Testimony of Eric P. Thompson, Executive Director of the Lower Savannah Council of Governments, Aiken, South Carolina, and President of the National Association of Development Organizations on behalf of the Coalition for Economic Development Before the Subcommittee on Transportation and Infrastructure, Committee on Environment and Public Works, United States Senate, July 14, 1998.

Mr. Chairman and Mr. Baucus, thank you for inviting me to testify on reauthorization of the Economic Development Administration (EDA) on behalf of the Coalition for Economic Development. I am Eric Thompson, Executive Director of the Lower Savannah Council of Governments headquartered in Aiken, South Carolina. As President of the National Association of Development Organizations (NADO), I am pleased to join the other members of our coalition in offering strong support for EDA reauthorization.

My fellow coalition member Judge Villines has given an excellent overview of the importance of EDA programs to rural and urban communities. I would like to focus on an issue of great importance to my region, the state of South Carolina and other places throughout the country affected by defense industry contract cuts and base closures.

Despite the small size of EDA, the agency has always provided flexible programs and funding needed in times of sudden economic dislocation. EDA's Defense Adjustment Program helps communities impacted by base closures and/or defense contract reductions to rebuild and diversify their economies and move away from defense dependency.

EDA is the only federal agency with flexible program tools to help communities implement base reuse plans. The agency allows local communities to establish their own priorities and use EDA grants to fill funding gaps. EDA investments require local commitment and funding. This creates a true public-private partnership to address long term strategic needs. Working with their local partners, economic development districts, EDA funds are highly leveraged and targeted to areas of greatest need.

In the state of South Carolina there have been a number of base closings and significant cutbacks at the Department of Energy (DOE) Savannah River Site located in the Lower Savannah region.

In April 1996 the Charleston Naval Base was closed resulting in the loss of 21,902 direct jobs with $644 million in annual payroll. When a base closes, there is a need for a regional approach to provide a transition to other jobs for dislocated workers and to increase economic diversity for long-term sustainability. Military base reuse is important, but meaningful defense adjustment must focus on the structural recovery of defense impacted communities and not just base reuse. EDA's programs and funding are critical in order to achieve structural adjustment because they allow local communities to establish their own priorities. Working with the local Economic Development District, the Berkeley-Charleston-Dorchester Council of Governments, EDA funds have been invested in infrastructure, a revolving loan fund and a regional marketing plan to create and retain jobs in the region. EDA funds significantly leveraged private sector investment and have resulted in the creation and retention of 12,800 jobs.

In the Lower Savannah region the Savannah River Site produced material for nuclear weapons used in the US defense program. It is the largest employer in the state of South Carolina. With the end of the cold war, the Department of Energy (DOE) downsized the facility, resulting in a loss of over 10,000 jobs, increasing unemployment, causing real estate values to stagnate and essentially halting new home starts. In 1997, all six counties in the Lower Savannah COG -- Aiken, Allendale, Bamberg, Barnwell, Calhoun and Orangeburg -- had unemployment rates above the state average. The rural counties of Allendale, Bamberg, and Orangeburg have almost twice the state average and are the three highest unemployment counties in the state.

In order to help the Lower Savannah region adjust to this drastic cutback, the Department of Energy needed a federal agency to administer DOE funds provided for community transition. Using the existing EDA system and grant process, DOE transferred funds to EDA to administer and now requires that EDA approve all requests for community adjustment assistance from DOE's Office of Worker and Community Transition.

While defense spending cuts appear to be bottoming out, the defense adjustment challenge remains. Consolidation and mergers in the defense industry and additional base closures will continue to require EDA's support and participation in defense adjustment activities. Used for a variety of purposes, EDA funds are tailored to meet the needs of local communities; they are not based on rigid federal directives and guidelines.

One of EDA's greatest strengths is the ability to use the existing network of 320 Economic Development Districts, such as the Lower Savannah COG, for defense adjustment, disaster relief and overall economic development assistance. These regional development organizations provide local governments with professional and technical assistance. Districts, the core of EDA's delivery mechanism, are multi-county public- private partnerships whose boards are composed of local elected officials, private sector and minority representatives. They are critically important in small metropolitan and rural regions where professional and technical assistance is limited or nonexistent. Of the nation's 39,000 units of local government, 33,000 have populations of less than 3,000 and 11,500 governments have no employees.

Larger cities and counties have professional staff including engineers and planners to assist elected officials in the decisionmaking process. However, in most of the country's small and rural communities, Economic Development District employees are the only professional staff who are able to navigate the mountains of red tape, regulations and application forms necessary to apply for federal and state assistance. It is through EDA planning grants to districts that distressed communities gain access to professional capacity and technical expertise to plan for the future. Today, EDA's small planning grants to districts support an Overall Economic Development Program (OEDP) for the communities served. OEDPs are blueprints providing a comprehensive plan for sustainable community and economic development.

EDA is extremely effective both in helping communities cope with long-term economic disasters such as resource-dependent economies facing the decline of coal or timber industries or sudden economic crises caused by plant and base closings and natural disasters. It is important to remember that not all of the Base Realignment And Closure (BRAC) listed installations are yet closed. It takes several years to actually shut down a facility so the need for EDA's defense adjustment programs will continue.

EDA has demonstrated its effectiveness and has earned the right to be reauthorized. Under the leadership of Assistant Secretary Phillip Singerman, EDA has streamlined its operations and significantly reformed and reinvented itself. Now is the time to provide the agency with legislative tools and congressional guidance to bring EDA into the 21st century. It is particularly important that America's distressed communities be prepared to compete in the global marketplace through state-of-the-art technology. We strongly encourage EDA to once again assume a leadership role during this transition.

On behalf of the members of the Coalition for Economic Development, I urge the committee to work with EDA to update the authorizing legislation so that the nation's distressed communities will continue to have this vital federal partner as we move into the next century. I can assure you that those of us who work in economic development at the local level will do everything we can to help make EDA more efficient and effective.


Statement of NADO Supporting reauthorization of the Economic Development Administration (EDA)
on behalf of the members of the National Association of Development Organizations (NADO)
submitted to the Subcommittee on Transportation and Infrastructure,
Committee on Environment and Public Works of the United States Senate, July 14, 1998.

The members of the National Association of Development Organizations (NADO), strongly support reauthorization of the Economic Development Administration (EDA). EDA is the only federal agency that has the program tools necessary to address the broad range of economic development challenges facing America's distressed communities. Whether through infrastructure grants, strategic planning or economic adjustment assistance, EDA helps distressed communities compete economically and enter the mainstream. During the past 30 plus years, the agency has created or retained more than 2.8 million jobs resulting from 39,000 assistance projects throughout the country; generated $1.9 billion in private sector capital through revolving loan funds that have supported more than 7,000 businesses; and leveraged more than ten dollars in private sector investment for every federal dollar invested.

The National Association of Development Organizations is a public interest group founded in 1967 to help professionals and local elected officials build communities and create jobs. The association is the leading advocate for a regional approach to economic and community development in America's small metropolitan and rural communities. Economic distress and development needs transcend jurisdictional boundaries, and solutions to rural distress are most effective when implemented at the substate regional level. NADO members provide community, economic and rural development technical assistance to local governments and the private sector. The members of NADO directly serve over 1,800 counties and 15,000 cities and towns.

NADO members are regional development organizations, known variously as economic development districts, planning and development councils, councils of governments, area development districts and regional councils. Regional development organizations draft long-term strategic economic development plans, offer a wide range of technical assistance and provide small business financing. EDA supports these regional planning and development efforts through the economic development district program.

There are four major reasons why Congress should pass reauthorization legislation for the Economic Development Administration this year.

1. Public Investment in Infrastructure Is Essential for Private Sector Job Creation

For distressed communities outside the economic mainstream, EDA's public works grants are the major source of infrastructure funding for projects related directly to the creation of private sector jobs. Among the projects funded are water and sewer facilities serving industry and commerce; access roads to industrial parks or sites; port investments; and business incubator facilities. While these are not glamorous projects, they play an essential role in the process of upgrading and expanding the nation's aging public infrastructure which directly impacts communities' ability to develop new businesses, retain and expand existing companies and generate local tax revenues. Since 1965, EDA public works investments have assisted in the creation of more than 1.5 million jobs.

The Economic Development Council of Northern Vermont (EDCNV) an economic development district serving six counties where dairy farming is important, created a regional dairy industrial park with EDA funding. The focus of this industrial park is on using dairy by-products such as whey for pharmaceutical products and fertilizer. This kind of careful investment based on local planning continues to pay substantial returns to the economy and builds on and adds value to existing resources.

EDA funding for infrastructure improvements to the Mallord Fox Creek Industrial Park in Decatur, Alabama through the North-central Alabama Regional Council of Governments has resulted in bringing more than 4,000 jobs to the area. This includes the recent announcement by the Boeing Company to employ between 2,000 and 3,000 people to build the common booster core for the new Delta IV rocket.

2. Planning Is Essential for Long Term Sustainable Development

EDA provides support for a network of 320 Economic Development Districts (EDDs) that serve local communities with professional and technical assistance. EDDs are multi-county public- private partnerships whose boards are composed of local elected officials, private sector and minority representatives. EDDs are the core of EDA's delivery mechanism. Districts have evolved into the central planning and service coordination mechanism for many other federal programs in rural areas including job training, housing, environmental protection, aging services, emergency management and small business assistance.

As former Representative Bill Clinger (R-PA) stated during the debate on the Economic Development Reauthorization Act of 1994 (HR 2442), "EDA has established a network of regional development organizations throughout its service areas, and I cannot stress too much their importance. EDA is directed toward rural areas of distress, rural communities that are having trouble competing in a wide variety of ways. What this program does is provide an expertise that would not otherwise be available to these communities." NADO members heartily agree with this analysis.

The districts are providers of professional capacity and technical assistance. In the current fiscal year, Congress appropriated $24 million for EDA's Title III planning grants. Of this, EDA provides slightly more than $17 million for EDD planning grants. Districts receive an average of $53,000 from EDA. Like all EDA funds, these planning grants leverage additional funding from nonfederal sources, including state and local funds. EDA's planning grants support a staff person in each EDD who prepares an Overall Economic Development Program (OEDP) for the communities they serve. OEDPs are blueprints providing a comprehensive plan for community and economic development. They are developed with, and approved by, the local elected officials from all the participating communities.

It is important to note that the real purchasing power of the planning grants has been greatly diminished over the past 30 years by inflation. The average planning grant to districts was approximately $54,000 at the start of the program in 1966. Today, the average planning grant remains only $54,000. Adjusted for inflation, the value of a 1998 planning grant is only $10,800, or 20 cents on the dollar, when compared to its original purchasing power in 1966. While districts have leveraged and stretched these small but significant dollars to help thousands of America's small metropolitan and rural communities forge ahead and create jobs, NADO members strongly encourage Congress to dramatically increase the authorization levels for the planning grant program.

Larger cities and counties have professional staff including engineers and planners to assist elected officials in the decision making process. However, in most of the country's small and rural communities, district employees are the only professional staff that are able to navigate the mountains of red tape, regulations and application forms necessary to apply for federal assistance. It is through EDA grants to districts for planning assistance that many distressed communities gain access to professional capacity and technical expertise. Of the 39,000 general purpose local governments in the US, 33,000 have populations of less than 3,000 and 11,500 have no employees.

EDDs are also the local institution that facilitates the flow of federal assistance to rural and small metropolitan communities. Districts help smaller communities prepare applications for federal and state assistance and often administer EDA infrastructure and economic adjustment grants. Districts are critically important in obtaining aid for rural counties and towns from other state and federal agencies including: the US Department of Agriculture's rural development grants and loans, Department of Housing and Urban Development Community Development Block Grants, Department of Health and Human Service Welfare to Work and Older Americans programs, Department of Labor job training, Small Business Administration micro-loan and Certified Development Company programs.

Economic Development Districts are entrepreneurial, extremely flexible and provide assistance far greater in scope than that provided by EDA or the federal government programs. Because they serve local communities and are governed by a majority of local elected officials, they respond to the needs of the communities and deliver a variety of services to meet locally identified needs.

The Lower Savannah Council of Governments (LSCOG) headquartered in Aiken, South Carolina was officially established on June 20, 1967 with an EDA grant of $31,450 and local funds of $10,500. Today, LSCOG's base has broadened to include not only economic development but also law enforcement assistance programs, comprehensive local and regional planning, services to older Americans, health planning and historic preservation. During the past 31 years, the Lower Savannah Council of Governments has worked with EDA on a number of successful projects, including:

Creation of the Aiken Technical Education Center and the Denmark Area Trade School which have helped increase both the number of jobs and the qualified persons to fill those positions.

Testing the effectiveness of exporting goods produced by small businesses or farmers. The council identified current exporters and industries with the potential to export goods and assisted in developing the capacity of persons who had never participated in the export process.

LSCOG planning staff provides mapping services which facilitate environmental, land use and economic planning, as well as the preparation of custom census and other data reports, using a Geographic Information System (GIS). GIS is an organized collection of computer hardware, software, geographic data and personnel designed to efficiently capture, store, update, manipulate, analyze and display all forms of geographically referenced information. A Global Positioning System (GPS) which allows locations to be mapped with satellite technology is also being used by LSCOG.

3. Small Business Assistance Through Revolving Loan Funds Helps Fill Credit Gaps

EDA's revolving loan fund (RLF) program is one of the most successful and powerful economic development tools for addressing the credit gaps that exist in many distressed communities, particularly in underserved rural areas. RLFs provide financing when standard lending institutions will not fund smaller, riskier or unconventional business ventures. These funds are lent to businesses that cannot obtain financing through traditional lending institutions. RLFs are managed by public or private nonprofit lending institutions as part of an overall economic development program by lending their initial capital and then relending funds as payments are made.

The Mount Rogers Planning District Commission (PDC), an EDA Economic Development District, headquartered in Marion, Virginia offers an excellent example of the impact EDA's revolving loan fund program has in distressed communities. The commission has been a major beneficiary of EDA grants and special funding that have provided the critical infrastructure and site development for several industrial parks and facilities. Established in 1986, the commission's revolving loan fund has developed an outstanding track record with $1,368,000 dollars loaned for 12 loans that range from $25,000 to $150,000. Over 840 jobs have been created or saved via the commission's RLF program with a cost per job portfolio of $1,622 per job. Of the loans, approximately 28 percent went to industry and business start-ups and 81 percent to manufacturers. The RLF also targeted four percent of the firms that were women or minority owned.

One of the Mount Rogers RLF's most successful borrowers, Jack Galyean, President and Entrepreneur of Printed Circuit Solutions, recently received the Appalachian Regional Commission (ARC) Entrepreneur of Virginia Award. With the assistance of Mount Rogers PDC, Mr. Galyean established one of the region's most technically advanced/leading edge manufacturing facilities, specializing in the printed circuit board industry. Following a successful career in technology at Rockwell & Honeywell, he brought his expertise and business experience home to realize his dream of establishing a manufacturing operation in Galax, Virginia which would provide technically advanced, much needed jobs with above average wages. Printed Circuit Solutions Manufacturing, Inc. has grown to 30 employees with at least 50 percent of the workforce having two years of college or more. The company provides wages 20 to 30 percent above the industry average in the Galax area.

Based on the success of the RLF program, NADO members strongly encourage Congress to help strengthen the program. The agency should be strongly encouraged to continue to allocate resources to capitalize or recapitalize RLFs, to review their regulations to allow more flexibility and responsiveness to local priorities and make use of existing training programs such as the NADO Research Foundation's Economic Development Finance Service to ensure top level performance of new and existing RLFs.

4. Assistance Is Needed for Communities Facing Long Term and Sudden Economic Decline

EDA is extremely effective in helping communities cope with long-term economic disasters, such as resource-dependent economies facing the decline of coal or timber industries or sudden economic crises caused by plant closings and natural disasters. The agency is also a major player in the federal government's efforts to assist communities and industries struggling with defense conversion to shift their emphasis from military-based to private sector economies.

NADO members applaud EDA for its past success and encourage the agency to continue using economic development districts as part of its defense conversion strategy. In distressed communities, the districts are prepared to respond to and meet needs identified at the local level. The districts have the flexibility and expertise to respond to challenges, as well as the capacity to provide rural communities with the ability to react to new causes of economic distress, such as base or industry closure due to military downsizing. Through the overall economic development program, districts can help communities plan for defense conversion related problems and prepare a regional strategy to counter these obstacles.

The South Western Oklahoma Development Authority (SWODA), an EDA Economic Development District, converted a former B-52 Strategic Air Command Base into the Clinton-Sherman Industrial Air Park owned by the city of Sherman. Employing 500 people, the industrial park is a small town in itself, with an airport, and commercial and industrial operations. Currently the State of Oklahoma has formed a team with SWODA to compete for a launch site for the next generation space shuttle.

EDA Has Earned the Right to Be Reauthorized

The Economic Development Administration has demonstrated its effectiveness and deserves the stability in programmatic structure and funding that reauthorization would provide. During the past 30 plus years, the agency has created or retained more than 2.8 million jobs resulting from 39,000 assistance projects throughout the country; generated $1.9 billion in private sector capital through revolving loan funds that have supported more than 7,000 businesses; and leveraged more than ten dollars in private sector investment for every federal dollar invested.

Under the leadership of Assistant Secretary Phillip Singerman, EDA has streamlined its operations and significantly reformed and reinvented itself. Now is the time to provide the agency with legislative tools and congressional guidance to bring EDA into the 21st century.

EDA infrastructure grants are not only necessary, they are extremely successful and cost effective investment of federal resources. The federal government receives a return on their investment far greater than the size of the federal share of EDA infrastructure grants. As Assistant Secretary Singerman testified during House hearings last summer, a May 1997 performance evaluation of the EDA Public Works Program conducted by Rutgers University shows that EDA assistance helps distressed communities create jobs (at a cost of $3,058 per job), expands the local tax base (an increase of $10 for every $1 of EDA investment), and leverages private investment ($10 for every $1 of EDA investment). The results of this evaluation were gathered from a study of 203 public works projects that received their final payment from EDA in fiscal year 1990.

In addition to EDA legislation, NADO members support reauthorization of the Appalachian Regional Commission (ARC) which provides assistance to distressed areas in this 13 state region. ARC, working with Local Development Districts, has focused its resources on their most distressed counties and should also be reauthorized.

To restate briefly the main reasons why Congress should reauthorize the Economic Development Administration this year. EDA is the only federal agency that has the array of program tools needed to meet the challenges facing America's distressed communities including: public works, revolving loan funds, planning and economic adjustment. The Economic Development Administration supports a network of 320 Economic Development Districts (EDDs) that serve small metropolitan and rural communities as vital providers of professional and technical assistance. EDA has demonstrated its effectiveness and has earned the stability in programmatic structure and funding that reauthorization would provide.