Designation of Rural Empowerment Zones and Enterprise Communities
Federal RegisterApr 16, 1998
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SUMMARY: This interim rule sets forth the policy and procedures by
which the Secretary of the U.S. Department of Agriculture (USDA) will
designate not more than five rural Empowerment Zones (Round II) as
authorized by the Taxpayer Relief Act of 1997 (Pub. L. 105-34). This
interim rule also amends regulations pertaining to the existing three
(3) rural Empowerment Zones and thirty (30) rural Enterprise
Communities which were designated pursuant to Title XIII of the Omnibus
Budget Reconciliation Act of 1993 (Pub. L. 103-66) (Round I). Published
elsewhere in this Federal Register is a Notice Inviting Applications
for Designation of rural Empowerment Zones for Round II pursuant to
this implementing regulation.
DATES: Effective May 18, 1998. Written comments must be received on or
before June 15, 1998.
ADDRESSES: Submit written comments in duplicate on the interim rule to
the Chief, Regulations and Paperwork Management Branch, Support
Services Division, Rural Development, U.S. Department of Agriculture,
STOP 0743, 1400 Independence Ave., SW, Washington, DC 20250-0743. Also,
comments may be submitted via the Internet by addressing them to
``[email protected]'' and must contain ``Empowerment'' in the
subject. All written comments will be available for public inspection
during regular work hours at the above address. (In addition, see the
Paperwork Reduction Act heading under the Supplementary Information
section of this preamble regarding submission of comments on the
information collection burden.)
FOR FURTHER INFORMATION CONTACT: Deputy Administrator for Community
Development, USDA Rural Development, Office of Community Development,
Reporters Building, Room 701, STOP 3203, 300 7th Street, SW,
Washington, DC 20024-3203, telephone 1-800-851-3403, or by sending an
Internet e-mail message to www.ezec.gov">``[email protected]www.ezec.gov''. For hearing-
and speech-impaired persons, information concerning this program may be
obtained by contacting USDA's TARGET Center at (202) 720-2600 (Voice
and TDD).
SUPPLEMENTARY INFORMATION:
Classification
This rule has been reviewed under E.O. 12866 and has been
determined to be a significant regulatory action, as that term is
defined in Executive Order 12866, and has been reviewed by OMB.
Justification for Interim Rule
It is the policy of this Department that rules relating to public
property, loans, grants, benefits, or contracts shall be published for
comment notwithstanding the exemption of 5 U.S.C. 553 with respect to
such rules. However, exemptions are permitted where an agency finds,
for good cause, that compliance would be impracticable, unnecessary, or
contrary to the public interest.
The Department finds that good cause exists to publish this rule
for effect without first soliciting public comment. USDA believes it
would be contrary to the public interest to delay the effectiveness of
the rule, since it will prescribe the criteria for designating new
empowerment zones. The governmental entities and other entities that
may work with them in partnership to develop an application for
designation need to know the requirements of the program in time to
develop their strategic plans and apply for designation, which
designations are subject to a statutory deadline of January 1, 1999.
The Department has already published a rule for notice to comment
on the subject of designation of Empowerment Zones, which was codified
at 7 CFR part 25. This new rule to implement a second round of
designation of Empowerment Zones is patterned on the prior rule. The
major differences between this rule and the earlier rule are based on
statutory changes, which leave virtually no room for exercise of
discretion. Other additions to the rule reflect USDA's experience with
the first round, clarifying the expectations of the parties to reflect
actual experience. These changes are not controversial and, therefore,
do not signal a necessity for advance public comment.
USDA's finding that it would be contrary to the public interest to
delay the effectiveness of the rule is based on the practical necessity
of preparing an application for designation as an empowerment zone
within the timeframe set by the authorizing statute. The designations
are required by the statute (section 1391(g)(2)) to be made before
January 1, 1999. The governmental entities and other entities that may
work with them in partnership to develop an application for designation
need to know the requirements of the program in time to develop their
strategic plans and apply for designation. Delay in prescribing the
criteria for designating new empowerment zones would delay the
development of these cooperative efforts and make it extremely
difficult for applicants to develop their strategic plans in a timely
fashion.
For these reasons, USDA believes that an interim rulemaking is
justified. USDA is soliciting public comments on this rule and will
consider these comments in the development of a final rule.
Programs Affected
The Catalog of Federal Domestic Assistance Program number assigned
to this program is 10.772.
Program Administration
The program is administered through the Office of Community
Development within the Rural Development mission area of the Department
of Agriculture.
Paperwork Reduction Act
The information collection requirements contained in this rule, as
described in Secs. 25.200(b), 25.201, 25.202, 25.203 together with the
implementing application form (Application burden), Secs. 25.400,
25.403, 25.405(b) and 25.405(b)(1) (Reporting burden), have been
approved by the Office of Management and Budget (OMB) under the
Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520) and assigned OMB
control numbers 0570-0026 (Application burden) and 0570-0027 (Reporting
burden). This approval has been granted on an emergency basis through
August 31, 1998. In accordance with the Paperwork Reduction Act, USDA
may not conduct or sponsor, and a person is not required to respond to,
a collection of information unless the collection displays a currently
valid OMB control number.
In addition, USDA will seek an extension of this approval for these
information collections. Therefore, USDA asks for comments regarding
the information collections contained in the sections of this rule
stated above. At the end of the comment period, USDA will submit the
proposed information collections to OMB for approval.
Comments regarding the information collections contained in the
rule, must be submitted by June 15, 1998. Comments on these information
[[Page 19109]]
collections should refer to the proposal by name and/or OMB control
number and must be sent to: Cheryl Thompson, Regulations and Paperwork
Management Branch, Support Services Division, U.S. Department of
Agriculture, Rural Housing Service, STOP 0743, 1400 Independence Ave.,
SW, Washington, DC 20250-0743.
Specifically, comments are solicited from members of the public and
affected agencies concerning the proposed collection of information to:
(1) Evaluate whether the proposed collection of information is
necessary for the proper performance of the functions of the agency,
including whether the information will have practical utility; (2)
evaluate the accuracy of the agency's estimate of the burden of the
proposed collection of information; (3) enhance the quality, utility
and clarity of the information to be collected; and (4) minimize the
burden of the collection of information on those who are to respond,
including through the use of appropriate automated collection
techniques or other forms of information technology, e.g., permitting
electronic submission of responses.
The following table identifies the components of the information
collection:
----------------------------------------------------------------------------------------------------------------
Est. avg.
Section of Number of Frequency response Annual
Type of collection 7 CFR part respondents of response time burden
25 affected (hours) (hours)
----------------------------------------------------------------------------------------------------------------
Application.................................... 25.200(b)
25.201
25.202
25.203 75 1 50 3,750
Periodic Reporting (all rural EZ/ECs).......... 25.400
25.403
25.405(b) 38 2 10 760
Response to Warning Letter..................... 25.405(b)(1
) 1 1 1 1
----------------------------------------------------------------------------------------------------------------
Total Burden in the Round II Application Year: 4,511 hours
Total Burden in each Reporting Year, Years 2 through 10: 761 hours
Environmental Impact Statement
It is the determination of the Secretary that this action is not a
major Federal action significantly affecting the environment.
Therefore, in accordance with the National Environmental Policy Act of
1969, Pub. L. 91-190, and 7 CFR part 1940 subpart G, an Environmental
Impact Statement is not required.
Executive Order 12988
This interim rule has been reviewed in accordance with E.O. 12988,
Civil Justice Reform. In accordance with this rule: (1) All state and
local laws and regulations that are in conflict with this rule will be
preempted; (2) no retroactive effect will be given to this rule; and
(3) administrative proceedings in accordance with 7 CFR part 11 must be
exhausted before bringing suit in court challenging action taken under
this rule unless those regulations specifically allow bringing suit at
an earlier time.
The Unfunded Mandates Reform Act of 1995
Title II of the Unfunded Mandates Reform Act of 1995 (UMRA), Pub.
L. 104-4, establishes requirements for Federal agencies to assess the
effects of their regulatory actions on state, local, and tribal
governments and the private sector. Under section 202 of the UMRA, USDA
must prepare a written statement, including a cost benefit analysis,
for proposed and final rules with ``Federal mandates'' that may result
in expenditures to state, local or tribal governments, in the
aggregate, or to the private sector, of $100 million or more in any one
year. When such a statement is needed for a rule, section 205 of UMRA
generally requires USDA to identify and consider a reasonable number of
regulatory alternatives and adopt the least costly, more cost effective
or least burdensome alternative that achieves the objectives of the
rule.
This rule contains no Federal mandates (under the regulatory
provisions of title II of the UMRA) for state, local, and tribal
governments or the private sector. Therefore this rule is not subject
to the requirements of sections 202 and 205 of UMRA.
Regulatory Flexibility Act
In compliance with the Regulatory Flexibility Act (5 U.S.C. 601-
612), the undersigned has determined and certified by signature of this
document that this rule will not have a significant economic impact on
a substantial number of small entities. The Regulatory Flexibility 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. The provisions included in this rule will not impact a
substantial number of small entities to a greater extent than large
entities. Therefore, no regulatory flexibility analysis under the
Regulatory Flexibility Act is necessary.
Executive Order 12611, Federalism
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.
I. Background
The Empowerment Zones program confers upon rural distressed
American communities the opportunity to design and implement programs
to create jobs, support their residents in becoming skilled and able to
earn a livable income and establish other strategies for creating
opportunity and building a brighter future. The program combines tax
benefits with investment of Federal resources and enhanced coordination
among Federal agencies.
The nomination process requires applicant communities to take stock
of their assets and problems, create a vision for the future, and
structure a strategic plan for achieving their vision. Local
partnerships among community residents, businesses, financial
institutions, service providers, transportation agencies, local court
systems, neighborhood associations, tribal governments and state and
local
[[Page 19110]]
governments are formed or strengthened by going through the application
process. Businesses will be encouraged to invest and create jobs in
distressed areas. Communities are afforded an opportunity to work with
these partners in the creation and implementation of a community-based
strategic plan. Local strategic plans are intended to produce more
complete coordination between community members working in the areas of
job creation, skills training, social services, education, criminal
justice, infrastructure improvements and other areas critical to
community development.
A. Champion Communities
Applicants which are not designated as either an Empowerment Zone
or Enterprise Community, but which have evidenced quality preparation
and strong support for implementing their strategic plans, are eligible
for designation by the Secretary as ``Champion communities.'' Champion
communities are eligible for targeted technical assistance, information
and outreach programs instituted by USDA. They receive priority
preference points, where such discretionary points may be granted by
agency administrators and state directors in administering USDA
programs. They receive priority consideration under such other federal
programs as may be identified and such other benefits as may be
conferred by statute. State directors are strongly encouraged to use
discretionary points on behalf of Champion communities where possible.
B. Community Development Corporations
Under a separate program directed by the Department of Housing and
Urban Development (HUD), Community Development Corporations (CDCs)
nominated by the locality, or the Round I applicants for the
empowerment zone or enterprise community designation, are considered
eligible for designation to receive tax preferred contributions from
donors. HUD has designated eight rural CDCs for this program.
C. Round I Enterprise Communities
Communities designated as Enterprise Communities in Round I receive
a number of benefits. Enterprise Communities are eligible for tax-
exempt facilities bonds for certain private business activities. States
with designated Round I Enterprise Communities received Empowerment
Zone/Enterprise Community Social Service Block Grants (EZ/EC SSBGs) in
the amount of approximately $3 million for each rural Enterprise
Community for activities identified in their strategic plans which are
consistent with the statutory requirements for the use of those funds.
Enterprise Communities received special consideration in competition
for funding under numerous Federal programs. The Taxpayer Relief Act of
1997 provided for a new qualified academy zone bond program to
contribute toward educational needs. Also new under this recent
legislation is a provision allowing certain environmental cleanup costs
to be deducted from income for tax purposes in the year incurred, which
costs would otherwise be capitalized into the cost of the land.
Eligible cleanup costs include costs for cleaning up sites in targeted
areas, which areas include Enterprise Communities.
D. Round I Empowerment Zones
Communities designated as Round I Empowerment Zones receive all of
the benefits provided to Enterprise Communities, in addition to other
benefits. States with rural Empowerment Zones designated in Round I
received EZ/EC SSBGs in the amount of $40 million for each rural
Empowerment Zone, or their proportional share of $40 million in a
multi-state Empowerment Zone, equal to the proportion of that
Empowerment Zone's residents living in the state. Employer Wage Credits
for Round I Empowerment Zone residents are provided to qualified
employers engaged in trade, business, health care, or human service
delivery in designated Round I Empowerment Zones.
E. Round II Empowerment Zones
Communities designated as Round II Empowerment Zones will receive
virtually all of the benefits provided to Round I Empowerment Zones. To
the extent direct federal funding for Round II rural Empowerment Zones
is not authorized as of the publication date of this rule, future
authorization of direct funding is possible. A major benefit for Round
II Empowerment Zones which is not available to Round I Empowerment
Zones or Enterprise Communities is the $60,000,000 authorization per
zone for issuing tax exempt facilities bonds, which issuance authority
is not subject to the overall cap on state issuances of federally tax-
exempt private activity bonds. A comparison of the benefits (as of this
publication date) afforded the additional five Round II rural
empowerment zones to those available to Round I Empowerment Zones
follows:
Rural Empowerment Zones Benefit Comparison Table
------------------------------------------------------------------------
Round I Round II
------------------------------------------------------------------------
Period.......................... From December 21, In most cases, ten
1994 (Designation full calendar
Date) to December years following
31, 2004. the Designation
Date
Title XX of the Social Security 2 grants To be determined.
Act Appropriations. aggregating
$40,000,000 per
rural zone.
Tax Exempt Bonds................ A new category of Round II rural
tax-exempt zones can each
private activity issue up to
bonds was $60,000,000 in
authorized for ``new bonds'' to
certain zone finance zone
facilities. facilities in
Issues are addition to Round
subject to state I type tax exempt
private activity bonds
bond cap levels Round II ``new
on total bonds'' are not
issuances, and subject to
special limits on private activity
issue size. bond volume caps
Also available to or the special
Round I ECs. limits on issue
size applicable
to Round I type
issues.
Wage Credit Provision: 20% wage credit None.
(exclusive to Round I EZs). for the first
$15,000 of
qualified wages
paid to a zone
resident who
works in the
zone, with a
phaseout
beginning in
2002. ``Qualified
zone wages'' may
not include wages
for which a work
opportunity tax
credit is claimed
(see next).
[[Page 19111]]
Work Opportunity Tax Credit (not Available to Round 40% of qualified
exclusive to EZs; expires 6/30/ I EZs. first-year wages
98). Also available to paid to a member
Round I ECs. of a targeted
group, where
first-year wages
taken into
account may not
exceed $6,000.
Targeted
employees include
high risk youth
residents of EZs
and ECs, food
stamp and SSI
recipients,
vocational
rehabilitation
referrals and
others.
Internal Revenue Code 26 U.S.C. Capital costs of As with Round I
Sec. 179 Expensing:. some kinds of EZs, up to
business property $20,000 of
which must additional
otherwise be section 179
capitalized and expensing,
depreciated over however, the
time may be property in
deducted in the question must be
year incurred on the parcels
under section qualified under
179. For a zone the poverty rate
business, the criteria.
annual expensing Property on
allowance for parcels included
section 179 under the
property is ``developable
increased by the site'' per that
lesser of (1) eligibility
$20,000 or (2) provision is not
actual cost of eligible property
property placed (see Eligibility
in service during Criteria Table,
the year. below).
Eligible types of
property do not
include
buildings. The
phaseout
provision of
section 179 that
would otherwise
apply to eligible
179 property is
reduced for zone
property.
Brownfields Deductible Expense Certain Also available to
(not exclusive to EZs and ECs). environmental Round II EZs.
remediation
expenditures that
would otherwise
be capitalized
into the cost of
the land may be
deducted if the
costs are paid or
incurred prior to
January 1, 2001.
Also available to
Round I ECs.
Qualified Zone Academy Bonds: (A Tax credit bonds Also available to
national limitation across all whereby certain Round II EZs.
empowerment zones and financial The statute does
enterprise communities of up to institutions not expressly
$400 million each year for (i.e., banks, provide for an
years 1998 and 1999). insurance allocation to
companies, and rural empowerment
corporations zones or
actively engaged enterprise
in the business communities.
of lending money)
that hold
``qualified zone
academy bonds''
are entitled to a
nonrefundable tax
credit in an
amount equal to a
credit rate (set
by the Treasury
Department)
multiplied by the
face amount of
the bond. They
may or may not be
interest bearing;
if so, the
interest is
taxable.
The credit is
effective for
obligations
issued after
December 31, 1997.
Also available to
Round I ECs.
------------------------------------------------------------------------
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 and must demonstrate
the capacity or the commitment to carry out these plans. Effective plan
development must involve the participation of the affected community,
and of the private sector, acting in concert with the state, tribal 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. Poverty, unemployment,
and other need factors are critical in determining eligibility for
Empowerment Zone status, but play a less significant role in the
selection process.
State and local governments, tribal governments and economic
development corporations that are state chartered may nominate
distressed rural areas for designation as Empowerment Zones. A Round I
Enterprise Community may apply for Round II Empowerment Zone status.
II. Program Description
General
Pursuant to Title XIII of the Omnibus Budget Reconciliation Act of
1993, the Secretary of Agriculture designated three rural Empowerment
Zones and thirty rural Enterprise Communities on December 21, 1994. The
Secretary is proposing to designate five more rural empowerment zones
pursuant to the authorization in title IX of the Taxpayer Relief Act of
1997 (Pub. L. 105-34, approved August 5, 1997).
Eligibility
To be eligible for designation as a Round II rural Empowerment Zone
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); and
b. 25 percent in 90 percent of the 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. Show that each nominated parcel independently meets the two
poverty rate requirements;
7. Be located entirely within the jurisdiction of the unit or units
of general local government making the nomination; and
8. Not include any portion of a central business district as
defined in the Census of Retail Trade unless the poverty rate for each
Census tract is at least 35 percent.
A table summarizing the Eligibility Criteria applicable to Round II
Rural Empowerment Zone designations follows:
[[Page 19112]]
Rural Empowerment Zones Eligibility Criteria Table
------------------------------------------------------------------------
Criteria Round II
------------------------------------------------------------------------
Population................... The population of the nominated area may
not exceed 30,000.
Distress..................... The nominated area is one of pervasive
poverty, unemployment, and general
distress.
Area......................... Not more than 1,000 square miles.
Does not include any portion of a central
business district (as defined in the
most recent Census of Retail Trade)
unless the poverty rate for each
population census tract in such district
is 35 percent or higher.
Where a tract exceeds 1,000 square miles,
the excess land may be excluded.
Where a tract includes substantial
governmentally owned land, the
governmentally owned land may be
excluded.
Developable sites are not taken into
account in determining whether the 1,000
square mile limitation is met.
Boundary (sub category within May be continuous or consist of not more
Area). than 3 noncontiguous parcels. Where a
rural area straddles more than one state
(it may not, in any event, straddle more
than 3 states), the boundary must be
continuous.
Subject to: Where a tract exceeds 1,000
square miles or a nominated area
includes substantial governmentally
owned land, exclusion of the excess or
government-owned land will not be
treated as violating the continuous
boundary requirement.
Developable sites are not taken into
account in determining whether the
continuous boundary requirement is met.
Poverty Rate................. (1) Not less than a 20% poverty rate in
each census tract; and
(2) At least 90% of the total census
tracts each have a poverty rate of not
less than 25%;
Subject to:
Up to an aggregate of 2,000 acres in not
more than 3 noncontiguous parcels may be
excluded from the nominated area for
purposes of determining whether the 20%
and 25% tests are met, where those acres
may be developed for commercial or
industrial purposes.
Tracts with zero population are treated
the same as tracts with population under
2,000 for purposes of applying the
poverty rate criteria.
Tracts with population under 2,000 are
presumed to have a poverty rate of not
less than 25% if:
(1) more than 75% of the tract is zoned
for commercial or industrial use; and
(2) such tract is contiguous to 1 or more
other tracts which have a poverty rate
of not less than 25%, where that
determination for the contiguous tracts
is made using the actual poverty rate,
not by applying this provision.
Noncontiguous parcels must separately
meet the 20% and 25% tests above.
In the case of an area not tracted for
population census purposes, the
equivalent county divisions, defined by
the Bureau of the Census for defining
poverty areas, shall be used for
determining poverty rates.
The Secretary of Agriculture may
disregard the poverty rate test for not
more than one Round II Rural Empowerment
Zone and apply in lieu thereof an
emigration test as contained in the
applicable regulations.
Additional Factors........... (1) Effectiveness of the strategic plan;
and
(2) Assurances made by state and local
governments that the strategic plan will
be implemented.
(3) Other criteria as the Secretary may
impose.
A Round I Enterprise Community (EC) may
be designated a Round II Empowerment
Zone, however, the enterprise community
must apply for zone designation in its
entirety, or in its entirety together
with an additional area. A sub area of
an Enterprise Community may not apply.
With the exception of a Round I EC
applying for a Round II Empowerment Zone
designation, no portion of the area
nominated may already be included in a
Round I Empowerment Zone or Enterprise
Community.
A Round II Empowerment Zone may include
an area on an Indian reservation.
A nominated area in Alaska or Hawaii is
deemed to meet the Distress, Area and
Poverty Rate Criteria above, if for each
census tract or block group at least 20%
of the families within have an income
which is 50% or less than the statewide
median family income. [Note: the
Population and other requirements still
apply.]
------------------------------------------------------------------------
Application of Poverty Rate Test
A rounding methodology will be applied to the 90 percent
calculation in determining the number of tracts which must evidence a
poverty rate of not less than 25 percent. Where the nominated area
consists of fewer than ten tracts, the following table reflects
application of this methodology:
------------------------------------------------------------------------
Number of tracts Number of tracts
which must which must
Total Number of Census Tracts in demonstrate a demonstrate a
the Nominated Area poverty rate of poverty rate of
not less than 25% not less than 20%
------------------------------------------------------------------------
9 [.90 x 9 = 8.1; rounded to 8]... 8 1
8................................. 7 1
7................................. 6 1
6................................. 5 1
5 [.90 x 5 = 4.5; rounded to 5]... 5 .................
4................................. 4 .................
3................................. 3 .................
2................................. 2 .................
1................................. 1 .................
------------------------------------------------------------------------
Nomination Process
The law requires that areas be nominated by one or more local
governments and the states, or tribal government, where the nominated
rural area is located. Nominations can be considered for designation
only if:
1. The rural area meets the applicable requirements for
eligibility;
[[Page 19113]]
2. The Secretary determines such governments have the authority to
nominate the area for designation and to provide the required
assurances; and
3. The Secretary determines all information furnished by the
nominating state and local governments is reasonably accurate.
The state and local governments nominating an area for designation
must certify:
1. Each nominating governmental entity has the authority to
nominate the rural area for designation as an Empowerment Zone or
Enterprise Community and make the assurances required under this part;
2. Each nominating governmental entity has the authority to make
the state and local commitments contained in the strategic plan and as
required by this part;
3. Each nominating governmental entity has the authority to provide
written assurances satisfactory to the Secretary that these commitments
will be met;
4. The nominated area satisfies the eligibility criteria, inclusive
of the requirement that either
a. No portion of the area nominated is already included in a
designated Empowerment Zone or Enterprise Community or in an area
otherwise nominated to be designated under this section; or
b. Where an existing Round I Enterprise Community is seeking to be
designated as a Round II Empowerment Zone, that the nominated area
includes the entirety of the applicable Round I Enterprise Community
and any other areas as may be included in the application do not
comprise any portion of a designated Empowerment Zone or Enterprise
Community or part of an area otherwise nominated to be designated under
this section.
The state and local governments nominating an area for designation
must provide the following written assurances:
1. The strategic plan will be implemented;
2. The nominating governments will make available all information
requested by USDA to aid in the evaluation of progress in implementing
the strategic plan; and
3. EZ/EC SSBG funds, as applicable, will be used to supplement, not
supplant, other Federal or non-Federal funds available for financing
services or activities which can be used to achieve or maintain the
objectives consistent with EZ/EC SSBG purposes.
Strategic Plan
The application for designation must include a strategic plan. The
strategic plan must be developed in accordance with the following four
key principles:
1. 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.
2. Community-based partnerships, involving the participation of all
segments of the community, including the political and governmental
leadership, community groups, local public health and social service
departments and nonprofit groups providing similar services,
environmental groups, local transportation planning entities, public
and private schools, religious organizations, the private and nonprofit
sectors, centers of learning, and other community institutions and
individual citizens;
3. Economic opportunity, including job creation within the
community and throughout the region, entrepreneurial initiatives, small
business expansion, job training and other important services such as
affordable childcare and transportation services that may enable
residents to be employed in jobs that offer upward mobility;
4. Sustainable community development, to advance the creation of
livable and vibrant communities through comprehensive approaches that
coordinate economic, physical, environmental, community and human
development. These approaches should preserve the environment and
historic landmarks--they may include ``brownfields'' clean-up and
redevelopment, and promote transportation, education, and public
safety.
The strategic plan must:
1. Describe the coordinated economic, human, community, and
physical development plan and related activities proposed for the
nominated area;
2. Describe the process by which the affected community is a full
partner in the process of developing and implementing the plan and the
extent to which local institutions and organizations have contributed
to the planning process;
3. Identify the amount of state, local, and private resources that
will be available in the nominated area and the private and public
partnerships to be used, which may include participation by, and
cooperation with, universities, medical centers, and other private and
public entities;
4. Identify the funding requested under any Federal program in
support of the proposed economic, human, community, and physical
development and related activities;
5. Identify the baselines, methods, and benchmarks for measuring
the success of carrying out the strategic plan, including the extent to
which poor persons and families will be empowered to become
economically self-sufficient;
6. Must not include any action to assist any establishment in
relocating from one 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:
(i) The establishment of the 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
(ii) 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 in the area of its
original location or in any other area where the existing business
entity conducts business operation; and
7. Include such other information as required by USDA in a Notice
Inviting Applications.
III. Differences Between the Round II Interim Rule and the Round I
Final Rule
This interim rule amends the February 6, 1995 final rule
promulgated with respect to Round I Empowerment Zones and Enterprise
Communities. In addition to incorporating revised eligibility criteria
for Round II Empowerment Zones, changes have been made to streamline
the application process and provide guidance for the format of required
strategic plans. Changes have been made to the post designation
monitoring activities for all Empowerment Zones and Enterprise
Communities as well.
The broad categories for eligibility continue to be population,
distress, area size and boundary configuration, and poverty rate.
Within those categories, population limit and the requirement that the
nominated area evidence pervasive poverty and general distress remain
unchanged. The area size and boundary determinations were modified
[[Page 19114]]
for Round II and the specific poverty rate thresholds were relaxed
somewhat. The former requirement that at least half of the nominated
area consist of Census tracts with poverty rates of 35 percent or more
does not apply to Round II designees. Round II applicants must
demonstrate a poverty rate of not less than 25 percent for 90 percent
of the census tracts and a poverty rate of not less than 20 percent for
all Census tracts. The rule for Census tracts with populations under
2,000 was changed. The low population tract may qualify under its
actual poverty rate or by application of a special rule. If (i) the low
population tract is contiguous to a census tract which has an actual
poverty rate of not less than 25 percent, and (ii) more than 75 percent
of the area in the low population tract area is zoned commercial or
industrial, then the low population tract will be treated as having a
poverty rate of not less than 25 percent under the applicable statutory
provision.
The requirement that nominated areas conform to census tract
boundaries remains unchanged in most instances from Round I.
The 1,000 square mile limitation continues to apply to rural areas;
however, for purposes of determining whether a nominated area meets
this test, a special rule for rural areas allows the exclusion in a
single census tract of square mileage in excess of 1,000 square miles
as well as land owned by the Federal, state or local governmental
entities. The exclusion of such excess area or governmentally owned
land will not be treated as violating the boundary requirements.
The requirement that the nominated rural area not exceed 3
noncontiguous parcels if it is wholly within one state, but observe a
continuous boundary requirement if it crosses state lines, remains
unchanged from Round I. It may not involve more than three contiguous
states.
Round II nominated areas may include developable sites for which
the poverty rate criteria do not apply. The poverty rate criteria shall
not apply to up to three noncontiguous parcels in a nominated area
which may be developed for commercial or industrial purposes. The
aggregate area of such parcels may not exceed 2,000 acres. This
provision is subject to, and does not modify, the overall limit of
three noncontiguous parcels for the entire nominated area. Developable
sites are not taken into account in determining whether the 1,000
square mile and boundary limitations are met.
Round II provides that an area in an Indian reservation may be
nominated for designation as a rural Empowerment Zone. Where two [or
more] governing bodies have joint jurisdiction over an Indian
reservation, the nomination of a reservation area must be a joint
nomination. Nominated areas wholly within an Indian reservation are not
required to adhere to census tract boundaries if sufficient credible
data are available to show compliance with other requirements of the
rule.
The Interim rule does not include information concerning EZ/EC SSBG
funds that may become available from the U.S. Department of Health and
Human Services (HHS). Information about allowed uses of such grant
funds may be found in an appendix to the USDA Notice Inviting
Applications published elsewhere in this issue of the Federal Register.
Previously designated Round I Enterprise Communities may apply for
Round II Empowerment Zone designation. The Interim rule provides that a
Round I Enterprise Community must apply in its entirety, or in its
entirety together with additional area. A subportion of the Round I
Enterprise Community may not spin off such that the remainder of the
Round I Enterprise Community is not included in the application for
Round II Empowerment Zone designation.
The Interim rule provides that the format of the strategic plans
conform to the requirements set forth in the Notice Inviting
Applications published elsewhere in this Federal Register. This is to
offer guidance to the applicants and facilitate greater efficiency in
reviewing the applications and post designation evaluation. The Interim
rule clarifies and makes applicable to all designees the USDA reporting
requirements which were instituted for Round I Empowerment Zones and
Enterprise Communities.
The Notice Inviting Applications published elsewhere in this
Federal Register includes as an appendix a model Memorandum of
Agreement (MOA). Round I designees were asked to sign comparable MOAs;
Round II applicants will also be required to sign comparable MOAs.
List of Subjects in 7 CFR Part 25
Community development, Economic development, Empowerment zones,
Enterprise communities, Housing, Indians, Intergovernmental relations,
Reporting and recordkeeping requirements, Rural development.
In accordance with the reasons set out in the preamble, 7 CFR part
25 is revised to read as follows:
1. Title 7 is amended by revising part 25 to read as follows:
PART 25--RURAL EMPOWERMENT ZONES AND ENTERPRISE COMMUNITIES
Subpart A--General Provisions
Sec.
25.1 Applicability and scope.
25.2 Objective and purpose.
25.3 Definitions.
25.4 Secretarial review and designation.
25.5 Waivers.
25.6-25.9 [Reserved]
Subpart B--Area Requirements
25.100 Eligibility requirements.
25.101 Data utilized for eligibility determinations.
25.102 Pervasive poverty, unemployment and general distress.
25.103 Area size and boundary requirements.
25.104 Poverty rate.
25.105-25.199 [Reserved]
Subpart C--Nomination Procedure
25.200 Nominations by state and local governments.
25.201 Application.
25.202 Strategic plan.
25.203 Submission of applications.
25.204 Evaluation of the strategic plan.
25.205-25.299 [Reserved]
Subpart D--Designation Process
25.300 USDA action and review of nominations for designation.
25.301 Selection factors for designation of nominated rural areas.
25.302-25.399 [Reserved]
Subpart E--Post-Designation Requirements
25.400 Reporting.
25.401 Responsibility of lead managing entity.
25.402 Periodic performance reviews.
25.403 Ongoing 2-year work plan requirement.
25.404 Validation of designation.
25.405 Revocation of designation.
25.406-25.499 [Reserved]
Subpart F--Special Rules
25.500 Indian reservations.
25.501 Governments.
25.502 Nominations by state-chartered economic development
corporations.
25.503 Rural areas.
25.504-25.599 [Reserved]
25.600-25.999 [Reserved]
Authority: 5 U.S.C. 301, 26 U.S.C. 1391.
Subpart A--General Provisions
Sec. 25.1 Applicability and scope.
(a) Applicability. This part sets forth 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 (Round I) and the Taxpayer Relief Act of
1997, title IX, subtitle F (Round II).
(b) Scope. This part contains provisions relating to area
requirements,
[[Page 19115]]
the nomination process for rural Empowerment Zones and rural Enterprise
Communities, and the designation of these Zones and Communities by the
Secretary of the U.S. Department of Agriculture (Secretary) (USDA).
Provisions dealing with the nominations and designation of urban
Empowerment Zones and Enterprise Communities are promulgated by the
U.S. Department of Housing and Urban Development (HUD). This part also
contains provisions relating to granting certain nominated areas status
as Champion communities.
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 in order to
facilitate the empowerment of the disadvantaged and long-term
unemployed such that they may become economically self-sufficient, and
to promote revitalization of economically distressed areas, primarily
by facilitating:
(a) Coordination of economic, human services, health,
transportation, education, community, and physical development plans,
and other 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
comprehensive multi-sectoral strategic plan for any nominated rural
Empowerment Zone or Enterprise Community;
(c) Tax incentives and credits; and
(d) Distribution of other federal resources including grants from
USDA and other federal departments, including Empowerment Zone and
Enterprise Community Social Services Block Grant (EZ/EC SSBG) funds as
may be available from the U.S. Department of Health and Human Services
(HHS).
Sec. 25.3 Definitions.
As used in this part--
Annual report means the report submitted to USDA by all rural
Empowerment Zones and Enterprise Communities pursuant to Sec. 25.400.
Applicant means the entity that is submitting the community's
strategic plan for accomplishing comprehensive economic, human
community, and physical development within the area; such an entity may
include, but is not limited to, state governments, local governments,
tribal governments, regional planning agencies, non-profit
organizations, community-based organizations, or a partnership of
community members and other entities. The applicant may be the same as
or different from the lead managing entity.
Baseline condition means a measurable condition or problem at the
time of designation for which benchmark goals have been established for
improvement.
Benchmark activity means a program, project, task or combination
thereof which is designed to achieve a benchmark goal.
Benchmark goal means a measurable goal targeted for achievement in
the strategic plan.
Census tract means a population census tract, or, if census tracts
are not defined for the area, a block numbering area (BNA) as
established by the Bureau of the Census, U.S. Department of Commerce.
BNAs are areas delineated by state officials or (lacking state
participation) by the Census Bureau, following Census Bureau
guidelines, for the purpose of grouping and numbering decennial census
blocks in counties or statistically equivalent entities in which census
tracts have not been established. A BNA is equivalent to a census tract
in the Census Bureau's geographic hierarchy.
Brownfield means a ``qualified contaminated site'' meeting the
requirements of section 941 of the Taxpayer Relief Act of 1997, (26
U.S.C. 198(c)), where the site is located in an empowerment zone or
enterprise community.
Champion Community means a rural area granted such status by the
Secretary pursuant to this part from among those communities which
applied for designation as either a rural Empowerment Zone or
Enterprise Community and which were not so designated.
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.), and for certain consideration by
Federal programs such as the EZ/EC SSBG program established pursuant to
section 2007 of title XX of the Social Security Act (42 U.S.C. 1397f).
Designation date means December 21, 1994 in the case of Round I
designations and, in the case of Round II designations, the date
designation is made by the Secretary.
Developable site means a parcel of land in a nominated area which
may be developed for commercial or industrial purposes.
Empowerment Zone means a rural area so designated by the Secretary
pursuant to this part.
Enterprise Community means a rural area so designated by the
Secretary pursuant to this part.
EZ/EC SSBG funds or EZ/EC Social Services Block Grant funds means
any funds that may be provided to states or tribal governments by HHS
in accordance with section 2007(a) of the Social Security Act (42
U.S.C. 1397f), for use by designated Empowerment Zones or Enterprise
Communities.
HHS means the U.S. Department of Health and Human Services.
HUD means the U.S. Department of Housing and Urban Development.
Indian reservation means a reservation as defined in section
168(j)(6) of the Internal Revenue Code, 26 U.S.C. 168(j)(6).
Lead managing entity means the entity that will administer and be
responsible for the implementation of the strategic plan.
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 subdivisions that 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 in accordance with this part.
Outmigration means the negative percentage change reported by the
Bureau of the Census, U.S. Department of Commerce, for the sum of:
(1) Net Domestic Migration;
(2) Net Federal Movement; and
(3) Net International Migration, as such terms are defined for
purposes of the 1990 Census.
Poverty rate means, for a given Census tract, the poverty rate
reported in Table 19 of the Bureau of the Census CPH-3 series of
publications from the 1990 Census of Population and Housing: Population
and Housing Characteristics for Census Tracts and Block Numbering
Areas.
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. 25.405.
Round I identifies designations of rural Empowerment Zones and
Enterprise Communities pursuant to 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).
Round II identifies designations of rural Empowerment Zones
pursuant to subtitle F (Empowerment Zones,
[[Page 19116]]
Enterprise Communities, Brownfields, and Community Development
Financial Institutions) of Title IX of the Taxpayer Relief Act of 1997
(Pub. L. 105-34).
Rural area means any area defined pursuant to Sec. 25.503.
Secretary means the Secretary of the U.S. Department of
Agriculture.
State means any state in the United States.
Strategic plan means a plan for achieving benchmark goals
evidencing improvement over identified baseline conditions, developed
with the participation and commitment of local governments, tribal
governments, state governments, private sector, community members and
others, pursuant to the provisions of Sec. 25.202.
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; such designations of rural
Empowerment Zones and Enterprise Communities as are made shall be from
the applications submitted in response to the applicable Notice
Inviting Applications. The Secretary may elect to designate as Champion
communities, those nominated areas which are not designated as either a
rural Empowerment Zone or Enterprise Community and whose applications
meet the criteria contained in Sec. 25.301.
(b) Number of rural empowerment zones, enterprise communities and
champion communities.--(1) Round I. The Secretary may designate up to
three rural Empowerment Zones and up to thirty rural Enterprise
Communities prior to December 31, 1996.
(2) Round II. The Secretary may, prior to January 1, 1999,
designate up to five rural Empowerment Zones in addition to those
designated in Round I. The number of Champion Communities is limited to
the number of applicants which are not designated.
(c) Period of designation. The designation of a rural area as an
Empowerment Zone or Enterprise Community shall remain in effect during
the period beginning on the designation date and ending on the earliest
of the:
(1) End of the tenth calendar year beginning on or after the
designation date;
(2) Termination date designated by the state and local governments
in their application for nomination;
(3) Date the Secretary revokes the designation; or
(4) Date the Empowerment Zone or Enterprise Community modifies its
boundary without first obtaining the written approval of the Secretary.
Sec. 25.5 Waivers.
The Secretary may waive any provision of this part in any
particular case 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.
Secs. 25.6--25.99 [Reserved]
Subpart B--Area Requirements
Sec. 25.100 Eligibility requirements.
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;
(c) Meets the area size and boundary requirements of Sec. 25.103;
(d) Is located entirely within the jurisdiction of the general
local government making the nomination; and
(e) Meets the poverty rate criteria contained in Sec. 25.104.
(f) Provision for Alaska and Hawaii. A nominated area in Alaska or
Hawaii shall be presumed to meet the criteria of paragraphs (b), (c),
and (e) of this section if, for each Census tract or block group in the
area, at least 20 percent of the families in such tract have an income
which is 50 percent or less of the statewide median family income.
Sec. 25.101 Data utilized for eligibility determinations.
(a) Source of data. The data to be employed in determining
eligibility pursuant to this part shall be based on the 1990 Census,
and from information published by the Bureau of Census and the Bureau
of Labor Statistics, provided, however, that for purposes of
demonstrating outmigration pursuant to Sec. 25.104(b)(2)(iii), interim
data collected by the Bureau of Census for the 1990-1994 period may be
used. 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, except:
(1) Nominated areas in Alaska and Hawaii shall coincide with the
boundaries of census tracts or block groups as such term is used for
purposes of the 1990 Census;
(2) Developable sites are not required to coincide with the
boundaries of Census tracts; and
(3) Nominated areas wholly within an Indian reservation are not
required to adhere to census tract boundaries if sufficient credible
data are available to show compliance with other requirements of this
part. The requirements of Sec. 25.103 are otherwise applicable.
Sec. 25.102 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, levels of public assistance, numbers of persons or families
in poverty or similar data.
(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; outmigration and population
decline, a high or rising incidence of crime, narcotics use, abandoned
housing, deteriorated infrastructure, school dropouts, teen pregnancy,
incidents of domestic violence, incidence of certain health conditions
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 Area size and boundary requirements
(a) General eligibility requirements. A nominated area:
(1) May not exceed one thousand square miles in total land area;
(2) Must have one continuous boundary if located in more than one
[[Page 19117]]
state or may consist of not more than three noncontiguous parcels if
located in only one state;
(3) If located in more than one state, must be located within no
more than three contiguous states;
(4) May not include any portion of a central business district (as
such term is used for purposes of the most recent Census of Retail
Trade) unless the poverty rate for each Census tract in such district
is not less than 35 percent for an Empowerment Zone (30 percent in the
case of an Enterprise Community);
(5) Subject to paragraph (b)(4) of this section, may not include
any portion of an area already included in an Empowerment Zone or
Enterprise Community or included in an area otherwise nominated to be
designated under this section;
(b) Eligibility requirements specific to different rounds.
(1) For purposes of Round I designations only, a nominated area may
not include any area within an Indian reservation;
(2) For purposes of applying paragraph (a)(1) of this section to
Round II designations:
(i) A Census tract larger than 1,000 square miles shall be reduced
to a 1,000 square mile area with a continuous boundary, if necessary,
after application of Secs. 25.103(b)(2)(ii) and (iii);
(ii) Land owned by the Federal, state or local government may (and
in the event the Census tract exceeds 1,000 square miles, will) be
excluded in determining the square mileage of a nominated area; and
(iii) Developable sites, in the aggregate not exceeding 2,000
acres, may (and in the event the Census tract exceeds 1,000 square
miles, will) be excluded in determining the square mileage of the
nominated area;
(3) For purposes of applying paragraph (a)(3) of this section to
Round II designations, the following shall not be treated as violating
the continuous boundary requirement:
(i) Exclusion of excess area pursuant to paragraph (b)(2)(i) of
this section;
(ii) Exclusion of government owned land pursuant to paragraph
(b)(2)(ii) of this section; or
(iii) Exclusion of developable sites pursuant to paragraph
(b)(2)(iii) of this section; and
(4) Paragraph (a)(5) of this section shall not apply where a Round
I Enterprise Community is applying either in its entirety or together
with an additional area for a Round II Empowerment Zone designation.
Sec. 25.104 Poverty rate.
(a) General. Eligibility of an area on the basis of poverty shall
be established in accordance with the following poverty rate criteria
specific to Round I and Round II nominated areas:
(1) Round I: (i) In each Census tract, the poverty rate may not be
less than 20 percent;
(ii) For at least 90 percent of the Census tracts within the
nominated area, the poverty rate may not be less than 25 percent; and
(iii) For at least 50 percent of the Census tracts within the
nominated area, the poverty rate may not be less than 35 percent.
(2) Round II: (i) In each Census tract, the poverty rate may not be
less than 20 percent;
(ii) For at least 90 percent of the Census tracts within the
nominated area, the poverty rate may not be less than 25 percent;
(iii) Up to three noncontiguous developable sites, in the aggregate
not exceeding 2,000 acres, may be excluded in determining whether the
requirements of paragraphs (a)(2)(i) and (a)(2)(ii) of this section are
met; and
(iv) The Secretary may designate not more than one rural
Empowerment Zone without regard to paragraphs (a)(2)(i) and (a)(2)(ii)
of this section if such nominated area satisfies the emigration
criteria specified in paragraph (b)(2)(iii) of this section.
(b) Special rules. The following special rules apply to the
determination of poverty rate for Round I and Round II nominated areas:
(1) Round I--(i) Census tracts with no population. Census tracts
with no population shall be treated as having a poverty rate that meets
the requirements of paragraphs (a)(1)(i) and (a)(1)(ii) of this
section, but shall be treated as having a zero poverty rate for
purposes of applying paragraph (a)(1)(iii) of this section;
(ii) Census tracts with populations of less than 2,000. A Census
tract with a population of less than 2,000 shall be treated as having a
poverty rate which meets the requirements of paragraphs (a)(1)(i) and
(ii) of this section if more than 75 percent of the tract is zoned for
commercial or industrial use;
(iii) Adjustment of poverty rates for Round I Enterprise
Communities. For Round I Enterprise Communities only, the Secretary
may, where necessary to carry out the purposes of this part, apply one
of the following alternatives:
(A) Reduce by 5 percentage points one of the following thresholds
for not more than 10 percent of the Census tracts (or, if fewer, five
Census tracts) in the nominated area:
(1) The 20 percent threshold in paragraph (a)(1)(i) of this
section;
(2) The 25 percent threshold in paragraph (a)(1)(ii) of this
section;
(3) The 35 percent threshold in paragraph (a)(1)(iii) of this
section; or
(B) Reduce the 35 percent threshold in paragraph (a)(1)(iii) of
this section by 10 percentage points for three Census tracts.
(2) Round II--(i) Census tracts with no population. Census tracts
with no population shall be treated the same as those Census tracts
having a population of less than 2,000;
(ii) Census tracts with populations of less than 2,000. A Census
tract with a population of less than 2,000 shall be treated as having a
poverty rate of not less than 25 percent if:
(A) More than 75 percent of such tract is zoned for commercial or
industrial use; and
(B) Such tract is contiguous to 1 or more other Census tracts which
have a poverty rate of 25 percent or more, where such determination is
made without applying Sec. 25.104(b)(2)(ii).
(iii) Emigration Criteria. For purposes of the discretion as may be
exercised by the Secretary pursuant to paragraph (a)(2)(iv) of this
section, a nominated area must demonstrate outmigration of not less
than 15 percent over the period 1980-1994 for each census tract. The
outmigration for each census tract in the nominated area shall be as
reported for the county in which the census tract is located: Provided,
however, That the nominated area may include not more than one census
tract where the reported outmigration is less than 15 percent, which
tract shall be contiguous to at least one other census tract in the
nominated area.
(c) General rules. The following general rules apply to the
determination of poverty rate for both Round I and Round II nominated
areas.
(1) 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.
(2) Noncontiguous parcels. Each such parcel (excluding, in the case
of Round II, up to 3 noncontiguous developable sites not exceeding
2,000 acres in the aggregate) must separately meet the poverty criteria
set forth in this section.
(3) Areas not within census tracts. In the case of an area which is
not tracted for Census tracts, the block numbering area shall be used
for purposes of determining poverty rates. Block groups may be used for
Alaska and Hawaii.
[[Page 19118]]
Secs. 25.105-25.199 [Reserved]
Subpart C--Nomination Procedure
Sec. 25.200 Nominations by State and local governments.
(a) Nomination criteria. One or more local governments and the
states in which an area is located must nominate such area for
designation as an Empowerment Zone or Enterprise Community. Nominated
areas can be considered for designation only if:
(1) The rural area meets the applicable requirements for
eligibility identified in Sec. 25.100;
(2) The Secretary determines such governments have the authority to
nominate the area for designation and to provide the assurances
described in paragraph (b) of this section; and
(3) The Secretary determines all information furnished by the
nominating states and local governments is reasonably accurate.
(b) Required certifications and assurances. The state and local
governments nominating an area for designation must:
(1) Submit the following certifications:
(i) Each nominating governmental entity has the authority to:
(A) Nominate the rural area for designation as an Empowerment Zone
or Enterprise Community and make the assurances required under this
part;
(B) Make the state and local commitments contained in the strategic
plan or otherwise required under this part; and
(C) Provide written assurances satisfactory to the Secretary that
these commitments will be met; and
(ii) The nominated area satisfies the eligibility criteria
referenced in Sec. 25.100, inclusive of the requirement that either;
(A) No portion of the area nominated is already included in a
designated Empowerment Zone or Enterprise Community or in an area
otherwise nominated to be designated under this section; or
(B) Where an existing Round I Enterprise Community is seeking to be
designated as a Round II Empowerment Zone, that the nominated area
includes the entirety of the applicable Round I Enterprise Community
and that any other areas as may be included in the application do not
comprise any portion of a designated Empowerment Zone or Enterprise
Community or part of an area otherwise nominated to be designated under
this section; and
(2) Provide written assurance that:
(i) The strategic plan will be implemented;
(ii) The nominating governments will make available, or cause to be
made available, all information requested by USDA to aid in the
evaluation of progress in implementing the strategic plan; and
(iii) EZ/EC SSBG funds, as applicable, will be used to supplement,
not supplant, other Federal or non-Federal funds available for
financing services or activities which promote the purposes of section
2007 of the Social Security Act.
Sec. 25.201 Application.
No rural area may be considered for designation pursuant to this
part unless the application:
(a) Demonstrates that the nominated rural area satisfies the
eligibility criteria contained in Sec. 25.100;
(b) Includes a strategic plan, which meets the requirements
contained in Sec. 25.202;
(c) Includes the written commitment of the applicant, as
applicable, that EZ/EC SSBG funds will be used to supplement, not
replace, other Federal and non-Federal funds available for financing
services or activities that promote the purposes of section 2007 of the
Social Security Act; and
(d) Includes such other information as may be required by USDA.
Sec. 25.202 Strategic plan.
(a) Principles of strategic plan. The strategic plan included in
the application must be developed in accordance with the following four
key principles:
(1) 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.
(2) Community-based partnerships, involving the participation of
all segments of the community, including the political and governmental
leadership, community groups, local public health and social service
departments and nonprofit groups providing similar services,
environmental groups, local transportation planning entities, public
and private schools, religious organizations, the private and nonprofit
sectors, centers of learning, and other community institutions and
individual citizens.
(3) Economic opportunity, including job creation within the
community and throughout the region, entrepreneurial initiatives, small
business expansion, job training and other important services such as
affordable childcare and transportation services that may enable
residents to be employed in jobs that offer upward mobility.
(4) Sustainable community development, to advance the creation of
livable and vibrant communities through comprehensive approaches that
coordinate economic, physical, environmental, community, and human
development. These approaches should preserve the environment and
historic landmarks--they may include ``brownfields'' clean-up and
redevelopment, and promote transportation, education, and public
safety.
(b) Minimum requirements. The strategic plan must:
(1) Describe the coordinated economic, human, community, and
physical development plan and related activities proposed for the
nominated area;
(2) Describe the process by which the affected community is a full
partner in the process of developing and implementing the plan and the
extent to which local institutions and organizations have contributed
to the planning process;
(3) Identify the amount of state, local, and private resources that
will be available in the nominated area and the private and public
partnerships to be used, which may include participation by, and
cooperation with, universities, medical centers, and other private and
public entities;
(4) Identify the funding requested under any Federal program in
support of the proposed economic, human, community, and physical
development and related activities, including details about proposed
uses of EZ/EC SSBG funds that may be available from HHS;
(5) Identify the baselines, methods, and benchmarks for measuring
the success of carrying out the strategic plan, including the extent to
which poor persons and families will be empowered to become
economically self-sufficient;
(6) Must not include any action to assist any establishment in
relocating from one 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:
(i) The establishment of the 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
[[Page 19119]]
(ii) 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 in the area of its
original location or in any other area where the existing business
entity conducts business operation; and
(7) Include such other information as required by USDA in the
Notice Inviting Applications.
(c) Implementation of strategic plan. The strategic plan may be
implemented by state governments, tribal governments, local
governments, regional planning agencies, non-profit organizations,
community-based organizations, or other nongovernmental entities.
Activities included in the strategic plan may be funded from any
source, Federal, state, local, or private, which agrees to provide
assistance to the nominated area.
(d) Public access to materials and proceedings. The applicant or
the lead managing entity, as applicable, must make available to the
public copies of the strategic plan and supporting documentation and
must conduct its meetings in accordance with the applicable open
meetings acts.
Sec. 25.203 Submission of applications.
General. A separate application for designation as an Empowerment
Zone or Enterprise Community must be submitted for each rural area for
which such designation is requested. The application shall be submitted
in a form to be prescribed by USDA in the Notice Inviting Applications
as published in the Federal Register, and must contain complete and
accurate information.
Sec. 25.204 Evaluation of the Strategic plan.
The strategic plan will be evaluated for effectiveness as part of
the designation process for nominated rural areas described in subpart
D 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 contained in Sec. 25.202(a). USDA will
review each plan submitted in terms of the four equally weighted
principal objectives, and of such other elements of these principal
objectives as are appropriate to address the opportunities and problems
of each nominated area, which may include:
(a) 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.
(b) Community-based partnerships.--(1) Community partners. The
extent to which residents of the community participated in developing
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 the nominated area, and their record
of success measured by their achievements and support for undertakings
within the nominated area;
(2) Private and nonprofit organizations as partners. The extent to
which partnership arrangements include commitments from private and
nonprofit organizations, including corporations, utilities, banks and
other financial institutions, human services organizations, health care
providers, and educational institutions supporting implementation of
the strategic plan;
(3) State and local government partners. The extent to which states
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.
(c) 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, community and
human 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.
(d) 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
public 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:
(i) Provided with the opportunity to take responsibility for
learning the skills, discipline, attitude, and initiative to make work
rewarding;
(ii) Invited to take part as resources in the rebuilding of their
community; and
[[Page 19120]]
(iii) Provided the opportunity to develop a sense of industry and
competency and a belief they might exercise some control over the
course of their lives.
(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 the 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;
(10) Health care. The extent to which the plan promotes a
community-based system of health care that facilitates access to
comprehensive, high quality care, particularly for the residents of EZ/
EC neighborhoods;
(11) 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, creed, 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.
Secs. 25.205--25.299 [Reserved]
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 applications for
designation 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 and Enterprise Communities
which USDA determines have met the criteria required under this part.
USDA will notify the states and local governments whether or not the
nomination has been accepted for processing. The application 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, inclusive of the
strategic plan, as required by Sec. 25.202, and the certifications and
written assurances required by Sec. 25.200(b).
(c) Site visits. In the process of reviewing each application
accepted for processing, USDA may undertake site visits to any
nominated area to aid in the process of evaluation.
(d) Modification of the strategic plan, boundaries of nominated
rural areas, or period during the application review period. Subject to
the limitations imposed by Sec. 25.100.
(1) USDA may request additional information pertaining to the
strategic plan and proposed area and may, as a part of that request,
suggest modifications to the strategic plan or nominated area that
would enhance the effectiveness of the strategic plan;
(2) Enlargement of a nominated area will not be allowed if the
inclusion of the additional area will result in an average poverty rate
less than the average poverty rate at the time of initial application;
and
(3) An applicant may modify the nominated area or strategic plan
during the application review period with USDA approval.
(e) 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.
Sec. 25.301 Selection factors for designation of nominated rural
areas.
In choosing among nominated rural areas eligible for designation as
Empowerment Zone, Enterprise Community or Champion Community, the
Secretary shall consider:
(a) The potential effectiveness of the strategic plan, in
accordance with the key principles in Sec. 25.202(a);
(b) The strength of the assurances made pursuant to Sec. 25.200(b)
that the strategic plan will be implemented;
(c) The extent to which an application proposes activities that are
creative and innovative;
(d) The extent to which areas consisting of noncontiguous parcels
are not so widely separated as to compromise achievement by the
nominated area of a cohesive community or regional identity; and
(e) 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.
Secs. 25.302-25.399 [Reserved]
Subpart E--Post-Designation Requirements
Sec. 25.400 Reporting.
(a) Periodic reports. Empowerment Zones, Enterprise Communities and
Champion Communities shall submit to USDA periodic reports which
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, Enterprise Communities and Champion communities as USDA may
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.
(b) Annual report. All rural Empowerment Zones and Enterprise
Communities shall submit an annual report to USDA for each calendar
year which includes an executive summary and benchmark progress report
as follows:
(1) Executive summary. The executive summary shall identify the
progress and setbacks experienced in efforts to achieve benchmark
goals. Activities other than those expressly included in the strategic
plan should also be noted in order to provide an understanding of where
the community stands with respect to implementation of the strategic
plan. Furthermore, the executive summary should address the following:
(i) Identify the most significant accomplishments to date.
(ii) Describe the level of community participation and overall
support for the EZ/EC initiative.
(iii) List and describe new partnerships or alliances formed.
[[Page 19121]]
(iv) Identify problems or obstacles not otherwise anticipated in
the strategic plan.
(v) Describe solutions developed or efforts to address the problems
and obstacles.
(vi) Identify practices or concepts which were found especially
effective in implementing the strategic plan.
(2) Benchmark progress report. For each benchmark goal the
community will provide a current measure of the baseline condition
which is the subject of targeted improvement and whether the current
measure represents an improvement from the baseline condition as
initially stated in the strategic plan. For each benchmark activity the
community will provide a status report in form and substance acceptable
to USDA.
(c) Timely state data. 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.
Sec. 25.401 Responsibility of lead managing entity.
(a) Financial. The lead managing entity will be responsible for
strategic plan program activities and monitoring the fiscal management
of the funds of the Empowerment Zone or Enterprise Community.
(b) Reporting. The lead managing entity will be responsible for
developing the reports required under this subpart.
(c) Cooperation. All entities with significant involvement in
implementing the strategic plan shall cooperate with the lead managing
entity in its compliance with paragraphs (a) and (b) of this section.
Sec. 25.402 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. Evidence of continual involvement of all segments of the
community, including low income and disadvantaged residents, must be
evidenced in the implementation of the strategic plan.
Sec. 25.403. Ongoing 2-year work plan requirement.
(a) Each Empowerment Zone and Enterprise Community shall prepare
and submit annually, work plans for the subsequent 2-year interval of
the designation period.
(b) The 2-year work plan shall be submitted to USDA 45 days prior
to the start of the applicable 2-year period.
(c) The 2-year work plan must include the following sections and
content:
(1) Section 1--Work Plan. Identify the benchmark goals to be
achieved in the applicable 2 years of the strategic plan, together with
the benchmark activities to be undertaken during the applicable 2 years
of implementation. Include references to the applicable baseline
conditions and performance indicators to be used in assessing
performance.
(2) Section 2--Operational Budget. For each benchmark activity to
be undertaken in the applicable 2 years of the strategic plan, set
forth the following information:
(i) Expected implementation costs;
(ii) Proposed sources of funding and whether actual commitments
have been obtained;
(iii) Technical assistance resources and other forms of support
pledged by Federal, state and local governments, non-profit
organizations, foundations, private businesses, and any other entity to
assist in implementation of the community's strategic plan, and whether
this support is conditional upon the designation of the community as an
Empowerment Zone; and
(iv) Documentation of applications for assistance and commitments
identified as proposed funding and other resources.
Sec. 25.404 Validation of designation.
(a) Reevaluation of designations. On the basis of the performance
reviews described in Sec. 25.402, and subject to the provisions
relating to the revocation of designation appearing at Sec. 25.405,
USDA will make findings as to the continuing eligibility for and the
validity of the designation of any Empowerment Zone, Enterprise
Community, or Champion 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 in accordance with
Sec. 25.405 and the requirements as to the number, maximum population
and other characteristics of rural Empowerment Zones referenced in
Sec. 25.100, the Secretary may modify designations by reclassifying
rural Empowerment Zones as Enterprise Communities or Enterprise
Communities as Empowerment Zones.
Sec. 25.405 Revocation of designation.
(a) Basis for revocation. The Secretary may revoke the designation
of a rural area as an Empowerment Zone or Enterprise Community, or
withdraw status as a Champion Community, if the Secretary determines,
on the basis of the periodic monitoring and assessments described in
Sec. 25.402, that the applicant, lead managing entity, or the states or
local governments in which the rural area is located have:
(1) Modified the boundaries of the area without written approval
from USDA;
(2) Failed to make progress in implementing the strategic plan; or
(3) Not complied substantially with the strategic plan (which may
include failing to apply funds as contained in the strategic plan
without advance written approval from USDA).
(b) Letter of Warning. 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, the lead managing entity
(if different from the applicant) and the nominating states and local
governments, with a copy to all affected Federal agencies of which USDA
is aware:
(1) Advising that the Secretary has determined that the applicant
and/or lead managing entity and/or the nominating local governments and
state:
(i) Have modified the boundaries of the area without written
approval from USDA; or
(ii) Are not complying substantially with, or have failed to make
satisfactory progress in implementing the strategic plan; and
(2) Requesting a reply from all involved parties within 90 days of
the receipt of this letter of warning.
(c) Notice of revocation. To revoke the designation, the Secretary
must issue a final notice of revocation of the designation of the rural
area as an Empowerment Zone or Enterprise Community, after:
(1) Allowing 90 days from the date of receipt of the letter of
warning for response; and
(2) Making a determination pursuant to paragraph (a) of this
section.
(d) Notice to affected Federal agencies. USDA will notify all
affected Federal agencies of which it is aware of its determination to
revoke any designation pursuant to this section or to modify a
designation pursuant to Sec. 25.404(b).
(e) Effective date. The final notice of revocation of designation
will be published in the Federal Register, and the revocation will be
effective on the date of publication.
[[Page 19122]]
Secs. 25.406-25.499 [Reserved]
Subpart F--Special Rules
Sec. 25.500 Indian reservations.
(a) An area in an Indian reservation shall be treated as nominated
by a state and a local government if it is nominated by the reservation
governing body.
(b) For purposes of paragraph (a) of this section, a reservation
governing body must be the governing body of an Indian entity
recognized and eligible to receive services from the United States
Bureau of Indian Affairs, U.S. Department of Interior.
(c) Where two or more governing bodies have joint jurisdiction over
an Indian reservation, the nomination of a reservation area must be a
joint nomination.
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 state-chartered 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
government.
Sec. 25.503 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, is an area that
has a population density less than or equal to 1,000 persons per square
mile, the land use of which is primarily agricultural.
(b) Exceptions to the definition. On a case by case basis, the
Secretary may 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 this section must submit
a request for waiver in writing to the Deputy Administrator, USDA
Office of Community Development, Reporters Building, Room 701, STOP
3203, 300 7th Street, SW, Washington, DC 20024-3202. 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) 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.
Secs. 25.504-25.999 [Reserved]
Dated: April 10, 1998.
Dan Glickman,
Secretary of Agriculture.
Regulatory Impact Analysis
DEPARTMENT OF AGRICULTURE
OFFICE OF THE SECRETARY
1. Title/Description:
Designation of Rural Empowerment Zones and Enterprise Communities.
This rule establishes procedures for designating five new rural
Empowerment Zones.
2. Cite/Status: 7 CFR Part 25 Interim Rule.
3. Purpose: This rule implements that portion of Subtitle F of
Title IX of the Taxpayer Relief Act of 1997 (P. L. 105-34, approved
August 5, 1997) concerning procedures for designating five rural
Empowerment Zones (Round II). It also amends regulations pertaining to
the three existing rural Empowerment Zones that were designated
pursuant to Title XIII of the Omnibus Budget Reconciliation Act of 1993
(P. L. 103-66, approved August 10, 1993).
4. Degree of Discretion: Mandated by Subtitle F, referred to above.
5. Special Considerations:
a. Statutory or judicial deadlines: The law requires that
designations be made prior to January 1, 1999.
b. Public health and safety deadlines: None identified.
c. Others: None identified.
6. Economic Impacts:
A. Costs:
a. Nature of hindrance to economic growth:
This rule establishes procedures for designating places to receive
Round II rural Empowerment Zone (EZ) status. No hindrance to economic
growth is expected, rather, the program objective is to foster economic
growth in the designated communities. However, various participants
will contribute funding to the program, hence there are some costs
involved.
b. Who is affected:
This is a highly competitive program. It is expected that more than
one hundred rural communities will submit applications with strategic
plans in order to qualify for one of the five new rural EZ's. In
comparison, there were 227 applicants for 3 Round Empowerment Zones and
30 Round I Enterprise Communities. All communities that apply will
incur some relatively minor costs in completing their plans--probably
in the range of $2,000 to $20,000 per community. More significant costs
may be incurred by those communities that receive designations. These
costs will be borne by all entities that have promised to invest in the
community, including Federal, State, and local governments, nonprofit
organizations, neighborhood groups, and businesses.
c. Degree of impact on individuals and society:
It is important to distinguish between the concepts of ``cost'' and
``investment.'' A cost estimate involves an attempt to summarize the
amount of new or additional funds committed to implementation of
community strategic plans or--in the case of the designated Empowerment
Zones--the amount of revenues foregone as the result of tax benefits.
Ordinarily, costs are assumed to be an involuntary burden on society,
which it is necessary to minimize. Investments, on the other hand, are
considered to be the application of resources in such a way as to
produce desirable outcomes. Investments are considered to be both
voluntary and likely to produce a rate of return that justifies their
expenses. Because the expenditures of Empowerment Zones are made for
the purpose of implementing the long-term strategic plans of these
communities, these expenditures must be considered to be investments.
The total costs to society associated with the five new zones are
difficult to predict. The Department of Treasury estimates that the
cost to the Federal Treasury in terms of taxes foregone associated with
the various Federal tax incentives for the five new rural zones will be
$200 million over the 10-year life of the designated zones. This
estimate is subject to considerable uncertainty because the zones will
receive tax incentives that are relatively new and it is hard to
predict how much they will be used in the five zones. Unlike the first
round of rural EZ's, which received $40 million each in Title XX Social
Service Block Grants (SSBG), no automatic grant funding has been
supplied for the Round II zones, though the Administration has proposed
to include some such grant funding. Additional uncertainty over the
cost to the Federal government involves other Federal assistance that
these zones are likely to request in the future in order to carry out
their strategic plans. The amount of such grants is a function of what
the communities envision they
[[Page 19123]]
need to implement their plans and the priority the Administration
places on responding to their funding requests. The zone revitalization
plans will also draw on the resources of State and local governments,
the private sector, and on non-profit organizations. The costs incurred
by these entities are difficult to predict, since they will depend on
the communities' plans and on the willingness of these entities to
contribute.
A rough idea of the potential magnitude of these costs may be
revealed from the experience of the three Round I rural EZ's designated
in December 1994. (Round I also included 30 Enterprise Communities
(EC's), which receive substantially less assistance than the EZ's--
because Round II does not include any EC's, we will ignore here the
costs and benefits associated with EC's and focus only on the EZ's in
this analysis). According to data collected by USDA covering the first
three years since their designation, the three Round I rural EZ's have
used the following funds (excluding the cost of tax incentives which
remain unknown): $25 million from Federal SSBG funds, $35 million from
other Federal funds, $24 million from State governments, $3 million
from local governments, $53 million from the private sector, and $4
million from nonprofit organizations. These investments are expected to
continue to accumulate over the 10-year duration of the zones.
While the magnitude of the investments by the Federal Government
associated with these zones appears very small relative to the total
Federal budget, their total for some of the other entities, such as the
individual State and local governments contributing to these zones, may
be more substantial relative to their budgets. However, these costs
might be offset at least in part by development-induced increases in
tax revenues resulting from the program, and by reduction in other
government costs associated with higher levels of poverty and
unemployment, both of which are expected to be reduced by this program.
In addition, with the exception of Federal SSBG funds, all other
expenditures of public and private funds represent voluntary
investments from existing sources of funding that would otherwise be
spent in other places, and they thus do not represent a net additional
cost.
The purpose of this regulatory impact analysis is to determine the
extent to which program costs (and benefits) might be affected by
USDA's rules. Because this is a bottom-up program that allows
localities to make their own plans, most of the costs are determined by
the locality and participating funding sources. Hence the magnitude of
costs is not directly determined by USDA's regulations. The rule mainly
affects costs through its selection criteria, in which communities are
encouraged to develop and implement comprehensive plans using whatever
Federal, State, and local resources are required for a successful,
sustainable revitalization. The more comprehensive these plans are, the
more costly (and beneficial) their implementation is likely to be.
While USDA does not require a minimum amount of spending for each of
its zones, given the comprehensive nature of its guidelines, that might
lead applicants to propose more ambitious (and hence more costly)
strategies than they might otherwise propose. However, these other
Federal costs represent a redirection of funds that would otherwise be
spent in other communities and they are therefore not a net additional
burden on the Treasury.
The highly competitive nature of the program's selection process is
also expected to result in many communities going through the strategic
planning process required as part of the application requirements.
Since only five of these communities will receive designation, the
remaining, undesignated communities will be left with a plan but
without any automatic Federal support. USDA will designate applicant
communities that complete a satisfactory planning process as Champion
Communities. Following designation of the Round I zones, many of these
communities have been found to follow through with some portion of
their plans, seeking other types of assistance from various sources
(Federal, State, local, etc.). This in turn will lead to additional
costs (and benefits). However, these Federal costs represent a
redirection of funds that would otherwise be spent in other communities
and they are therefore not a net additional burden on the Treasury.
The rule also provides a mechanism whereby zone designation may be
terminated in the event that a zone does not live up to its promised
strategy. This might also be expected to add to program costs (and
benefits) because it places pressure on participants (States, local
governments, private and nonprofit sectors) to make a good faith effort
to deliver on their promised contributions to the zone.
B. Benefits
a. Nature:
The Empowerment Zones program represents a radically new approach
to the development of severely depressed rural communities. Unlike
other Federal programs, the Empowerment Zone program is targeted
heavily toward those rural communities with the highest levels of
poverty or population loss. These communities are typically locked in a
pattern of hopelessness from which it is very difficult to extricate
themselves. Often, they have neither the will nor the organizational
capacity, in addition to a lack of resources, to extricate themselves
from the cycle of distress in which they are trapped. The objective of
the Empowerment Zone program is not merely to expend Federal and other
program dollars within the Zones. Instead, the program seeks to change
the whole equation by which these communities approach their futures by
helping them to develop fresh visions of what their futures can be
like, build comprehensive, long-term strategic plans to achieve these
visions, assemble resources and partners to assist with plan
implementation, and build internal community capacity to plan and
implement programs so that at the end of the ten-year designation
period the communities have achieved a position in which the economic
and social gains they have made will be sustainable without continued
governmental assistance.
This process of building sustainability cannot occur through
isolated, single-program investments, even though these may
individually meet pressing needs within the community. It requires the
coordinated and comprehensive development of a wide range of community
assets, skills and capacities that occur in a variety of sectors. One
way of thinking about this process of building toward sustainability is
by using the analogy of an ``empowerment staircase.'' The first steps
on the staircase are building hope that a different future may be
possible, forming a vision of what future is desired for the community,
creating a realistic plan for achieving that vision, obtaining
resources to implement the plan, achieving some initial positive
results, revising the plan to reflect changed conditions and
aspirations, building additional partnerships and leveraging additional
resources, enhancing the community's organizational and skill base and
its capacity to continue its development process after the Federal
support runs out.
The experience with the Round I Empowerment Zones and Enterprise
Communities, which are approximately three years into the
implementation of their development plans, shows that most of these
communities have climbed the first five steps of the empowerment
staircase. The
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announcement of a program specifically limited to the most distressed
communities gave the 227 applicant communities hope that a different
outcome might be possible for them. The competition for designation and
the required strategic planning process itself led most applicant
communities to establish community-determined visions of different
futures and to build meaningful, comprehensive, long-term strategic
plans for reaching them. Both designated communities and those deemed
to be Champion Communities have also obtained resources to implement
portions of their plans and have achieved promising results, some of
which are discussed further below. Many are now beginning to re-examine
their strategic plans and to substitute alternative, more empowering
development strategies for these strategies they employed initially.
For example, the Mid-Delta Empowerment Zone Alliance, in Mississippi,
has already created a number of jobs to help enable unemployed workers
to be gainfully employed. Now it is turning its attention to strategies
that will increase the number of opportunities for local workers to
become business owners and increase the rates of entrepreneurship
within the community. In addition, through training offered by the USDA
and other sources, as well as on-the-job experience, the staff and
board members of Empowerment Zones and Enterprise Communities are
learning valuable skills in community organizing, resource
identification and mobilization, strategic planning, and project
implementation which will help them to continue their gains through
local effort once the ten-year designation ends.
The comprehensive and holistic nature of the community strategic
plans is itself a significant benefit over the more typical pattern of
disconnected, single-program investments that characterizes most
Federally-assisted development efforts. Economic and community
development relies on a number of factors to be successful, all of
which must be present for significant and lasting gains to be
accomplished. For example, not only must jobs be created, but workers
must be trained with appropriate skills for these jobs in order for
them to take these jobs and other services such as transportation and
day care must be available. Not only must new small business financing
be available, but entrepreneurship training and technical support must
be available during the start-up phase to assure higher rates of
business success. As a result of such coordinated and holistic
development, the likely benefits from Federal and other investments are
significantly higher than if the investments occurred singly, without
linkage to other, complementary actions and investments.
The statute entitles each of the five new rural Empowerment Zones
to qualify for new Empowerment Zone Facility Bonds, a new category of
tax exempt private activity bond, not subject to State volume caps.
Each new rural zone may issue up to $60 million in these bonds. These
are in addition to the more limited zone facility bonds available to
Round I Empowerment Zones. The new rural Empowerment Zones also receive
additional tax incentives for expensing of private investment in
equipment. These tax incentives last for ten years. The new zones will
also be eligible for some short-term tax reductions, including (1)
Brownfields expensing of environmental cleanup costs for certain
contaminated properties (through year 2000), (2) tax exempt Qualified
Zone Academy Bonds for school programs, equipment, curriculum and
rehabilitation, subject to a national volume cap (through 1999), and
(3) Work Opportunity Tax Credits to employers hiring targeted groups of
employees, including youths age 18-24 that reside within Empowerment
Zones and Enterprise Communities (through June 30, 1998). All three of
these tax benefits are to some extent available to other urban and
rural communities, including Round I Empowerment Zones and Enterprise
Communities, so that the total cost of these tax benefits cannot be
attributed to the five rural Empowerment Zones.
In addition, Federal agencies are expected to give special
preference to Empowerment Zones and Enterprise Communities with
legitimate requests for program assistance. State and local governments
and private firms and nonprofit are also expected to confer grants or
assistance to these places. The new zones, however, will not be
eligible for some of the benefits that the first round of Empowerment
Zones received, such as the employer wage tax credits, and to date, no
Title XX Social Service Block Grants funds are available for the new
zones.
The comprehensive strategic planning approach employed by this
program is meant to help poor communities identify their development
needs and design strategies to address those needs. This type of
approach should benefit the communities by helping them to focus their
limited resources on their most important community goals and
strategies, and it should also give them an advantage in obtaining
outside assistance.
If the program works as expected, the communities should benefit
through economic and community revitalization, including economic
growth in the form of increased employment and income and improved
economic self sufficiency (reduction of unemployment, welfare
dependency), and improved overall conditions in the community in the
form of lower crime rates, less drug dependency, better housing, better
education, and improved public and private services available to the
population. In addition, as discussed above, empowerment--the capacity
of communities to design and implement local strategies for long-term
community and economic enhancement--is expected to occur.
Recognizing the experimental character of this new approach, and
also its demonstration value for other rural communities in similar
circumstances, USDA has collected baseline information on the economic
and social conditions that existed in each community at the time the
program was inaugurated. In addition, USDA has undertaken a research
project with Iowa State University to develop and collect information
about the effect of the program on intangible community capacities,
such as the extent of community participation in this highly democratic
method of promoting community growth. USDA collects and publicizes best
practices drawn from among the successes of the existing Empowerment
Zones and Enterprise Communities and makes these available to all rural
communities through publications and the EZ/EC web site. USDA regularly
collects information from each of the Round I Empowerment Zones and
Enterprise Communities about the actions they have undertaken and the
results achieved, some of which results are reported below. At later
stages in the implementation of Round I of the program, USDA will
collect information about the overall impacts within the designated
communities to evaluate both the extent of the benefits and costs of
the program and the conditions under which optimal benefits were
achieved.
b. Who is affected:
The residents of the designated Empowerment Zones will be the
primary beneficiaries. The statute liberalizes the eligibility rules
for the new Round II rural zones. The poverty rate eligibility
threshold was higher for Round I, and Indian reservations were
excluded. This was changed by statute for Round II. One of the five new
rural
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zones is eligible based on outmigration, regardless of poverty, and
Indian reservations can participate if they meet eligibility criteria.
These and other changes in the statute's eligibility provisions should
allow more places to be eligible. In addition, the regions surrounding
these places are also expected to benefit. The existing statute
prohibits development plans from proposing a strategy that actively
encourages or assists the relocation of firms or branch plants into the
zones. The rule further encourages communities to adopt strategies that
complement, rather than compete with, the development of the
surrounding region. Also expected to benefit are those places that
apply but that do not receive designations (in rural areas, these are
called Champion Communities). Such places should benefit through the
value of the community partnerships formed and the strategic plans they
produced in the process of applying for the program. They are also
eligible, along with the designated Empowerment Zones, for certain tax
breaks for contributors to HUD-designated Community Development
Corporations.
c. Degree of benefits to individuals and society:
The magnitude of the economic benefits that each designated zone
community will receive from this program is difficult to predict. Most
of the tax incentives are new, as is the program itself. Because the
benefits are also affected by the strategies the communities choose in
their strategic plans, the benefits might be expected to vary from zone
to zone.
If the new Round II zones were to receive benefits like those of
the Round I zones, an idea of the magnitude of such benefits is
revealed by USDA statistics on Round I zones. As of January 1998, after
the three Round I rural Empowerment Zones had completed their first 3
years as EZ's, they had reported a total of $144 million in direct new
public and private investment, and 2,000 jobs created or saved. These
zones have created a total of 15 job training programs, 6 job training
facilities, and trained 442 persons. They have created 20 youth
development programs serving 3,375 youths, and 3 educational facilities
and 4 heath care facilities have been built or upgraded. The three
zones have established or upgraded 18 computer learning centers and
have received 3,480 Federal surplus computers. Five revolving loan or
microenterprise funds have been created, 44 housing units have been
built or rehabilitated, 19 water and waste projects are under
construction.
These measures are indicative of recent performance and do not
convey the full extent of benefits expected in the long run. A copy of
a progress report based on information supplied by program participants
is contained in Appendix A (attached).
These zones have used the resources available to them at a pace
that will allow them to use these funds throughout the ten-year period
of designation. As of January 1998--a little over two years into the
implementation of their plans--they had used about a fifth of the Title
XX SSBG funds allotted to them--$25 million out of a total of $120
million. These reserve SSBG funds should be able to leverage additional
Federal, State, local, and private investments--the leverage ratio of
non-SSBG funds to SSBG funds in the first three years averaged about
4.7:1. Thus, activity levels might be expected to pick up in the coming
years as the bulk of the SSBG funds are spent. Although their zone
designations officially end in the year 2004, they may continue to
benefit from this program in the following years, since many of their
investments are in infrastructure, training, community development
financial institutions, and other forms of capital--including social
capital--which should enhance their future productivity long after they
stop receiving EZ tax incentives and priority in receipt of Federal
funds.
The Round II zones will go through the same strategic planning
process as did the Round I zones, and they may be expected to pursue
similar comprehensive development strategies, drawing on various
sources for funding. Other things being equal, their benefits should be
roughly comparable to those of Round I zones. However, the five Round
II zones might experience different economic impacts than those of the
Round I zones because of the differences in tax incentives and the
lack--thus far--of specially allocated Title XX grants that the Round I
zones received. The difference in tax incentives might result in
greater benefits, since the new zone facility bonds are not subject to
the State volume cap and hence are more likely to be issued than the
previous, more limited zone facility bonds. The additional $20,000 in
expensing should also stimulate more private investment. And, although
the employer wage tax credit is no longer available, this might be
offset by the Work Opportunity Tax Credit and some of the other new tax
incentives. However, if no specially-provided Title XX grant funds are
provided to the Round II zones, as is true now, then this would dampen
the economic benefits in the new zones. As currently structured, it
seems likely that net benefits to Round II zones will be lower than
those enjoyed by Round I zones, but it is difficult to estimate the
actual amount of economic benefits involved.
The magnitude of the economic benefits will also depend on the
extent that State Governments and various Federal agencies are
encouraged to give preference to these places in providing grants and
loans and regulatory relief. It also depends on the extent that Federal
grants are devoted to non-economic purposes, such as reduced crime and
drug use, and improved recreational programs.
Most of the program's benefits flow from the statutory aspects of
the program and not from the rule itself. As previously noted, this
rule pertains primarily to the application and selection process for
the zones. The benefits that flow directly from the rule are related to
the strategies that are being encouraged through the selection criteria
specified in the rule. If successful, these strategies will result in
sustainable, long-term development for the selected EZ's. This could
lead to similar strategies being encouraged by other Federal and State
programs that assist distressed areas, thereby having a more profound
effect on society.
C. Dynamic implications that may affect economic growth:
Although the program is expected to significantly affect the
economies of the designated local zones, in only a very minor way does
this program affect dynamic aspects of national economic growth. Since
it will tend to add to overall national spending and investment, this
could slightly add to inflationary pressures while the economy remains
near full-employment and slightly reduce unemployment during
recessions. However, because the designated communities tend to have
high rates of unemployment, this would dampen any inflationary pressure
associated with the program. Moreover, the magnitude of these shifts is
not large enough to make much of a difference, nationwide.
It is expected that, in addition to these direct contributions to
national economic growth, the comprehensive, long-term, community-based
model of development that is employed in this program will serve as a
model to Champion Communities and to other rural communities, which may
choose to employ similar methods of development in order to achieve
some of the same results as the Empowerment
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Zones and Enterprise Communities have been able to achieve. If the
model should come into widespread application throughout rural America,
the net contribution to the national economy could be substantial. Such
an impact is unlikely to occur, however, within the period of
designation of the Round II Empowerment Zones but would most likely
occur over a period of one or two generations.
7. ``User Friendliness'':
Every effort has been made to make this program work for all
communities that apply. The regulations allow the communities maximum
flexibility in the form that their plans take and the strategies that
can be employed. A guidebook will be available to communities to guide
them through the application process and to clarify any questions they
may have about the program rules and procedures. In addition, lessons
learned from Round I should add to the user-friendliness for the Round
II zones, as modifications have been made to streamline the
applications process and improve the structure of the required
strategic plans.
Attachment: Appendix A, Progress Report
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[FR Doc. 98-10156 Filed 4-14-98; 11:38 am]
BILLING CODE 3410-07-C
This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.