TESTIMONY OF DAVID A. SAMPSON
ASSISTANT SECRETARY OF ECONOMIC DEVELOPMENT
U.S. DEPARTMENT OF COMMERCE
SENATE COMMITTEE ON ENVIRONMENT AND PUBLIC WORKS
THURSDAY, NOVEMBER 1, 2001
Chairman Jeffords, Senator Smith, Members of the Committee:
Thank you for this opportunity to appear before the Environment and Public Works Committee regarding the Economic Development Administration’s (EDA) role in the economic revitalization of New York City. I have a longer prepared statement; with your permission, I ask that it be inserted into the record.
One week ago today Deputy Secretary of Commerce Samuel Bodman, Lloyd Blanchard (Office of Management and Budget Associate Director General Government Programs), Doug Holtz-Eakin (Chief Economist of the President’s Council of Economic Advisors), and I toured the World Trade Center site and met with leading members of New York City’s business community. As you know, ground zero is quite literally beyond comprehension or description. But equally moving was the sight of thousands of New Yorkers who were lined up outside Madison Square Garden to participate in a job fair for displaced workers.
The Administration, the Department of Commerce, and the Economic Development Administration are committed to the economic revitalization of New York. As you are aware, the Administration is providing considerable funding for efforts that are underway to promote the City’s recovery and economic revitalization. In this context this means we are developing a multi-prong approach at getting people back to work and businesses, both large and small, back on their feet.
The Economic Development Administration (EDA) has contributed to previous disaster response efforts and has the statutory authority to assist communities in long-term economic recovery efforts. EDA has participated in over 20 major disaster adjustment efforts since Hurricane Camille in 1969, and has received in excess of $600 million in supplemental appropriations to deal with disasters since 1992. Appendix A illustrates EDA’s supplemental disaster appropriations. This funding has supplemented the lead roles assigned to the Federal Emergency Management Agency (FEMA), the Small Business Administration (SBA), and other agencies, including the Department of Transportation (DOT) and the Department of Housing and Urban Development (HUD). EDA has limited ability to respond without a supplemental appropriation.
Under existing statutory authority, EDA administers disaster program funds through targeted grants to disaster-impacted communities designed to achieve long-term economic recovery.
EDA disaster recovery efforts assist communities in shifting focus from short-term emergency response to long-term economic impacts of the disaster, and enabling the development of an economic recovery program that reflects local priorities.
EDA’s disaster response is organized into three phases: (1) monitoring, (2) mobilization, and (3) program delivery. Each phase has a triggering event with specific roles and responsibilities for EDA’s divisions. The plan builds upon the basic organizational structure and is designed to enable EDA to reasonably adapt its resources to be responsive to the size and scope of the disaster.
Reports of potential disaster situations, such as severe storm warnings and FEMA advisories, or the occurrence of a sudden catastrophic disaster such as an earthquake or tornado, trigger the initial monitoring phase. Activities include monitoring the events and gathering information critical to positioning EDA to move quickly into the mobilization phase, if warranted.
A Presidential declaration of a major disaster triggers the intermediate mobilization phase. Other types of non-Presidential disaster declarations may also trigger portions of EDA recovery plan actions.
EDA triggers the final program delivery phase by issuance of a Disaster Response Guidance Memorandum from EDA headquarters to appropriate EDA organizational units. Generally, proceeding with the program delivery phase also assumes that emergency supplemental appropriations or other funding resources have been identified and dedicated to EDA’s disaster response, recovery, and mitigation activities.
EDA’s discretionary grant implementation for disasters is in accordance with the prevailing statutory requirements and regulations. Within the statutory and regulatory framework and subject to any disaster specific restrictions, EDA uses all available program tools to implement a timely and appropriate strategic disaster recovery response to the disaster, consistent with EDA’s economic recovery role.
When asked to assist with disaster recovery, EDA has a comprehensive and flexible set of program tools, including:
· Targeted economic recovery planning and technical assistance grants;
· Revolving loan fund grants to address unmet business financing needs where other financing is insufficient or not available; and
· Infrastructure construction grants to rebuild an environment attractive to private investment for the re-creation of job opportunities.
While our program tools are flexible, EDA has a clearly defined target group of those eligible to receive EDA investment dollars. Those eligible include state and local governments, public and private nonprofit organizations, and regional economic development districts. Businesses are not eligible for direct assistance under EDA’s major programs.
Additionally, FEMA may direct EDA to perform economic impact evaluations or carry out other specific tasks through special “mission assignments.” Recently, FEMA mission assignments have tasked EDA to perform economic impact assessments in North Carolina, Virginia and New Jersey resulting from Hurricane Floyd.
The additional EDA staff and staff administrative costs would depend greatly on the amount of funds involved and the nature of the assistance. Since 1994, EDA has received additional funding for Salaries and Expenses (S&E) to administer emergency supplemental appropriations. The S&E rate averaged 5% of the funds appropriated, with the expectation that the funds would cover the costs associated with both grant award and post-approval monitoring for three to five years.
EDA currently oversees New York City development projects from our Philadelphia regional office, which is staffed with 35 employees. As this region consists of more than a dozen states, EDA at this time has relatively few staff devoted exclusively to New York City development projects. Were EDA to be assigned a responsibility for a portion of New York economic revitalization and recovery efforts, we would, as we have in past disasters, assemble a special disaster response team comprised of existing headquarters personnel as well as existing personnel from the six regional economic development offices around the country.
While it is important that the federal, state, and city governments move as quickly as possible to address the economic impacts in New York City, it is also critically important that economic revitalization efforts be based on a sound understanding of the New York City economic landscape both pre-September 11th and post-September 11th to ensure that federal efforts are truly market-based and phased appropriately in light of the projected timeline for clearing the World Trade Center site.
The Administration is committed to taking a thorough, comprehensive, and coordinated market-based approach in addressing New York’s immediate and long-term economic recovery needs. To this end, we believe it is vitally important to work not only with state and city officials, but also with New York’s business leaders.
With that in mind, last week we met with New York City business leaders and the New York City Partnership. This group’s leadership includes CEO’s of global businesses headquartered in New York. The New York City Partnership has commissioned seven of the world’s leading consulting firms (A.T. Kearney, Booz-Allen, Bain, Boston Consulting Group, KPMG, McKinsey, and PricewaterhouseCoopers) to assess the economic impact of the World Trade Center attack on New York City and identify investment priorities for renewal. As I understand from my briefing, the overall project objectives will be to:
· Adopt a base line of New York City economic forecasts prior to the World Trade Center tragedy;
· Assess the economic impacts of the World Trade Center tragedy on all key industries and sectors of the City economy, both short-term and long-term;
· Understand the economic and fiscal impact on lower Manhattan and New York City and fiscal impact on New York State; and
· Identify priorities to accelerate recovery.
Based on my conversations with New York City business leaders, my sense is that the most urgent need is to focus on recovery in the collateral damaged area because ground zero cleanup is probably a year away. The best information I have seen indicates that there are approximately 5,000 businesses directly affected in New York City at ground zero and the cordoned off areas. Approximately 4,000 of those are small businesses that employ approximately 77,000 employees. These are the most vulnerable businesses. Because of the indeterminate extent of the New York City recovery program, it is evident that loans will not be an appropriate vehicle in support of these businesses and they can only be retained by some sort of grant program. The Director of the Office of Management and Budget, Mitch Daniels, is announcing today the release of funds from the Emergency Supplemental Appropriation that New York can use for such grants to businesses.
The Administration is currently providing significant funding to New York through a variety of agencies. The proposed authorization for a major grant to provide employment incentives needs more analysis to ensure the funding of recovery is effective and provides the infrastructure necessary to move the economic base of New York City forward. The Administration is looking at a range of existing government programs for a comprehensive solution. We believe this is a better systemic approach than locking into a $2 billion appropriation at EDA.
The Administration is focused on ensuring that economic recovery funding is effective and truly focused on rebuilding New York City’s economic infrastructure in order to get people back to work and businesses up and running again. As the Administration and Congress make these decisions, I respectfully suggest we do not limit ourselves to one narrow path of assistance, but use a wide range of existing federal programs and delivery infrastructure to maximize every federal dollar on rebuilding New York City. Working together with the private sector, we will not disappoint those who need the assistance of an effective, coordinated federal, state and local response to rebuild the economic infrastructure and get people back to work.
Thank you for allowing me to testify before you today. I would be happy to answer any questions you may have.
EDA Supplemental Disaster Appropriations – 1992 to Present
FY Disaster Program Funds S&E Funds (Millions) (Millions)
92 Hurricanes Andrew, Iniki and Typhoon Omar $ 70 $5
EDA awarded 63 grants in Florida, Hawaii,
Louisiana, and Guam.
93/94 Midwest Floods 200
EDA awarded 297 grants in North Dakota, South Dakota,
Iowa, Missouri, Kansas, Wisconsin, Minnesota, and Illinois.
94 Southern California Earthquake (Northridge) 91
EDA awarded 20 grants in southern California.
94 NE Fishery Disaster 18
EDA awarded 21 grants in the New England states.
94 Tropical Storm Alberto 50 5
EDA awarded 74 grants in Georgia, Alabama and Florida.
96 1996 Floods 16.75 1.25
EDA awarded 41 grants in Maryland, New York, Virginia,
Pennsylvania, West Virginia, Kentucky, Idaho, Oregon,
Washington and North Dakota.
97 Hurricanes Fran and Hortense 25
EDA awarded 44 grants in North Carolina, South Carolina,
Virginia, West Virginia, and Puerto Rico.
97 Upper Midwest Floods of 1997 50.2 2
EDA awarded 74 grants North Dakota, South Dakota,
Minnesota, Kentucky, West Virginia, Ohio, Indiana, Illinois,
Arkansas and Tennessee.
99 Alaska Fisheries 19.1 .9
EDA has to-date awarded 29 grants in Alaska.
Implementation is still proceeding.
00 Hurricane Floyd 55.8 1.9*
EDA awarded 51 grants primarily in New Jersey,
North Carolina and Virginia.
01 Alaska Norton Sound Fisheries 10
EDA has to-date awarded 10 grants in Alaska.
Implementation is still proceeding.
* 1.9 M for S&E for Hurricane Floyd and Norton Sound Fisheries provided through an FY 2001 reprogramming.