Designation of Rural Empowerment Zones and Enterprise Communities

SUMMARY: This final rule implements that portion of Subchapter C, Part

I (Empowerment Zones, Enterprise Communities and Rural Development

Investment Areas) of Title XIII of the Omnibus Budget Reconciliation

Act of 1993 (Pub. L. 103-66, approved August 10, 1993) dealing with the

designation of rural Empowerment Zones and Enterprise Communities. This

rule authorizes the Secretary of Agriculture (USDA) to designate not

more than three (3) rural Empowerment Zones and not more than thirty

(30) rural Enterprise Communities based upon the effectiveness of the

strategic plan submitted by an applicant and nominated by a State or

States and local governments.

The purpose of this program is to empower rural communities and

their residents to create jobs and opportunities to build for tomorrow

as part of a Federal-State-local and private-sector partnership.

Businesses will be encouraged to invest and create jobs in distressed

areas, and comprehensive local strategic plans are to be adopted and

implemented, encouraging entrepreneurship, furthering local self-

development and assisting in the revitalization of these areas.

EFFECTIVE DATE: March 8, 1995.

FOR FURTHER INFORMATION CONTACT:

Sandi Brewster-Walker, Deputy Administrator, Rural Business and

Cooperative Development Service, Reporters Building, Room 701, 300 7th

Street, SW, Washington, DC 20024, telephone 1-800-645-4712, or by

sending an Internet Mail message to: ezecdir.rurdev.usda.gov.

SUPPLEMENTARY INFORMATION:

Paperwork Reduction Act

No new data collection or record keeping requiring Office of

Management and Budget (OMB) approval under the Paperwork Reduction Act

of 1980 are included in this final rule. The reporting and record

keeping burden associated with this rule is approved by the Office of

Management and Budget under OMB No. 2506-0148.

I. Background

The Empowerment Zones program confers upon rural distressed

American communities the opportunity to take effective action to create

jobs and opportunities. The program combines tax benefits with

substantial investment of Federal resources and enhanced coordination

among Federal agencies.

All communities which complete the nomination process will be

strengthened by it; gaining by taking stock of their assets and

problems, by creating a vision of a better future, and by structuring a

plan for achieving their vision. Local partnerships among community

residents, businesses, financial institutions, service providers,

neighborhood associations and State and local governments will be

formed or strengthened by going through the application process.

Communities will be afforded an opportunity to work with these partners

in the creation and implementation of a community-based strategic plan.

Communities that were not designated as Empowerment Zones or

Enterprise Communities are eligible for certain benefits. Under a

separate program directed by the Department of Housing and Urban

Development, Community Development Corporations (CDCs) nominated by the

locality, or the applicant for the Empowerment Zone or Enterprise

Community, will be considered eligible for designation to receive tax

preferred contributions from donors. HUD has committed to designating

eight rural CDCs for this program. Communities with innovative visions

for change will be considered for requested waivers of Federal program

regulations, flexible use of existing program funds, and cooperation in

meeting essential mandates, even if they did not receive a designation

by the Secretary as an Empowerment Zone or Enterprise Community.

Communities that are designated as Enterprise Communities receive a

number of benefits. Enterprise Communities are eligible for new Tax-

Exempt Facilities Bonds for certain private business activities. States

with designated Communities will receive Empowerment Zone/Enterprise

Community Social Service Block Grants (EZ/EC SSBG) in the amount of

approximately $3 million for each rural Enterprise Community to pass

through to each designated area for approved activities identified in

the strategic plans. Enterprise Communities receive special

consideration in competition for funding under numerous Federal

programs, including the new National Service and Community Policing

initiatives. The Federal Government will focus special attention on

working cooperatively with designated Enterprise Communities to

overcome regulatory impediments, to permit flexible use of existing

Federal funds, and to assist these Communities in meeting essential

mandates.

Communities that are designated as Empowerment Zones receive all of

the benefits provided to Enterprise Communities, in addition to other

benefits. States with designated rural Empowerment Zones will receive

Empowerment Zone/Enterprise Community Social Service Block Grants in

the amount of $40 million for each rural Empowerment Zone. Employer

Wage Credits for Empowerment Zone residents are provided to qualified

employers engaged in trade, business, or human service delivery in

designated Empowerment Zones. Businesses are afforded an increased

deduction under section 179 of the Internal Revenue Code for qualified

investments.

The rural part of the program will be administered by USDA as a

Federal-State-local-private partnership, with a minimum of red tape

associated with the application process. Applicants must demonstrate

the ability to design and implement an effective strategic plan for

real opportunities for growth and revitalization, that deal with local

problems in a comprehensive way, and must demonstrate the capacity or

the commitment to carry out these plans. Development of an effective

plan must [[Page 6946]] also involve the participation of the community

affected by the nomination of the rural area, and of the private

sector, acting in concert with the State or States and local

governments. The plan should be developed in accordance with four key

principles, which will also serve as the basis for the selection

criteria that will be used to evaluate the plan. These key principles

reflect the Secretary's intention that Empowerment Zone and Enterprise

Community designations should be based on potential for successful

economic and community revitalization as reflected in the strategic

planning process, participants in the plan, and the quality of the

plan. Poverty, unemployment, and other need factors are critical in

determining eligibility for Empowerment Zone or Enterprise Community

status, but play a less significant role in the selection process. The

four key principles are:

(1) Economic opportunity, including job creation within the

community and throughout the region, entrepreneurial initiatives, small

business expansion, and training for jobs that offer upward mobility;

(2) Sustainable community development, to advance the creation of

livable and vibrant communities through comprehensive approaches that

coordinate economic, physical, environmental, community and human

development;

(3) Community-based partnerships, involving participation of all

segments of the community, including the political and governmental

leadership, community groups, health and social service groups,

environmental groups, religious organizations, the private and non-

profit sectors, centers of learning, other community institutions, and

individual citizens; and

(4) Strategic vision for change, which identifies what the

community will become and a strategic map for revitalization. The

vision should build on assets and coordinate a response to community

needs in a comprehensive fashion. It should also set goals and

performance benchmarks for measuring progress and establish a framework

for evaluating and adjusting the revitalization plan.

State and local governments and economic development corporations

that are state chartered may nominate distressed rural areas for

designation as Empowerment Zones (which will also permit their

consideration for designation as Enterprise Communities), or solely for

designation as Enterprise Communities.

Title XIII of the Omnibus Reconciliation Act of 1993 included

Empowerment Zones and Enterprise Communities as a new program.

II. Program Description

General

Pursuant to Title XIII of the Omnibus Reconciliation Act of 1993,

the Secretary of USDA may designate up to three rural Empowerment Zones

and up to thirty rural Enterprise Communities.

Eligibility

To be eligible for designation as a rural Empowerment Zone or

Enterprise Community an area must:

(1) Have a maximum population of 30,000;

(2) Be one of pervasive poverty, unemployment, and general

distress;

(3) Not exceed one thousand square miles in total land area;

(4) Demonstrate a poverty rate that is not less than:

(a) 20 percent in each census tract or census block numbering area

(BNA);

(b) 25 percent in 90 percent of the population census tracts and

BNAs within the nominated area;

(c) 35 percent for at least 50 percent of the population census

tracts and BNAs within the nominated area;

(5) Be located entirely within no more than three contiguous

States; if it is located in more than one State, the area must have one

continuous boundary; if located in only one State, the area may consist

of no more than three noncontiguous parcels;

(6) If the nominated area consists of noncontiguous parcels, each

must independently meet the three poverty requirements;

(7) Be located entirely within the jurisdiction of the unit or

units of general local government making the nomination;

(8) Not include any portion of a census-defined central business

district unless the poverty rate for each population census tract is at

least 35 percent for an Empowerment Zone and 30 percent for an

Enterprise Community; and

(9) Not include any portion of an Indian reservation.

Nomination Process

The law requires that areas be nominated by one or more local

governments and the State(s) in which a nominated rural area is

located. Nominations can be considered for designation only if:

(1) The area meets the eligibility requirements set forth in these

rules;

(2) The area is within the jurisdiction of the nominating local

government(s) and the State(s);

(3) The local government(s) and State(s) provide assurances that

the required strategic plan submitted by the applicant will be

implemented;

(4) All information furnished by the nominating local government(s)

and State(s) is determined by the Secretary of USDA to be reasonably

accurate;

(5) The local government(s) and State(s) certify that no portion of

a nominated rural area is already in an Empowerment Zone or Enterprise

Community or in an area otherwise nominated for designation; and

(6) The local government(s) and State(s) certify that they possess

the legal authority to make the nomination.

The nomination must be accompanied by an application for

designation including a strategic plan, which:

(1) Indicates and briefly describes the specific groups,

organization and individuals participating in the development of the

plan, and describes the history of these groups in the community;

(2) Explains how participants were selected and provides evidence

that the participants, taken as a whole, are broadly representative of

the racial, cultural and economic diversity of the community;

(3) Describes the role of the participants in the creation and

development of the plan and indicates how they will participate in its

implementation;

(4) Identifies two or three topics addressed in the plan that

caused the most serious disagreements among participants and describes

how those disagreements were resolved;

(5) Explains how the community participated in choosing the area to

be nominated and why the area was nominated;

(6) Provides evidence that key participants have the capacity or

how they will develop the capacity to implement the plan;

(7) Provides a brief explanation of the community's vision for

revitalizing the area;

(8) Explains how the vision stimulates economic opportunity,

encourages self-sufficiency and promotes sustainable community

development;

(9) Identifies key needs of the area and the barriers that restrict

the community from achieving its vision, including a description of

poverty and general distress, barriers to economic opportunity and

development and barriers to human development;

(10) Discusses how the vision is related to the assets and

capacities of the area and its surroundings; and

(11) Describes the ways in which the community's approaches to

economic [[Page 6947]] development, social/human services,

transportation, housing, sustainable community development, public

safety, drug abuse prevention, and educational and environmental

concerns will be addressed in a coordinated fashion.

The strategic plan must identify how government resources will be

used to support the plan. Specifically, the plan must indicate:

(1) How Social Service Block Grant (SSBG) funds for designated

Zones and Communities, tax benefits for designated Zones and

Communities, State and local resources, existing Federal resources

available to the locality and additional Federal resources believed

necessary to implement the strategic plan will be utilized within the

Empowerment Zone or Enterprise Community;

(2) The level of commitment necessary to ensure that these

resources will be available to the area upon designation; and

(3) The Federal resources being applied for or for which

applications are planned.

The plan must identify private resources committed to its

implementation, including:

(1) Private resources and support, including assistance from

businesses, non-profit organizations and foundations, that are

available to be leveraged with public resources; and

(2) Assurances that these resources will be made available to the

area upon designation.

The plan must address changes needed in Federal rules and

regulations necessary to implement the plan, including:

(1) Specific paperwork or other Federal program requirements that

need to be altered to permit effective implementation of the strategic

plan; and

(2) Specific regulatory and other impediments to implementing the

strategic plan for which waivers are requested, with appropriate

citations and an indication whether waivers can be accomplished

administratively or require statutory changes.

The plan must demonstrate how State and local governments will

reinvent themselves to help implement the plan, by:

(1) Identifying the changes that will be made in State and local

organizations, processes and procedures, including laws and ordinances,

to facilitate implementation of the plan; and

(2) Explaining how different agencies in State and local

governments will work together in new responsive ways to implement the

strategic plan.

The plan must provide details as to the manner in which the plan

will be implemented and indicate what benchmarks will be used to

measure progress, by:

(1) Identifying the specific tasks necessary to implement the plan;

(2) Describing the partnerships that will be established to carry

out the plan;

(3) Explaining how the strategic plan will be regularly revised to

reflect new information and opportunities; and

(4) Identifying the baselines, benchmarks and goals that will be

used in evaluating performance in implementing the plan.

III. Differences Between Final Rule and Interim Rule

This final rule makes appropriate corrections to the January 18,

1994 interim rule. As will be discussed in the following section of

this preamble, USDA received several good suggestions and

recommendations of matters that the rule should address or expand upon,

or terms that should be defined. These changes are largely directed at

the nomination process, the eligibility process, the contents of the

strategic plans, and evaluations of the strategic plans or policies

associated with the use of EZ/EC funds.

The technical changes made by this final rule are largely directed

to that section of the rule (Sec. 25.200(d)) which addresses the use of

EZ/EC SSBG funds and therefore are relevant even after the designation

process is complete. The following provides a list of editorial/

technical changes made to the interim rule by this final rule.

1. In Sec. 25.200 (Nominations by State and local governments),

USDA sets forth the procedures for nominations by State and local

governments of areas for designation as an Empowerment Zone and/or

Enterprise Community. Paragraph (d) of the section addresses the

elements of the strategic plan which must be developed as part of the

application for designation, and paragraph (d)(12) specifically

addresses how the Social Services Block Grant (SSBG) funds for

designated Empowerment Zones and Enterprise Communities will be

utilized. Several technical errors were made in paragraph (d)(12), and

these are as follows:

a. Paragraph (d)(12)(i)(A) discusses the commitment concerning the

use of EZ/EC SSBG funds. The rule provides for the commitment to be

made by the ``applicant as well as by the State government(s).'' In

this paragraph, USDA inadvertently omitted reference to the full range

of nominating entities that would have to make this commitment, and

only listed ``State governments.'' (Note that Sec. 25.501 provides for

nomination by States and local governments and Sec. 25.502 provides for

nominations by State-chartered economic development corporations.)

Accordingly, the final rule corrects this paragraph to include not only

State governments, but local governments and State-chartered economic

development corporations. The final rule also explains that the

``services or activities'' referenced in this paragraph are the

``services or activities which can be used to achieve or maintain the

goals set forth in paragraph (d)(12).''

b. Paragraph (d)(12)(ii) provides, in error, that Empowerment Zone

or Enterprise Community SSBG funds (EZ/EC SSBG funds) may be used to

achieve certain goals set forth in the paragraph by ``undertaking one

of the below specified options.'' The correct wording should provide

that States and local governments may undertake ``one or more'' of the

options set forth in the paragraph. One option available to States and

local governments for the use of EZ/EC SSBG funds was inadvertently

omitted from the interim rule. This option provides for the use of EZ/

EC SSBG funds to promote the economic independence of low-income

residents, such as capitalizing revolving or micro-enterprise loan

funds for their benefit.

c. In paragraph (d)(12)(ii), the interim rule provides that EZ/EC

SSBG funds ``may'' be used to maintain the goals set forth in paragraph

(d)(12). The rule should have stated that the EZ/EC SSBG funds ``must''

be used to maintain the goals set forth in paragraph (d)(12), and that

the goals ``may be achieved'' by undertaking the program options listed

in (d)(12)(ii).

d. The interim rule inadvertently omitted the paragraph that

provides guidance concerning how designated Empowerment Zones and

Enterprise Communities may meet the goals specified in paragraph

(d)(12). This paragraph does not dictate how the goals may be met, but

offers guidance as to how they may be met. This rule makes this

correction by adding a new paragraph (iii), and by redesignating the

succeeding paragraphs accordingly.

e. In paragraph (d)(12)(v) of the interim rule, the Department

provided that the State must obligate EZ/EC SSBG funds in accordance

with the strategic plan within two years from the ``date of designation

of the Empowerment Zone or Enterprise Community.'' This time frame is

incorrect. This paragraph should have provided that the State must

obligate funds two years from the date ``the funds are paid to the

State.'' This paragraph is also corrected by this

[[Page 6948]] document to add that ``funds not obligated must be

remitted to the Secretary of Health and Human Services.'' This sentence

was inadvertently dropped in the rule text.

f. Two requirements pertaining to the strategic plan were

inadvertently omitted from paragraph (d)(12). One requirement provides

that the strategic plan must indicate how the EZ/EC SSBG funds will be

invested and used for the period of designation, and the second

provides that the strategic plan must provide for periodic reporting of

information by the relevant State. These requirements are now set forth

in (d)(12) (vii) and (viii).

2. In Sec. 25.401 (Periodic Performance Reviews), USDA sets forth

guidelines for evaluation of progress in the implementation of

strategic plans. This section is expanded to include responsibilities

of implementation entities.

3. Editorial corrections are as follows:

a. In Sec. 25.300(b)(1) the second sentence is deleted; ``and;'' is

added.

b. In Sec. 25.302 the numeral `3' is replaced by ``three''.

c. In Sec. 25.401 ``important'' is replaced by ``impartial''.

d. In Sec. 25.504 (b) the sentence ``On a case basis, the Secretary

will grant requests for waiver from the above definition of ``rural''

upon a showing of good cause'', ``above'' is deleted and ``stated in

paragraph (2) of this section'', is added following the word ``rural''.

In the next sentence, ``the above subsection'' is deleted and ``the

definition in paragraph (a) of this section'' is added following the

word ``satisfy''.

The designation of Rural Development Administration has been

changed to Rural Business and Cooperative Development Service.

IV. The Public Comments

General Comments

The January 18, 1994 interim rule provided for a 30-day public

comment period. The public comment period expired on February 17, 1994.

Comments, however, were accepted through March 1, 1994. By this date, a

total of 36 comments had been received. The commenters consisted of the

Federal agencies, labor unions, (insert ``private citizens'') State and

local jurisdictions, state legislators and non-profit organizations.

USDA received several good suggestions and recommendations from

commenters that will be adopted or considered in any future rulemaking.

Other suggestions, although of equal merit, could not be adopted given

the current statutory framework of the EZ/EC Program. Other requests

for changes or clarification were determined to be adequately addressed

by the January 18, 1994 interim rule. The following provides a summary

of the significant issues raised by public commenters and USDA's

response to these issues.

Technical Corrections

Comment: Five commenters highlighted inadvertent omissions in the

text of the interim rule regarding the use of EZ/EC SSBG funds.

Response: Appropriate corrections were adopted in this final rule.

Business Non-Relocation

Comment: The AFL-CIO makes the point that public funds should not

be used to encourage plant relocations from one location to another and

that the Federal government should not be a participant in state and

local programs which only shift employment from one location to

another. The letter called for strengthening regulations by placing the

responsibility on the communities to show that relocations did not

occur and that jobs created in the community are not at the expense of

another location. The following recommendations were made regarding

enforcement of the non-relocation provision: (1) Require firms to

certify that they did not relocate from another area; (2) require

public assistance to firms be paid back if plant relocations occur; (3)

require employers to list annual employment at plant locations so that

relocations could be monitored. Commenters also recommend revocation of

EZ/EC designation if job relocations occur in the approved zones. The

final comment sought the addition of labor unions to the list among

segments of the community that could form community-based partnerships.

Response: The issue of non-relocation of business received

consideration early in the developmental stages of the EZ/EC program.

The regulations include a prohibition against business relocation by

prohibiting any activity in the strategic plan to assist business

relocation to the nominated area from an area outside the nominated

area. According to the Empowerment Zone statute (26 U.S.C. 1391

(f)(2)(F)), expansion of an existing business entity is permitted if

(1) it will not result in a decrease in employment in any area where

the company currently conducts business; and (2) there is no reason to

believe that a new branch is being established with the intention of

closing down the existing business in another area. The issue of non-

relocation can be dealt with in the monitoring and evaluation process.

Comment: One commenter requested clarification on the issue of

relocation of foreign plants/entities to Empowerment Zones or

Enterprise Communities.

Response: The statute does not distinguish between foreign and

domestic businesses in the prohibition against business relocation.

Comments on Census Data Calculations

Comment: One commenter recommended that where calculations are made

to determine eligibility, numbers should be rounded off and in a

direction to favor the applicant. This recommendation would allow

readjustment of the poverty threshold in the case of less than 10

census tracts and rounding off up to 5 percentage points.

Response: USDA disagrees with the commenter. Section 25.103 b(4)

states: ``In making the calculations required by this section, the

Secretary shall round all fractional percentages of one-half percentage

point or more up to the next highest whole percentage point figure''.

There is no authority for special mathematical rounding of the number

of census tracts when there are less than 10 tracts (BNAs) identified.

Comments on Census Tracts and Census Tract Definitions

Comment: Nineteen commenters requested the use of census block data

in lieu of census tract data and to broaden the definition of

population census tracts.

Response: USDA is unable to adopt the suggestions of the

commenters. The statute requires the use of the most recent decennial

census data available. The regulations which govern designation of

Empowerment Zones and Enterprise Communities (part 25, subpart A,

Sec. 25.101(a)) indicate that the data employed to determine

eligibility is based on the 1990 Census and from information published

by the Bureau of the Census and the Bureau of Labor Statistics. Census

tracts or block numbering areas are used to satisfy these requirements.

The census data is reported in terms of census tracts or block number

areas and not for other graphical units.

Comment: Three commenters indicated that the statutory requirement

to limit the area of nominated areas to 20 square miles for urban areas

and 1000 square miles for rural areas imposed undue difficulties for

many areas of the West and Southwest.

Response: USDA is unable to adopt the suggestions of the

commenters. The statute requires the size limitation and

[[Page 6949]] does not permit exclusions as suggested by the

commenters.

Comments on the Definition of Rural Area

Comment: Several comments involved the definition of a `rural

area'. The current definition of rural in the regulation excludes

communities where predominantly rural populations reside within

Metropolitan Areas (MA) or where more than 50 percent of the population

resides within a designated Metropolitan Area. Metropolitan Area does

not have an exact definition in the Bureau of the Census Dictionary of

Geographical Terms. Tracts within MA's are restricted from applying

unless they are contiguous to and part of a multicounty application.

Response: No rule changes are required. Statute Section

1393(a)(2)(B) and Sec. 25.504(b) of part 25 give the Secretary

sufficient discretionary power to define a rural area.

General Comments on the Rule

Comment: Apparent conflict between the EZ/EC rules and the Cash

Management Act of 1990. Concern was expressed that while, under the

Cash Management Act, States drawing Federal monies must make

expenditures within three days of receipt or pay interest, EZ/EC SSBG

funds are transferred to the states to be passed on to the implementing

entities and that the State has two years to obligate these funds to

the implementing entities.

Response: Department of Health and Human Services has advised that

the Cash Management Act does not apply to SSBG funds.

Comment: The Governor of Texas and the Texas Department of Commerce

requested that the application deadline be extended to six months from

the issue date of the Interim Rule to allow time to prepare

comprehensive applications.

Response: USDA disagrees with the commenters. Extension of the

deadline would penalize States that have allocated funds and technical

assistance in order to meet the June 30, 1994 deadline.

Comment: One commenter stated that the interim rule as a whole did

not adequately address the needs of extremely low-income persons.

Response: USDA disagrees with the commenter. The eligibility for

designation as an Empowerment Zone or Enterprise Community requires a

significant level of poverty, and the strategic plan is required to

include various descriptions of how the nominated area would address

the need of low-income persons, for example, through the creation of

economic opportunities, home ownership, education or other route to

economic independence for low-income families, youth and other

individuals. (See Sec. 25.200.)

Comment: One commenter stated that the definition of ``State-

chartered economic development corporation'' was not very clear.

Response: The statute defined this term, and the rule simply

incorporated the statutory definition.

Comment: Three commenters stated that the strategic plan principle

concerning employment should emphasize job creation for low-income

persons. Another commenter stated that the strategic plan principle

concerning employment should emphasize job creation for minority

businesses.

Response: USDA agrees with the commenters and such emphasis will be

considered in future rulemaking that may be necessary for any

additional rounds of designations that may be authorized.

Comment: One commenter raised the concern of possible channeling of

EDA assistance from Economic Development Districts, which may not

qualify the EZ/EC designation, to designated EZ/EC areas.

Response: The intent of the legislation is to provide assistance to

distressed communities by encouraging creation of jobs and

opportunities for local development as part of a Federal-State-local

and private-sector partnership. Although this effort addresses `local'

issues within each community, the context of revitalization applies

nationally. Therefore diversion of programmed assistance from one

distressed area to the designated EZ/EC communities is not consistent

with the purpose of the EZ/EC program.

Comment: One commenter stated that labor union should be added to

the list among the segments of the community that could form Community-

based Partnerships.

Response: While labor unions were not named specifically, they are

included under the regulation. Subpart C (Nomination Procedure)

Sec. 25.200 Paragraph (c)(3) states that ``Community based

partnerships, involve the participation of all segments of the

community groups, health and social service groups, environmental

groups, religious organizations, the private and non-profit sectors,

centers of learning, and other community institutions and individual

citizens.'' The organizations listed are examples of the kinds of

partnerships that could be formed by communities.

Comment: One commenter addressed issues related to the use of

certain statistics in the determination of applicant eligibility for

the EZ/EC program.

Response: These suggestions will be considered in any future

rulemaking needed for a new round of designation.

Comment: Two commenters stated that the rule should allow

designated communities to use funds and other resources identified in

the strategic plans for properties directly adjacent to the boundaries

of the designated census tracts.

Response: The regulation is clear on the use of EZ/EC SSBG funds

for approved EZ/EC activities identified in the community strategic

plans. A issue of this type can be addressed during the approval

process.

V. Other Matters

National Environmental Policy Act

This document has been reviewed in accordance with 7 CFR part 1940,

subpart G, ``Environmental Program.'' It is the determination of USDA

that this action does not constitute a major Federal action

significantly affecting the quality of the human environment and in

accordance the National Environmental Policy Act of 1969, Pub. L. 91-

190, an Environmental Impact Statement is not required.

Executive Order 12866, Regulatory Planning and Review

This rule was reviewed and approved by the Office of Management and

Budget as a significant rule, as that term is defined in Executive

Order 12866, which was signed by the President on September 30, 1993.

The economic analysis required by Executive Order 12866 will be

retained in the public file with the Department's Rule Docket Clerk.

Regulatory Flexibility Act

The Secretary, in accordance with the Regulatory Flexibility Act (5

U.S.C. 605(b)), has reviewed this rule before publication and by

approving it certifies that the rule will not have a significant

economic impact on a substantial number of small entities. The Act is

intended to encourage Federal agencies to utilize innovative

administrative procedures in dealing with individuals, small

businesses, small organizations, and small governmental bodies that

would otherwise be unnecessarily adversely affected by Federal

regulations. To the extent that this rule affects those entities, its

purpose is to reduce any disproportionate burden by providing for the

waiver of regulations [[Page 6950]] and by affording other incentives

directed toward a positive economic impact. Therefore, no regulatory

flexibility analysis under the Act is necessary.

Executive Order 12611, Federalism

The General Counsel, as the Designated Official under section 6(a)

of Executive Order 12611, Federalism, has determined that the policies

contained in this rule will not have substantial direct effects on

States or their political subdivisions, or the relationship between the

Federal Government and the States, or on the distribution of power and

responsibilities among the various levels of government. The purpose of

this rule is to provide a cooperative atmosphere between the Federal

Government and the States and local governments, and to reduce any

regulatory burden imposed by the Federal Government that impedes the

ability of State and local governments to solve pressing economic,

social, and physical problems in their communities.

List of Subjects in 7 CFR Part 25

Community development, Economic development, Empowerment zones,

Enterprise communities, Housing, Indians, Intergovernmental relations,

Reporting and recordkeeping requirements.

In accordance with the reasons set out in the preamble, title 7,

subtitle A, part 25 of the Code of Federal Regulations is revised to

read as follows:

1. Title 7, subtitle A is amended by revising part 25 to read as

follows:

PART 25--RURAL EMPOWERMENT ZONES AND ENTERPRISE COMMUNITIES

Sec.

Subpart A--General Provisions

25.1 Applicability and scope.

25.2 Objective and purpose.

25.3 Definitions.

25.4 Secretarial review and designation.

25.5 Waivers.

Subpart B--Area Requirements

25.100 Eligibility requirements and data usage.

25.101 Data utilized for eligibility determinations.

25.102 Tests of pervasive poverty, unemployment and general

distress.

25.103 Poverty rate.

Subpart C--Nomination Procedure

25.200 Nominations by State and local governments.

25.201 Evaluating the strategic plan.

25.202 Submission of nominations for designation.

Subpart D--Designation Process

25.300 USDA action and review of nominations for designation.

25.301 Selection factors for designation of nominated rural areas.

25.302 Number of Rural Empowerment Zones and Enterprise

Communities.

Subpart E--Post-Designation Requirements

25.400 Reporting.

25.401 Periodic performance reviews.

25.402 Validation of designation.

25.403 Revocation of designation.

Subpart F--Special Rules

25.500 Indian reservations.

25.501 Governments.

25.502 Nominations by economic development corporations.

25.503 Use of census data.

25.504 Rural areas.

Authority: 5 U.S.C. 301; 26 U.S.C. 1391 et seq.

Subpart A--General Provisions

Sec. 25.1 Applicability and scope.

(a) Applicability. This part establishes policies and procedures

applicable to rural Empowerment Zones and Enterprise Communities,

authorized under the Omnibus Budget Reconciliation Act of 1993, title

XIII, subchapter C, part I (Pub. L. 103-66, approved August 10, 1993),

which amended the Internal Revenue Code by adding a new subchapter U,

relating to the designation and treatment of Empowerment Zones and

Enterprise Communities.

(b) Scope. This part contains provisions relating to area

requirements, the nomination process for rural Empowerment Zones and

rural Enterprise Communities, and the designation of these Zones and

Communities by USDA. Provisions dealing with the nominations and

designation of urban Empowerment Zones and Enterprise Communities are

promulgated by the United States Department of Housing and Urban

Development (HUD). USDA and HUD will consult in all cases in which

nominated areas possess both rural and urban characteristics and will

utilize a flexible approach in determining the appropriate designation.

Sec. 25.2 Objective and purpose.

The purpose of this part is to provide for the establishment of

Empowerment Zones and Enterprise Communities in rural areas, to

stimulate the creation of new jobs, particularly for the disadvantaged

and long-term unemployed, and to promote revitalization of economically

distressed areas, primarily by providing or encouraging:

(a) Coordination of economic, human, community, and physical

development plans and related activities at the local level;

(b) Local partnerships fully involving affected communities and

local institutions and organizations in developing and implementing a

strategic plan for any nominated rural Empowerment Zone or Enterprise

Community;

(c) Tax incentives and credits; and

(d) Empowerment Zone/Enterprise Community Social Service Block

Grant (EZ/EC SSBG) funds.

Sec. 25.3 Definitions.

As used in this part--

Applicant means the lead entity that has prepared and will

implement the community's strategic plan, pursuant to the provisions of

Sec. 25.200(c) of this part, for comprehensive economic, human,

community, and physical development within the area; such an entity may

include, but is not limited to, state governments, local governments,

regional planning agencies, non-profit organizations, community-based

organizations, or a partnership of community members and other

entities.

Designation means the process by which the Secretary designates

rural areas as Empowerment Zones or Enterprise Communities eligible for

tax incentives and credits established by subchapter U of the Internal

Revenue Code (26 U.S.C. 1391 et seq.), EZ/EC SSBGS as established by

the Department of Health and Human Services (HHS), and for

consideration for programs of Federal assistance.

Empowerment Zone means a rural area so designated by the Secretary

pursuant to this part. Up to three such zones may be designated.

Enterprise Community means a rural area so designated by the

Secretary pursuant to this part. Up to 30 such communities may be

designated.

EZ/EC SSBG Funds means grants made by the Secretary of HHS to

States containing Empowerment Zones and Enterprise Communities whose

strategic plans are qualified plans as defined in section 13761 of the

Omnibus Budget Reconciliation Act of 1993.

Indian reservation means a reservation as defined in section 3(d)

of the Indian Financing Act of 1974 (25 U.S.C. 1452(d)) or section

4(10) of the Indian Child Welfare Act of 1978 (25 U.S.C. 1903(10)).

Local government means any county, city, town, township, parish,

village, or other general purpose political subdivision of a State, and

any combination of these political [[Page 6951]] subdivisions which is

recognized by the Secretary.

Nominated area means an area which is nominated by one or more

local governments and the State or States in which it is located for

designation pursuant to this part.

Population census tract means a census tract, or, if census tracts

are not defined for the area, a block numbering area (BNA).

Poverty means the number of persons listed as being in poverty in

the 1990 Census.

Revocation of designation means the process by which the Secretary

may revoke the designation of an area as an Empowerment Zone or

Enterprise Community pursuant to Sec. 25.403 of this part.

Rural area means any area defined pursuant to Sec. 25.504 of this

part.

Secretary means the Secretary of Agriculture.

State means any State in the United States.

Strategic plan means a strategy developed by the applicant, with

the participation and commitment of local governments, State

government(s), private sector, community members and others, pursuant

to the provisions of Sec. 25.200(c) of this part. The plan must include

written commitments from the local governments and State(s) that they

will adhere to the strategy.

USDA means the U.S. Department of Agriculture.

Sec. 25.4 Secretarial review and designation.

(a) Designation. The Secretary will review applications for the

designation of nominated rural areas to determine the effectiveness of

the strategic plans submitted by applicants in accordance with

Sec. 25.200 of this part. The Secretary will designate up to three

rural Empowerment Zones and up to 30 rural Enterprise Communities.

(b) Period of designation. The designation of a rural area as an

Empowerment Zone or Enterprise Community shall remain in full effect

during the period beginning on the date of designation and ending on

the earliest of:

(1) The close of the tenth calendar year beginning or after the

date of designation;

(2) The termination date designated by the State and local

governments in their application for nomination; or

(3) The date the Secretary revokes or modifies the designation, in

accordance with Sec. 25.402 or Sec. 25.403 of this part.

Sec. 25.5 Waivers.

The Secretary may waive any provision of this part in any

particular case subject only to statutory limitations, for good cause,

where it is determined that application of the requirement would

produce a result adverse to the purpose and objectives of this part.

Subpart B--Area Requirements

Sec. 25.100 Eligibility requirements and data usage.

Eligibility Criteria. A nominated rural area may be eligible for

designation pursuant to this part only if the area:

(a) Has a maximum population of 30,000;

(b) Is one of pervasive poverty, unemployment, and general

distress, as described in Sec. 25.102 of this part;

(c) Does not exceed one thousand square miles in total land area;

(d) Be located entirely within no more than three contiguous

States; if it is located in more than one State, the area must have one

continuous boundary; if located in only one State, the area may consist

of up to three noncontiguous parcels;

(e) Is located entirely within the jurisdiction of the unit or

units of general local government making the nomination;

(f) Does not include any portion of a central business district, as

this term is used in the most recent Census of Retail Trade, unless the

individual poverty rate of each population census tract in the district

is not less than 35 percent for an Empowerment Zone and 30 percent for

an Enterprise Community; and

(g) Does not include any area within an Indian reservation.

Sec. 25.101 Data utilized for eligibility determinations.

(a) Source of data. The data to be employed in determining

eligibility pursuant to the criteria described in Sec. 25.102 of this

part shall be based on the 1990 Census, and from information published

by the Bureau of Census and the Bureau of Labor Statistics. The data

shall be comparable in point or period of time and methodology

employed.

(b) Use of statistics on boundaries. The boundary of a rural area

nominated for designation as an Empowerment Zone or Enterprise

Community must coincide with the boundaries of census tracts, or, where

tracts are not defined, with block numbering areas.

Sec. 25.102 Tests of pervasive poverty, unemployment and general

distress.

(a) Pervasive poverty. Conditions of poverty must be reasonably

distributed throughout the entire nominated area. The degree of poverty

shall be demonstrated by citing available statistics on low-income

population and levels of public assistance. Poverty is demonstrated by

poverty data from the 1990 census.

(b) Unemployment. The degree of unemployment shall be demonstrated

by the provision of information on the number of persons unemployed,

underemployed (those with only a seasonal or part-time job) or

discouraged workers (those capable of working but who have dropped out

of the labor market--hence are not counted as unemployed), increase in

unemployment rate, job loss, plant or military base closing, or other

relevant unemployment indicators having a direct effect on the

nominated area.

(c) General distress. General distress shall be evidenced by

describing adverse conditions within the nominated area other than

those of pervasive poverty and unemployment. Below average or decline

in per capita income, earnings per worker, per capita property tax

base, average years of school completed; outmitigration and population

decline from 1980-1990, and a high or rising incidence of crime,

narcotics use, abandoned housing, deteriorated infrastructure, school

dropouts and illiteracy are examples of appropriate indicators of

general distress. The data and methods used to produce such indicators

that are used to describe general distress must all be stated.

Sec. 25.103 Poverty rate.

(a) General. Eligibility of an area on the basis of poverty shall

be established in accordance with the following criteria:

(1) In each census tract within a nominated area, the poverty rate

shall be not less than 20 percent; and

(2) For at least 90 percent of the population census tracts within

the nominated area, the poverty rate shall not be less than 25 percent;

and

(3) For at least 50 percent of the population census tracts within

the nominated area, the poverty rate shall be not less than 35 percent.

(b) Special rules relating to the determination of poverty rate.--

(1) Census tracts with no population. Census tracts with no population

shall be treated as having a poverty rate that meets the standards of

paragraphs (a)(1) and (a)(2) of this section, but shall be treated as

having a zero poverty rate for purposes of applying paragraph (a)(3) of

this section.

(2) Census tracts with populations of less than 2,000. A population

census tract with a population of less than 2,000 shall be treated as

having a poverty rate that meets the requirements [[Page 6952]] of

paragraphs (a)(1) and (a)(2) of this section if more than 75 percent of

the tract is zone for commercial or industrial use.

(3) Adjustment of poverty rates for Enterprise Communities. For

Enterprise Communities only, the Secretary has the discretion to reduce

by 5 percentage points one of the following thresholds for not more

than 10 percent of the census tracts, or, if fewer, five population

census tracts in the nominated area:

(i) The 20 percent threshold in paragraph (a)(1) of this section;

(ii) The 25 percent threshold in paragraph (a)(2) of this section;

and

(iii) The 35 percent threshold in paragraph (a)(3) of this section;

Provided that, the Secretary may in the alternative reduce the 35

percent threshold by 10 percentage points for three population census

tracts.

(4) Rounding up of percentages. In making the calculations required

by this section, the Secretary shall round all fractional percentages

of one-half percentage point or more up to the next highest whole

percentage point figure.

(c) Noncontiguous areas. There can be no more than 3 noncontiguous

areas if the nominated area is located within one state; noncontiguous

areas are not allowed in the multistate area. Each such parcel must

separately meet the poverty criteria set forth in this section.

(d) Areas not within census tracts. In the case of an area that

does not have population census tracts, the block numbering area shall

be used for purposes of determining poverty rates.

Subpart C--Nomination Procedure

Sec. 25.200 Nominations by State and local governments.

(a) Nomination criteria. One or more local governments and the

State or States in which an area is located must nominate such area for

designation as an Empowerment Zone or Enterprise Community, if:

(1) The rural area meets the requirements for eligibility described

in Sec. 25.100 and Sec. 25.103 of this part;

(2) The rural area is entirely within the jurisdiction of the

nominating State or States and local government(s); such governments

must have the authority to nominate the area for designation and

provide written assurances satisfactory to the Secretary that the

strategic plan described in paragraph (c) of this section will be

implemented;

(3) All information furnished by the nominating State(s) and local

government(s) is determined by the Secretary to be reasonably accurate;

and

(4) The State(s) and local government(s) certify that no portion of

the area nominated is already included in an Empowerment Zone or

Enterprise Community under this Act or in an area otherwise nominated

to be designated under this section.

(b) Nomination for designation. No rural area may be considered for

designation pursuant to subpart D of this part unless the application

for designation:

(1) Demonstrates that the nominated rural area satisfies the

eligibility criteria set forth at Sec. 25.100 of this part;

(2) Includes a strategic plan, as described in paragraph (c) of

this section; and

(3) Includes such other information as may be required by USDA in a

Notice Inviting Applications, to be published in the Federal Register.

(c) Strategic plan. Each application for designation must be

accompanied by a strategic plan, which must be developed in accordance

with four key principles that will be utilized to evaluate the plan.

These key principles are:

(1) Economic opportunity, including job creation within the

community and throughout the region, entrepreneurial initiatives, small

business expansion, and training for jobs that offer upward mobility;

(2) Sustainable community development, to advance the creation of

livable and vibrant communities through comprehensive approaches that

coordinate economic, physical, environmental, community and human

development;

(3) Community-based partnerships, involving the participation of

all segments of the community, including the political and governmental

leadership, community groups, health and social service groups,

environmental groups, religious organizations, the private and non-

profit sectors, centers of learning, and other community institutions

and individual citizens; and

(4) Strategic vision for change, which identifies what the

community will become and a strategic map for revitalization. The

vision should build on assets and coordinate a response to community

needs in a comprehensive fashion. It should also set goals and

performance benchmarks for measuring progress and establish a framework

for evaluating and adjusting the revitalization plan.

(d) Elements of strategic plan. The strategic plan should:

(1) Indicate and briefly describe the specific groups,

organizations, and individuals participating in its production, and

describe the history of these groups in the community;

(2) Explain how participants were selected and provide evidence

that the participants, taken as a whole, are broadly representative of

the entire community;

(3) Describe the role of the participants in the creation and

development of the plan and indicate how they will participate in its

implementation;

(4) Identify two or three topics addressed in the plan that caused

the most serious disagreements among participants and describe how

those disagreements were resolved;

(5) Explain how the community participated in choosing the area to

be nominated and why the area was nominated;

(6) Provide evidence that key participants have the capacity to

implement the plan;

(7) Provide a brief explanation of the community's vision for

revitalizing the area;

(8) Explain how the vision creates economic opportunity, encourages

self-sufficiency and promotes community development;

(9) Identify key community goals and the barriers that restrict the

community from achieving such goals, including a description of poverty

and general distress, barriers to economic opportunity and development,

and barriers to human development;

(10) Discuss how the vision is related to the assets and needs of

the area as well as to the surrounding community;

(11) Describe the ways in which the community's approaches to

economic development, social/human services, transportation, housing,

community development, public safety, drug abuse prevention and

educational and environmental concerns will be addressed in a

coordinated fashion; and explain how these linkages support the

community's vision;

(12) Indicate how all EZ/EC SSBG funds for the designated

Empowerment Zone or Enterprise Community will be utilized.

(i) In doing so, the strategic plan shall provide the following

information:

(A) A commitment by the applicant, as well as by the nominating

state-chartered economic development corporation or State

government(s), and local government(s), that the EZ/EC SSBG funds will

be used to supplement, not replace, other Federal or non-Federal funds

available for financing services or activities which can be used to

achieve or maintain the goals outlined in paragraph (d)(12)(ii) of this

section;

(B) a description of the entities that will administer the EZ/EC

SSBG funds; [[Page 6953]]

(C) a certification by such entities that they will provide

periodic reports on the use of the EZ/EC SSBG funds; and

(D) a detailed description of all the activities to be financed

with the EZ/EC SSBG funds and how all such funds will be allocated.

(ii) The EZ/EC SSBG funds must be used to achieve or maintain the

following goals through undertaking one of the below specified program

options. The goals may be achieved by undertaking one or more of the

following program options:

(A) The goal of economic self-support to prevent, reduce or

eliminate dependencies, through one of the following program options:

(1) Funding community and economic development services focused on

disadvantaged adults and youths, including skills training,

transportation services and job, housing, business, and financial

management counseling;

(2) Supporting programs that promote home ownership, education or

other routes to economic independence for low-income families, youths,

and other individuals;

(3) Assisting in the provision of emergency and transitional

shelter for disadvantaged families, youths, and other individuals;

(B) The goal of self-sufficiency, including reduction or prevention

of dependencies, through one of the following program options:

(1) Providing assistance to non-profit organizations and/or

community and junior colleges that provide disadvantaged individuals

with opportunities for short-term training courses in entrepreneurial,

self employment, and other skills that promote individual self-

sufficiency, and the interest of the community;

(2) Funding programs to provide training and employment for

disadvantaged adults and youths in construction, rehabilitation or

improvement of affordable housing, public infrastructure and community

facilities; and,

(C) The goal of prevention or amelioration of the neglect, abuse,

or exploitation of children and/or adults unable to protect themselves;

and, where appropriate, the goal of preservation or rehabilitation of

families, through one or more of the following program options:

(1) Providing support for residential or non-residential drug and

alcohol prevention and treatment programs that offer comprehensive

services for pregnant women, and mothers, and their children;

(2) Establishing programs that provide activities after school

hours, including keeping school buildings open during evenings and

weekends for mentor and study programs.

(iii) Designated Empowerment Zones and Enterprise Communities may

work to achieve or maintain the goals outlined in paragraphs

(d)(12)(ii)(A) and (B) of this section by using EZ/EC SSBG funds to

capitalize revolving or micro-enterprise loan funds which benefit low-

income residents of the designated Empowerment Zones or Enterprise

Communities. Similarly, grantees may work to achieve or maintain the

goals outlined in paragraphs (d)(12)(ii)(A) and (B) of this section by

using the EZ/EC SSBG funds to create jobs and promote economic

opportunity for low-income families and individuals through matching

grants, loans, or investments in community development financial

institutions.

(iv) If the applicant intends to use the EZ/EC SSBG funds for

program options not included in paragraph (d)(12) of this section, the

strategic plan must indicate how the proposed activities meet the goals

set forth in paragraph (d)(12) (ii)(B) of this section, and the reasons

the any approved program options were not pursued.

(v) To the extent that the EZ/EC SSBG funds are used for the

program options included in paragraph (d)(12) (ii)(B) of this section,

the applicant may use EZ/EC SSBG funds for the following activities, in

addition to those activities permitted by Sec. 2005 of the Social

Security Act (42 USC 1397d):

(A) To purchase or improve land or facilities;

(B) To make cash payments to individuals for subsistence or room

and board;

(C) To make wage payments to individuals as a social service;

(D) To make cash payments for medical care; and

(E) To provide social services to institutionalized persons.

(vi) The State must obligate the EZ/EC SSBG funds to in accordance

with the strategic plan within 2 years from the date of payment to the

state, or remit the unobligated funds to the Secretary of Health and

Human Services (HHS).

(vii) The Strategic Plan must indicate how the EZ/EC SSBG funds

will be invested and used for the 10 year period of designation. The

EZ/EC SSBG funds may be used to promote economic independence for low-

income residents, such as capitalizing revolving or micro-enterprise

loan funds for the benefit of residents. The EZ/EC SSBG funds may also

be used to create jobs and promote economic opportunity for low-income

families and individuals through matching grants, loans, or investments

in community development financial institutions.

(viii) The strategic plan must indicate how all the EZ/EC SSBG

funds will be used or invested for the period of designation of the

Empowerment Zone or Enterprise Community.

(ix) The strategic plan must provide for periodic reporting of

information by the relevant State.

(13) Indicate how tax benefits for designated zones and

communities, State and local resources, existing Federal resources

available to the locality and additional Federal resources believed

necessary to implement the strategic plan will be utilized within the

Empowerment Zone or Enterprise Community;

(14) Indicate a level of commitment necessary to ensure that these

resources will be available to the area upon designation;

(15) Identify the Federal resources applied for or for which

applications are planned;

(16) Identify private resources and support, including assistance

from businesses, non-profit organizations, and foundations, which are

available to be leverage with public resources; and provide assurances

that these resources will be made available to the area upon

designation.

(17) Identify changes requested in Federal rules and regulations

necessary to implement the plan, including specific paperwork or other

Federal program requirements that must be altered to permit effective

implementation of the strategic plan;

(18) Identify specific regulatory and other impediments to

implementing the strategic plan for which waivers are requested, with

appropriate citations and an indication whether waivers can be

accomplished administratively or require statutory changes;

(19) Demonstrate how State and local governments will reinvent

themselves to help implement the plan, by identifying changes that will

be made in State and local organizations, processes and procedures,

including laws and ordinances;

(20) Explain how different agencies in State and local governments

will work together in new responsive ways to implement the strategic

plan;

(21) Identify the specific tasks necessary to implement the plan;

(22) Described the partnerships that will be established to carry

out the plan;

(23) Explain how the plan will be regularly revised to reflect new

information and opportunities; and

(24) Identify baselines, benchmarks and goals that will be used in

evaluating performance in implementing the plan. [[Page 6954]]

(e) Prohibition against business relocation. The strategic plan may

not include any action to assist any establishment in relocating from

an area outside the nominated area to the nominated area, except that

assistance for the expansion of an existing business entity through the

establishment of a new branch, affiliate, or subsidiary is permitted,

if:

(1) The establishment of a new branch affiliate or subsidiary will

not result in a decrease in employment in the area of original location

or in any other area where the existing business entity conducts

business operations, and

(2) There is no reason to believe that the new branch, affiliate,

or subsidiary is being established with the intention of closing down

the operations of the existing business entity conducts business

operations.

(f) Implementation of strategic plan. The strategic plan may be

implemented by the State government(s), local governments, regional

planning agencies, non-profit organizations, community-based

organizations, and/or other nongovernmental entities. Activities

included in the plan may be funded from any source, Federal, State,

local, or private, which agrees to provide assistance to the nominated

area.

(g) Elements of the strategic plan. A strategic plan may include,

but is not limited to, activities that address:

(1) Economic problems, through measures designed to create

employment opportunities; support business startup or expansion; or

development of community institutions;

(2) Human concerns, through the provision of social services, such

as rehabilitation and treatment programs or the provision of training,

education or other services within the affected areas;

(3) Community needs, such as the expansion of housing stock and

homeownership opportunities, efforts to reduce homelessness, to promote

fair housing and equal opportunity, to reduce and prevent crime and

improve security in the area; and

(4) Physical improvements, such as the provision or improvement of

public infrastructure, or the provision or improvement of recreational,

transportation, or other public services within the affected area.

Sec. 25.201 Evaluating the strategic plan.

The strategic plan will be evaluated for effectiveness as part of

the designation process for nominated rural areas described in

Sec. 25.301 of this part. On the basis of this evaluation, USDA may

request additional information pertaining to the plan and the proposed

area and may, as part of that request, suggest modifications to the

plan, proposed area, or term that would enhance its effectiveness. The

effectiveness of the strategic plan will be determined in accordance

with the four key principles set forth in Sec. 25.200(c) of this part.

USDA will review each plan submitted in terms of the four equally

weighted key principles, and of such other elements of these key

principles as are appropriate to address the opportunities and problems

of each nominated area, which may include:

(a) Economic opportunity. (1) The extent to which businesses, jobs,

and entrepreneurship will increase within the zone or community;

(2) The extent to which residents will achieve a real economic

stake in the zone or community;

(3) The extent to which residents will be employed in the process

of implementing the plan and in all phases of economic and community

development;

(4) The extent to which residents will be linked with employers and

jobs throughout the entire area and the way in which residents will

receive training, assistance, and family support to become economically

self-sufficient;

(5) The extent to which economic revitalization in the zone or

community interrelates with the broader regional economies; and

(6) The extent to which lending and investment opportunities will

increase within the zone or community through the establishment of

mechanisms to encourage community investment and to create new economic

growth.

(b) Sustainable community development--(1) Consolidated planning.

The extent to which the plan is part of a larger strategic community

development plan for the nominating localities and is consistent with

broader regional development strategies;

(2) Public safety. The extent to which strategies such as community

policing will be used to guarantee the basic safety and security of

persons and property within the zone or community;

(3) Amenities and design. The extent to which the plan considers

issues of design and amenities that will foster a sustainable

community, such as open spaces, recreational areas, cultural

institutions, transportation, energy, land and water uses, waste

management, environmental protection and the vitality of life of the

community;

(4) Sustainable development. The extent to which economic

development will be achieved in a manner consistent that protects pubic

health and the environment;

(5) Supporting families. The extent to which the strengths of

families will be supported so that parents can succeed at work, provide

nurture in the home, and contribute to the life of the community;

(6) Youth development. The extent to which the development of

children, youth, and young adults into economically productive and

socially responsible adults will be promoted, and the extent to which

young people will be provided with the opportunity to take

responsibility for learning the skills, discipline, attitude, and

initiative to make work rewarding.

(7) Education goals. The extent to which schools, religious

organizations, non-profit organizations, for-profit enterprises, local

governments and families will work cooperatively to provide all

individuals with he fundamental skills and knowledge they need to

become active participants and contributors to their community, and to

succeed in an increasingly competitive global economy;

(8) Affordable housing. The extent to which a housing component,

providing for adequate safe housing and ensuring that all residents

will have equal access to that housing is contained in the strategic

plan;

(9) Drug abuse. The extent to which the plan addresses levels of

drug abuse and drug-related activity through the expansion of drug

treatment services, drug law enforcement initiatives, and community-

based drug abuse education programs; and

(10) Equal opportunity. The extent to which the plan offers an

opportunity for diverse residents to participate in the rewards and

responsibilities of work and service. The extent to which the plan

ensures that no business within a nominated zone or community will

directly or through contractual or other arrangements subject a person

to discrimination on the basis of race, color, national origin, gender,

handicap or age in its employment practices, including recruitment,

recruitment advertising, employment, layoff, termination, upgrading,

demotion, transfer, rates of pay or the forms of compensation, or use

of facilities. Applicants must comply with the provisions of Title VI

of the Civil Rights Act of 1964, section 504 of the Rehabilitation Act

of 1973, and the Age Discrimination Act of 1975, as implemented by

USDA.

(c) Community-based partnerships----(1) Community partners. The

extent to which residents of the strategic plan and their commitment to

implementing it. The extent to which community-based organizations in

the nominated area have participated in the development of

[[Page 6955]] the nominated area have participated in the development

of the plan, and their record of success measured by their achievements

and support for undertakings within the nominated area:

(2) Private and non-profit organizations as partners. The extent to

which partnership arrangements include commitments from private and

non-profit organizations, including corporations, utilities, banks and

other financial institutions, and educational institutions supporting

implementation of the strategic plan;

(3) State and local government partners. The extent to which

State(s) and local governments are committed to providing support to

the strategic plan, including their commitment to ``reinventing'' their

roles and coordinating programs to implement the strategic plan; and

(4) Permanent implementation and evaluation structure. The extent

to which a responsible and accountable implementation structure or

process has been created to ensure that the plan is successfully

carried out and that improvements are made throughout the period of the

zone or community's designation.

(d) Strategic vision for change.-- (1) Goals and coordinated

strategy. The extent to which the strategic plan reflects a projection

for the community's revitalization which links economic, human,

physical, community development and other activities in a mutually

reinforcing, synergistic way to achieve ultimate goals;

(2) Creativity and innovation. The extent to which the activities

proposed in the plan are creative, innovative and promising and will

promote the civic spirit necessary to revitalize the nominated area;

(3) Building on assets. The extent to which the vision for

revitalization realistically addresses the needs of the nominated area

in a way that takes advantage of its assets; and

(4) Benchmarks and learning. The extent to which the plan includes

performance benchmarks for measuring progress in its implementation,

including an on-going process for adjustments, corrections and building

on what works.

Sec. 25.202 Submission of nominations for designation.

(a) General. A separate nomination for designation as an

Empowerment Zone and/or Enterprise Community must be submitted for each

rural area for which such designation is requested. The nomination

shall be submitted in a form to be prescribed by USDA in the Notice

Inviting Applications published in the Fedeal Register, and must

contain complete and accurate information.

(b) Certifications. Certifications must be submitted by the

State(s) and local government(s) requesting designation stating that:

(1) The nominated area satisfies the boundary tests of

Sec. 25.100(d) of this part;

(2) The nominated area is one of pervasive poverty, unemployment,

and general distress, as described by Sec. 25.102 of this part;

(3) The nominated area satisfies the poverty rate criteria set

forth in Sec. 25.103 of this part;

(4) The nominated rural area contains no portion of an area that is

either already designated as an Empowerment Zone and/or Enterprise

Community or is otherwise included in any other area nominated for

designation as a Empowerment Zone and/or Enterprise Community;

(5) Each nominating governmental entity has the authority to:

(i) Nominate the rural area for designation as an Empowerment Zone

and/or Enterprise Community;

(ii) Make the State and local commitments required by

Sec. 25.200(d) of this part; and

(iii) Provide written assurances satisfactory to the Secretary that

these commitments will be met;

(6) Provide assurances the amounts provided to the State for the

area under section 2007 of Title XX of the Social Security Act will not

be used to supplant Federal or non-Federal funds for sevices and

activities which promote the purposes of section 2007;

(7) Provide that the nominating governments or corporations agree

to make available all information requested by USDA to aid in the

evaluation of progress in implementing the strategic plan and reporting

on the use of EZ/EC SSBG funds; and

(8) Provide assurances that the nominating State(s) agrees to

distribute the EZ/EC SSBG funds in accordance with the strategic plan

submitted for the designated zone or community.

(c) Maps and area description. Maps and a general description of

the nominated area shall accompany the nomination request.

Subpart D--Designation Process

Sec. 25.300 USDA action and review of nominations for designation.

(a) Establishment of submission procedures. USDA will establish a

time period and procedure for the submission of application as

Empowerment Zones or Enterprise Communities, including submission

deadlines and addresses, in a Notice Inviting Applications, to be

published in the Federal Register.

(b) Acceptance for processing. USDA will accept for processing

those applications as Empowerment Zones or Enterprise Communities which

USDA determines have met the criteria required under this part. USDA

will notify the State(s) and local government(s) whether or not the

nomination has been accepted for processing. The criteria for

acceptance for processing is that the application as an Empowerment

Zone or Enterprise Community must be received by USDA on or before the

close of business on the date established by the Notice Inviting

Applications published in the Federal Register. The applications must

be complete and must be accompanied by a strategic plan, as required by

Sec. 25.200(c) of this part and the certifications required by

Sec. 25.202(b) of this part.

(c) Evaluation of applications. In the process of reviewing each

application accepted for processing, USDA may undertake a site visit(s)

to any nominated area to aid in the process of evaluation.

(d) Modification of the strategic plan, boundaries of nominated

rural areas, and/or period during which designation is in effect.

Subject to the limitations imposed by Sec. 25.100 of this part, USDA

may request additional information pertaining to the plan and proposed

area and may, as a part of that request, suggest modifications to the

plan that would enhance its effectiveness.

(e) Publication of designations. Final determination of the

boundaries of areas and the term for which the designations will remain

in effect will be made by the Secretary. Announcements of those

nominated areas designated as Empowerment Zones of Enterprise

Communities will be made by publication of a Notice in the Federal

Register.

Sec. 25.301 Selection factors for designation of nominated rural

areas.

In choosing among nominated rural areas eligible for designation,

the Secretary shall consider:

(a) The effectiveness of the Strategic plan, in accordance with the

key principles set out in Sec. 25.201 of this part.

(b) The effectiveness of the assurances made pursuant to

Sec. 25.200(a)(2) of this part that the strategic plan will be

implemented.

(c) The extent to which an application proposes activities that are

creative and innovative. [[Page 6956]]

(d) Such other factors as established by the Secretary, which

include the degree of need demonstrated by the nominated area for

assistance under this part and the diversity within and among the

nominated areas. If other factors are established by USDA, a Federal

Register Notice will be published identifying such factors, along with

an extension of the application due date if necessary.

Sec. 25.302 Number of Rural Empowerment Zones and Enterprise

Communities.

The Secretary may designate up to three rural Empowerment Zones and

up to thirty rural Enterprise Communities.

Subpart E--Post-Designation Requirements

Sec. 25.400 Reporting.

USDA will require periodic reports for the Empowerment Zones and

Enterprise Communities and other applicants designated pursuant to this

part. These reports will identify the community, local government and

State actions which have been taken in accordance with the strategic

plan. In addition to these reports, such other information relating to

designated Empowerment Zones and Enterprise Communities as USDA shall

request from time to time shall be submitted promptly. On the basis of

this information and of on-site reviews, USDA will prepare and issue

periodic reports on the effectiveness of the Empowerment Zones/

Enterprise Communities Program.

Sec. 25.401 Periodic performance reviews.

USDA will regularly evaluate the progress in implementing the

strategic plan in each designated Empowerment Zone and Enterprise

Community on the basis of performance reviews to be conducted on site

and using other information submitted. USDA may also commission

evaluations of the Empowerment Zone program as a whole by an impartial

third party. Where not prevented by State law, nominating State

governments must provide the timely release of data requested by USDA

for the purposes of monitoring and assisting the success of Empowerment

Zones and Enterprise Communities. The implementing entity for

Empowerment Zones/Enterprises Communities will be responsible for EZ/EC

program activities and fiscal management of the EZ/EC funds. They must

demonstrate continual involvement of all segments of the community,

including low income/disadvantaged residents, in the implementation of

the Strategic Plan.

Sec. 25.402 Validation of designation.

(a) Reevaluation of designations. On the basis of the performance

review described in Sec. 25.401 of this part, and subject to the

provisions relating to the revocation of designation appearing at

Sec. 25.403 of this part, USDA will make findings as to the continuing

eligibility for the validity of the designation of any Empowerment Zone

or Enterprise Community. Determinations of whether any designated

Empowerment Zone or Enterprise Community remains in good standing shall

be promptly communicated to all Federal agencies providing assistance

or administering programs under which assistance can be made available

in such Zone or community.

(b) Modification of designation. Based on a rural Zone or

community's success in carrying out its strategic plan, and subject to

the provisions relating to revocation of designation appearing at

Sec. 25.403 of this part and the requirements as to the number, maximum

population and other characteristics of rural Empowerment Zones set

forth in Sec. 25.100 of this part, the Secretary may modify

designations by reclassifying rural Empowerment Zones as Enterprise

Communities or Enterprise Communities as Empowerment Zones.

Sec. 25.403 Revocation of designation.

(a) Basis for revocation. The Secretary may revoke the designation

of a rural area as an Empowerment Zone or Enterprise Community if the

Secretary determines on the basis of the periodic monitoring and

assessments described in Sec. 25.401 of this part, that the applicant

or the State(s) or local government(s) in which the rural area is

located:

(1) Has modified the boundaries of the area;

(2) Has failed to make satisfactory progress in achieving the

benchmarks set forth in the strategic plan; or

(3) Has not complied substantially with the strategic plan.

(b) Warning letter. Before revoking the designation of a rural area

as an Empowerment Zone or Enterprise Community, the Secretary will

issue a letter of warning to the applicant and the nominating State(s)

and local government(s):

(1) Advising that the Secretary has determined that the applicant

and/or the nominating local government(s)and/or State(s) has:

(i) Modified the boundaries of the area; or

(ii) Is not complying substantially with, or has failed to make

satisfactory progress in achieving the benchmarks set forth in the

strategic plan prepared pursuant to Sec. 25.200(d) of this part; and

(2) Requesting a reply from all involved parties within 90 days of

the receipt of this letter of warning.

(c) Notice of revocation. After allowing 90 days from the date of

receipt of the letter of warning for response, and after making a

determination pursuant to paragraph (a) of this section, the Secretary

may issue a final notice of revocation of the designation of the rural

area as an Empowerment Zone or Enterprise Community.

(d) Notice to affected Federal agencies. USDA will notify all

affected Federal agencies providing assistance in a rural Empowerment

Zone or Enterprise Community of its determination to revoke any

designation pursuant to this section or to modify a designation

pursuant to Sec. 25.402 of this part.

Subpart F--Special Rules

Sec. 25.500 Indian reservations.

No rural Empowerment Zone or Enterprise Community may include any

area within an Indian reservation.

Sec. 25.501 Governments.

If more than one State or local government seeks to nominate an

area under this part, any reference to or requirement of this part

shall apply to all such governments.

Sec. 25.502 Nominations by economic development corporations.

Any rural area nominated by an economic development corporation

chartered by a State and qualified to do business in the State in which

it is located, shall be treated as nominated by a State and local

governments.

Sec. 25.503 Use of census data.

Population and poverty rate data shall be determined by the 1990

Census Data.

Sec. 25.504 Rural areas.

(a) What constitutes ``rural''. A rural area may consist of any

area that lies outside the boundaries of a Metropolitan Area, as

designated by the Office of Management and Budget, or, as an area that

is primarily rural and has at least 50 percent of the population of the

nominated area residing outside of a Metropolitan Area.

(b) Exceptions to the definition. On a case by case basis, the

Secretary will grant requests for waiver from the definition of

``rural'' stated in paragraph (a) of this section upon a showing of

good cause. Applicants seeking to apply for a rural designation who do

not satisfy the definition in paragraph (a) of [[Page 6957]] this

section must submit a request for waiver in writing to the Rural

Business and Cooperative Development Service, Empowerment Zone Office,

Department of Agriculture, AG Box 3202, 14th Street and Independence

Avenue, SW, Washington, DC 20250-3200. Requests must include:

(1) The name, address and daytime phone number of the contact

person for the applicant seeking the waiver; and

(2) Sufficient information regarding the area that would support

the infrequent exception from the definition.

(c) The waiver process. The Secretary, in consultation with the

Department of Commerce, will have discretion to permit rural

applications for communities that do not meet the above rural criteria.

Sec. 25.550

Dated: January 25, 1995.

Richard E. Rominger,

Acting Secretary.

[FR Doc. 95-2313 Filed 2-3-95; 8:45 am]

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