul, Planning and Development Director, City of Newport News,
VA, representingthe National Council forUrbanEconomic Development .... 94
RobMeDrts, Brandon, President, Brandon Roberts and Associates, Baltimore, 99
Wohlbruck, Aliceann, Executive Director, National Association of Develop-
ment Organizations 89
APPENDIX
Prepared statements:
Kanjorski, Hon. PaulE 416
Atkinson, Dr. Robert 470
Frisby, Greg 489
John, DeWitt 455
McManus, PatrickJ 418
Miller, Paul 459
Roberts, Brandon 484
Wohlbruck,Aliceann 423
Additional Material Submitted for the Record
Wohlbruck,Aliceann:
"The NADO Report on Reinventing Regions," published by National
AssociatonofDevelopment Organizations 430
The New York Times magazine, January 9, 1994, The Myth ofConunu-
nity Development" 445
Evanston Inventure, An Economic Development Partnership, written state-
ment 502
RENEWING THE ECONOMIC DE\^LOPMENT
ADMINISTRATION: NEW APPROACHES TO
ECONOMIC DEVELOPMENT
TUESDAY, MARCH 15, 1994
House of Representatives,
Subcommittee on Economic Growth
AND Credit Formation,
Committee on Banking, Finance and Urban Affairs,
Washington, DC.
The subcommittee met, pursuant to notice, at 10:06 a.m., in room
2222, Rayburn House Office Building, Paul E. Kanjorski [chairman
ofthe suDcommittee] presiding.
Present: Chairman Kanjorski and Representative Nussle.
Chairman Kanjorski. The subcommittee will come to order. This
morning the subcommittee meets to receive testimony on the reau-
thorization of the Economic Development Administration and the
Appalachian Regional Commission. This is the first of three hear-
ings we are holding on this matter over the next 2 weeks.
Last time these agencies were reauthorized was in 1980. During
the 1980's both the Economic Development Administration and the
Appalachian Regional Commission faced neglect and hostility
under Presidents Reagan and Bush. EDA, in particular, was sin-
gled out for elimination. Fortunately, through annual appropria-
tions Congress managed to keep the EDA and the ARC alive. Nev-
ertheless, at least in the case ofthe EDA, that agency's authorities
and funding were dramatically reduced, which severely hampered
its vital mission of helping communities recover from serious eco-
nomic distress.
The Clinton administration, however, recognizes the importance
offostering economic development in hard-hit areas and especially
understands the major role the EDA and ARC must play in this
effort. Now imder new management, the Economic Development
Administration for example has renewed a sense of mission and is
making major strides, retooling its operations. The agency has put
considerable effort over the last year into revising and expediting
its cumbersome application process, which is both critically impor-
tant and long overdue.
I also am pleased with some ofthe initiatives in the EDA's budg-
et request for 1995 on which we heard testimony at previous hear-
ings. President Clinton's fiscal year 1995 budget request provides
EDA
with $50 million for loan guarantees for business develop-
ment. This important new tool will leverage an estimated $269 mil-
lion to help create newjobs in distressed communities.
(1)
However, the lack of a permanent Assistant Secretary for Eco-
nomic Development within the Department of Commerce naturally
limited the extent of revisions EDA made over the last year. Now
with the confirmation of Will Ginsberg to that position we have a
unique opportunity to move forward and enact new measures that
will enable true renovation ofthe EDA.
The importance of the EDA, not to mention the ARC, to Presi-
dent Clinton's economic strategy cannot be overstated. Historically,
especially during the 1960's, 1970's, the EDA aided numerous
economically distressed commimities in their efforts to get back on
their feet. Most of this assistance primarily came in the form of
public works and infrastructure development grants, planning
grants, and technical assistance to help communities develop com-
prehensive economic strategies and public enterprise loans and
loan guarantees.
The EDA in the 1970's was a much larger and better funded
agency than the EDA we see today. Yet, in recent years the EDA
has been called upon to meet rapidly growing demands for assist-
ance from an increasing number of regions and communities
around the country experiencing economic difficulty. The Economic
Development Administration has played a critical role in disaster
relief, first in response to Hurricane Andrew and Hurricane Iniki,
then to the Midwest floods, and most recently to the Los Angeles
earthquake.
The EDA is one of the key agencies involved in implementing
President Clinton's Defense Conversion and Adjustment Program.
Its importance in this effort are reflected in the administration's
greatly increased budget for activities under EDA's Title IX
Program.
The EDA is expected to be involved in the President's
Empowerment Zone/Enterprise Community Program.
Finally, there are numerous communities, both rural and urban,
EDA
suffering from steady economic decline that also need services
as they struggle to build sustainable economies that would compete
in the global economy.
The EDA, therefore, is confronted with a very substantial impor-
tant challenge. How should it retool and reorganize itself to meet
these very large demands. I am concerned that its current organi-
zation and machinery are too outdated and underfunded to do the
job. We consequently have to explore whether we should in this re-
authorization devise substantial new authorities and the impetus
to adopt new approaches and practices in this program.
Through the three roundtable hearings the subcommittee is hold-
ing we aim to open up the discussion about what kinds of changes
are needed to bring the EDA into the 21st century. We have struc-
tured the hearings to allow as wide a range of ideas and experi-
ences as possible.
In the first hearing we ask the question what new approaches to
economic development should be considered for incorporation into
the EDA programs? Traditionally, the EDA approach to economic
development centered around funding public works and infrastruc-
ture projects. While this type of support is still very valuable, other
kinds of economic development activity, such as financing for tech-
nology-based business development and what some experts have
called industrial service also need to be looked at.
I have been encouraged by discussions with the Economic Devel-
opment Administration's new leadership. There appears to be a
great deal ofreceptivity to such new approaches within the agency.
In the second hearing we ask what can we learn from State and
local initiatives that have achieved some measure of success and
represent the best practices in economic development? Again I am
EDA
encouraged that the has recognized the importance ofworking
more closely with States, regions, and local communities as well as
the private sector to build new engines the Nation needs for eco-
nomic growth andjob creation.
Finally, in the third hearing, drawing upon what we learned
from the first two hearings, we ask more specifically how can we
improve delivery of EDA's services? We also want to consider a
number of associated issues, such as how to expand the participa-
tion of private, nonprofit, and community-based organizations that
up to now have had limited access to EDA's support, how to bal-
ance the services between urban and rural areas, and how to strike
EDA
an appropriate balance in the distribution of resources be-
tween defense downsizing, empowerment zones, and other kinds of
distressed communities.
Today, I am pleased to begin the important process ofevaluating
EDA's role and developing a new direction for the agency which ad-
dresses the needs of the Nation in the coming decade. For this end
we have brought together a very distinguished group ofindividuals
with wide experience and expertise in the areas.
I welcome you all, and look forward to your testimonies and our
subsequent discussion.
[The prepared statement ofthe Honorable Paul E. Kanjorski can
be found in the appendix.]
In particular, I will start identifying the members of the panel,
first Dr. Atkinson. Welcome back. You have testified before. We ap-
preciate that testimony, and we look forward to today's testimony.
Dr. Atkinson is from the Office of Technological Assessment. He
is a Senior Analyst, Industrial, Technology and Employment
Program.
Next we have Mr. Brian Dabson, president ofthe Corporation for
Enterprise Development. Next, we have Mr. John Kutler, Quarter-
deck Investment Partners, Inc., Los Angeles, California. Next, we
have Mr. Greg LeRoy, president, GLR Associates, Chicago, Illinois.
We have Dr. Michael Oden, research fellow. Project on Regional
and Industrial Economics, Rutgers University, and, finally, we
have Mr. Thomas Croft, executive director. Steel Valley Authority,
Pittsburgh, Pennsylvania. He comes from my home State.
We would like to open with comments by Dr. Atkinson, but if I
could ask the entire panel to synthesize the opening comments to
3 minutes, 5 minutes at best, and give us an opportunity really to
have cross discussion ofyour ideas and what we could do.
Dr. Atkinson.
STATEMENT OF ROBERT ATKINSON, SENIOR ANALYST, INDUS-
TRIAL, TECHNOLOGY AND EMPLOYMENT PROGRAM, OFFICE
OF TECHNOLOGYASSESSMENT
Mr. Atkinson. Thank you, Mr. Chairman. It is a pleasure to be
here today. I will keep my remarks short.
I want to start by stating the importance of Federal support for
economic development, in general, and also, in specific, the role
EDA
that can play in helping communities adjust from economic
dislocation.
However, I want to focus most ofmy comments on how EDA can
be improved. EDA was established in 1965 and emerged as an or-
ganization in a time when the nature of economic development in
the U.S. economy was significantly different than it is today. EDA
has been slow to adapt to these changes.
We have moved from the old economic development environment.
A lot of the focus when the EDA and the Appalachian Regional
Commission were formed was on long-term distressed regions that
suffered from a lack of infrastructure, a healthy industrial base,
and oflen the technical skills to conduct economic development.
As a result, EDA's job was principally to focus on these regions,
to help establish and support economic development organizations,
and to fund physical infrastructure projects which would make
these regions able to attract industry.
However, that has changed in the past 20 years. First, many of
these distressed regions now have at least reasonable infrastruc-
ture in which to perform economic development. Second, most of
them have adequate technical skills in which to conduct economic
development, and the U.S. economy is different.
It is much more difficult for regions to attract branch plants,
large manufacturers, than it was 20 years ago: (a) There are fewer
branch plants; (b) most ofthese branch plants, when they are look-
ing for a low-wage location, a low-cost location, they are much less
likely to look in the United States than they were before. Often-
times, they will look overseas for a low-cost location.
Finally, technological innovation, flexibility, worker skills, qual-
ity, are much more important in terms of economic growth than
they were in the 1960's.
As a result, basing an economic development strategy on a low-
EDA
cost physical infrastructure approach, as initially did, I don't
think makes as much sense as today. What has happened in the
past 10 or 15 years?
Principally, States, local governments, and a number ofnonprofit
local development organizations have recognized these changes and
have forged new approaches to economic development; what some
have called a second wave in economic development. The first wave
was characterized as infrastructure-based, industrial recruitment.
The second wave sought to create economic growth through build-
ing from within, either by helping new businesses start or helping
existing industries in the region expand.
As a result, there were a number of new programs created in-
cluding business financing efforts, technology development and—de
ployment programs, export promotion, and worker training a
whole array ofnew approaches to economic development.
