/ '% The EDA Experience in the Evolution of Policy A Brief History September 1965 - June 1973 U.S. DEPARTMENT OF COMMERCE Economic Development Administration The EDA Experience in the Evolution of Policy A Brief History September 1965 -June 1973 Prepared by Economic Development Administration Office of Administration and Program Analysis c 3 U.S. DEPARTMENT OF COMMERCE Frederick B. Dent, Secretary William W. Blunt, Jr., Assistant Secretary for Economic Development May 1974 PR E FAC E Almost eight years have elapsed since Congress established the Economic Development Administration (EDA) to provide the assistance necessary to permanently eliminate substantial and persistent un- employment and underemployment in economically distressed areas. During this period, the Agency has obligated approximately $2 billion to operate and administer its program of grants, loans, and technical assistance. This paper is the second edition of a study tracing the evolution of policy within the Agency. It contains three additional chapters and covers Agency activities and events affecting Agency policies through June 1973. The study was initiated with the hope that the insights gained would increase EDA's effectiveness in the development and implementation of policy. Although it is not common practice for Federal agencies to document policy, EDA officials felt the project worthwhile because of its potential contribution to future policy decisions. The secondary objective of preparing a history of EDA operations also evoked considerable enthusiasm within the Agency. Any examination of EDA necessarily begins with a review of the Area Redevelopment Administration (ARA) experience. Together with the concepts embodied in the Accelerated Public Works Program and the Appalachian Regional Development Act, this experience formed the basis for the EDA legislation. After tracing the effects of these programs, the discussion centers on the EDA mission and the tools provided for its achievement. A chronological account of Agency policies and activities during the administrations of each of EDA's fourlV Assistant Secretaries follows the discussion of Agency goals and program tools. Included in this account are an examination of the Economic Development District Program and its concepts, and a discussion of the Regional Commission Program. Emphasis is placed on the policies and strategies established by each Assistant Secretary for dealing with the problems of economically distressed areas. The final chapter of this edition, Chapter 9, describes the plans for a new Federal approach to economic development as proposed by the President in his January 197 3 budget message to the 1/ The fourth Assistant Secretary was in an Acting capacity during part of the period covered in this publication. Congress. Also discussed in Chapter 9 is the effect of this proposal and the attendant decisions on EDA activities. The chapter concludes by reporting the one-year extension of EDA agreed upon by Congress and the Administration in June 197 3 as an interim measure. This agreement to continue EDA for a year reflected the lack of concurrence between Congress and the Administration. While the two branches were in accord as to the need for Federal aid to assist residents of depressed areas in their struggles to develop viable economies, they disagreed on the effectiveness of EDA and the steps that should be taken to improve the Federal approach to economic development. Before a program acceptable to both branches could be structured, further study and consideration were deemed necessary. July 1973 li TABLE OF CONTENTS CHAPTER PAGE PREFACE i 1 ARA/APW EXPERIENCE 1 2 MISSION AND TOOLS 10 3 PROGRAM IMPLEMENTATION - SEPT 1965 to SEPT 1966 19 4 PROGRAM IMPLEMENTATION - OCT 1966 to JAN 1969 30 5 PROGRAM IMPLEMENTATION - FEB 1969 to JAN 197 2 4 8 6 THE CONTINUING FEDERAL ROLE IN DEVELOPMENT ACTIVITIES 7 7 PROGRAM IMPLEMENTATION - JAN 197 2 to FEB 197 3 77 MANAGEMENT DECISIONS WITH AGENCY-WIDE EFFECTS 8 PROGRAM IMPLEMENTATION - JAN 1972 to FEB 1973 8 3 NEW DIRECTIONS 9 EXTERNAL EVENTS, AGENCY RESPONSES, AND THE CHANGING 9 6 FEDERAL ROLE IN DEVELOPMENT ACTIVITIES MAY 1972 - JUNE 1973 in Digitized by the Internet Archive in 2012 with funding from LYRASIS Members and Sloan Foundation http://www.archive.org/details/edaexperienceineOOunit CHAPTER ONE ARA/APW EXPERIENCE The foundation for Federal legislation providing aid to economically depressed areas was laid in the decade before the creation of the Economic Development Administration (EDA) . Debate, compromise, coalition building, experimentation, suc- cess and failure all played roles in shaping the Agency that exists today. However, although congressional guidance can- not be discounted, the primary influence in preparing the EDA legislation was the experience acquired from the operations of the Area Redevelopment Administration (ARA) . Other influ- ences included the concepts embodied in the Appalachian Regional Development Act and public and congressional reaction to the Public Works Acceleration Act (APW) . "Creation of an Agency" The Area Redevelopment Administration was established in May 1961, with the stated goal of implementing an effective program to alleviate conditions of substantial and persistent unemployment and underemployment in certain economically dis- tressed areas. This action represented a climax to seven years of heated debate on the subject, during which time two similar programs had been rejected by presidential vetoes. Regarded as an experimental program to give legislative support to the declarations of the Full Employment Act of 1946, ARA succeeded in creating jobs and generating income in depressed areas throughout the county. However, despite its accomplishments, the ambitious undertaking was plagued from the outset with a variety of problems. Conceived as an organ for encouraging private enterprise to locate in depressed areas and armed with such tools as business loan funds and public facility grants, ARA emerged as an enthusiastic organi- zation trying to administer a broadly defined and inadequately funded program. It was further handicapped by the national economy, which, by operating considerably below capacity, pro- duced a climate particularly unfavorable to the expansion or establishment of business. "Policy Making Under ARA" As implemented by ARA, area redevelopment focused on creating jobs in depressed areas. Congressional pressures to designate eligible areas and expend funds played havoc with any notions of planning entertained by program admin- istrators. For the most part, experience dictated policy. Projects were analyzed by top Agency officials at project review meetings. As each element requisite to project approval was isolated, a guideline was issued declaring an Agency policy to require that element in future projects. One example of this procedure was the "bird in hand" policy adopted in the first year of the Agency's existence. This decision to require that any public works grant or loan be directly linked to a business venture represented an interpretation of the legislation by ARA administrators and grew out of a concern to preserve reason in the project selection process. Without a requirement of this type, there was no logical basis for choosing among the hundreds of project applicants competing for ARA's limited public works funds. The effect of this decision was twofold: to demonstrate the demand for public facilities funds; and to indicate to congressmen and local communities that ARA had a broader commitment than funding public works facilities in depressed communities. "Unfavorable Publicity" The difficulties of ARA can in large part be attributed to the Agency's image, which was tarnished by mistakes and unrealized expectations. An over-enthusiastic staff filled early reports and news releases with inflated figures concerning job creation and unemployment reduction, and the General Accounting Office publicly accused ARA of claiming false results. Accompanying this criticism were cries of imprac- ticality and political motivation in the selection of projects. Also joining in the fray were advocates of regional and growth center approaches to economic development, who attacked the ARA program as artificial. Even elements of organized labor, previously overwhelmingly in support of the ARA concept, criticized the Agency for allegedly assisting in business re- locations. ARA was further discredited by its mistakes in encouraging local businessmen to expand. Although ARA in- tentions were good in such cases, the results were often devastating: to the individuals whose enterprises failed, to local communities, and to ARA's image as a redevelopment agency . "Funding Problems" ARA's effectivenss in creating jobs and lowering the incidence of unemployment was further impaired by funding problems. During most of the period covered by ARA operations more than 1,000 counties were eligible for assistance. However the Agency's four-year appropriation was only $551.9 million or just over $550,000 per county. Actual obligations were ' even lower, totaling $352.3 million, or approximately $352,000 per county. Other funding problems also hindered Agency operations The total public facility grant authorization of $75 million was requested and appropriated during the first two years of operation. However, ARA obligated only $41.5 million, or 55 percent, of this amount. (Primarily because of a shortage of acceptable project applications, the newly created Agency ex- perienced difficulty in obligating its resources during the first year of operations; less than four percent of the $40 million public facility grant appropriation was expended. Dur- ing the 1963 fiscal year, this problem was remedied, and approx- imate^ $34 million of the $35 million public facility grant appropriation was ODligated.) "Public Works Acceleration Act" In September of 1962, Congress passed the Public Works Acceleration (APW) Act. This Act, which was legislated as a counter-recessionary measure to generate temporary employment, stipulated that one-third of its $900 million authorization be allocated for public works projects in ARA-designated areas. Other areas eligible for APW funding were approximately 300 labor market areas that had exhibited substantial unemployment for at least nine of the preceding twelve months. Under ARA criteria, counties could not become eligible for Agency assist- ance unless they had experienced substantial unemployment for considerably longer periods of time, ranging from two to four years. *.u r, ARA administe red the APW program and, with the help of the Community Facilities Administration and the Public Health Service, expended approximately $851 million in APW funds in It™ two years. During that period, the program afforded temporary relief to unemployed residents of depressed areas and provided infrastructure facilities for hundreds of under- developed communities. However, the APW legislation required no evidence of local planning to award a grant or loan. Al- though the absence of such a requirement expedited the pro- ^fl! 1 ?? Project applications, it also resulted in criticism that the program had minimal ties to concepts of area redevel- By January of 1963, less than five months after the APW legislation was enacted, the response to the program had been so great that states and communities were discouraged from filing further project applications. Applicants for public facility grants could still seek ARA funds, but even that resource was exhausted by the end of June. In light of this situation, a bill to increase the ARA authorization and pro- vide additional public facility grant funds was introduced in Congress during the spring of 1963. After being defeated in the House by a five-vote margin, the bill was passed by the Senate on June 26 and returned to the House for recon- sideration. Congress adjourned without taking further action, thus depriving ARA of public facility grant funds during the 1964 and 1965 fiscal years. "Decision to Replace ARA" Beset with these and other troubles, the Area Redevelop- ment Administration was sacrificed for reasons of political expediency. While accepting ARA's premise that economically lagging areas could be stimulated through such tools as public works funds and technical assistance, the Administration and a majority of the nation's legislators affirmed the necessity of divesting the program of the ARA image through the creation of a new agency. However, ARA and APW experience had resulted in the approval of 9,866 projects, the creation of an estimated 117,000 permanent jobs, and the generation of approximately 210,000 man-years of short-term employment. In addition, more than 25,000 community leaders had served on local economic development committees. As a result, even those advocating the discontinuance of ARA recognized that valuable lessons had been learned. "Demand for Public Works Funds" Among the insights gained through ARA and APW experience was a recognition of the overwhelming demand for public works funds at the local level. Sponsors of the original depressed areas legislation had pictured economically distressed com- munities as possessing a basic infrastructure, but not putting it to full use. Thus, they assumed that residents would pri- marily be interested in establishing and attracting new busi- nesses as a means of promoting economic development. This assumption might have been valid for the legislation's original targets - northeastern and mid-Atlantic communities suffering from the problems of coal, textiles, and other declining in- dustries. However, it did not hold for the southern agricultural 4 areas included to acquire more widespread support for the ARA bill. The response to ARA and APW programs not only showed that such communities lacked a basic infrastructure, but also indicated that industries were reluctant to locate in areas lacking public works and development facilities. In recognition of this demand, framers of the EDA legis- lation increased emphasis on public works and renamed the bill accordingly, calling it the "Public Works and Economic Develop- ment Act of 1965." This step not only replied to the demon- strated needs of local communities, but also allowed the measure to be introduced through the Senate Public Works Com- mittee. It was anticipated that this Committee would be more agreeable to the provisions for expanded funds for each of the program tools than would the Banking and Currency Committee, which had not been particularly successful in acquiring funds for ARA. "Need for Staffing Funds" ARA experience with local, area, and state level planning was also instrumental in shaping the EDA legislation. Overall Economic Development Plans (OEDPs) composed under ARA never attained the sophistication advocated by professional planners. The majority of these documents, which describe an area's economic problems and needs and propose solutions, failed to evolve as viable blueprints for alleviating economic distress. The lack of funds for hiring full-time economic development staffs resulted in inadequate planning and inefficient pro- grams at the local, area, and state levels. Most communities were unable to prepare meaningful OEDPs and implement plans effectively with part-time, volunteer workers. Nonetheless, ARA administrators maintained the OEDPs were a spur to eco- nomic development because the necessity of preparing such documents forced local leaders to meet and discuss plans for their area. To combat these problems and increase the quality of local planning, the EDA legislation continued the require- ment for OEDPs and provided planning and operating funds for non-federal planning groups. "Geographic Scope of Development Activities" Several provisions of the EDA legislation stemmed from dissatisfaction with the results of ARA's approach to area redevelopment on a county basis. The assumption that the county represented the only basic unit through which economic development could be achieved was disproved as a result of ARA/APW experience. Although ARA administrators experimented with some regional and multi-county planning, framers of the EDA legislation devised a significantly broader geographic approach to economic development. One component of this approach involved the establishment of regional commissions for dealing with economic problems on a multi-state basis. This particular strategy evolved from ideas explored in ARA technical assistance studies and from the provisions of the Appalachian Regional Development Act, which established a regional commission to coordinate economic development in Appalachia . The regional approach was accompanied by legislative prescriptions for a multi-county District Program similar to that employed in France and the United Kingdom. Reflect- ing the belief that certain areas could not mount effective attacks on unemployment and low income on their own, this program encouraged the pooling of talents and resources to achieve common aims. The Act stipulated that financial provisions for the District Program be withheld for a period of one year after EDA began operations. It was expected that this interval would be devoted to planning. Included in the legislation was a capability to designate growth centers in economic development districts, a provision inserted partially to answer criticism directed at ARA by economists and planners in other agencies. The growth center concept also reflected European influence and the search for an alternative to urban migration. Several basic assumptions underlay this strategy. The first was that the provision of jobs, income, and local ser- vices in growth centers would benefit not only these centers, but residents of the surrounding areas as well. A second assumption was that accelerating and increasing the growth and prosperity of such centers would encourage residents of nearby depressed areas to seek work in the growth center in- stead of migrating to other areas. An additional assumption was that it would be less expensive to provide benefits to the target population (i.e., the unemployed and underemployed residents of depressed areas) through investments in growth centers than by funding projects in less developed areas. "Displeasure with Delegate Agencies" ARA and APW experience underlined a number of additional deficiencies in the enabling legislation. The requirement forcing ARA to administer its programs through delegate federal agencies hampered operations and resulted in extra work for ARA personnel. The delegate agencies proved incapable of processing loans and grants at the speed necessary in a pro- gram such as ARA's, and at least one agency attempted to acquire ARA funds for its own use. Determined to spare EDA the inefficiency and overwork that resulted from this pro- cedure, ARA administrators pressured Congress to remove the delegate agency requirement and allow EDA to operate inde- pendently. As a result of the efforts of these ARA officials and certain congressmen, administration of the EDA program is primarily an in-house operation. Although EDA's Office of Technical Assistance has considerable interaction with the Department of Labor in relation to training activities, the Business Development Program is the only Agency program that receives administrative assistance from another federal agency. In this case, the Small Business Administration (SBA) retained a small portion of the responsibilities it held under ARA. This entails investigating new business ventures that apply for business loans and supplying EDA with the information obtained. "Success of ARA's Job Training Program" Job training under the ARA program contributed signifi- cantly to the reduction of unemployment in depressed areas. Approximately 70 percent of the 45,000 jobless workers trained with ARA assistance were placed in the jobs for which they were trained. The success of ARA's job training program was par- tially responsible for the passage of the Manpower Development and Training Act of 1965. This act set aside special funds for use in training residents of ARA- or EDA-designated areas. The Act stipulated that EDA was to assume responsibility for stimulating and reviewing applications for the expenditure of these funds. "Need to Specify Local Share" Another problem that arose under ARA involved the per- centage of local funds necessary before a grant could be approved. The ARA Act required only that the applicant con- tribute to project cost "in proportion to its ability" to pay. Lacking legislative stipulations as to how to determine "ability," Agency officials experimented with several policies, including a complciated formula established by the Community Facilities Administration for determining the optimal amount for each applicant. Another policy implemented 'under ARA identified the local share as the part of the project cost that could be financed by user charges. However, political pressure - applied by constituents to congressmen and trans- ferred to Agency officials - often proved the ultimate factor in specifying a local contribution, and no ARA policy prevailed. As a result of APW success with legislation requiring specific percentages, a similar requirement was incorporated in the EDA legislation . "Area Designation Criteria" A final case in which ARA experience dictated EDA legis- lation relates to the criteria established for determining eli- gibility for Agency funds. ARA ' s legislation provided specific guidelines only in relation to substantial and persistent unem- ployment. To be eligible for ARA funds under these criteria, an area had to have a unemployment rate of 6 percent or more for the most recent calendar year for which statistics were available; have averaged 6 percent or more unemployment for one of the time periods specified below; and meet one of three conditions: (1) have experienced unemployment 5 percent above the national average for three of the preceding four calendar years; (2) have experi- enced unemployment 7 5 percent above the national average for two of the preceding three calendar years; or (3) have experienced unemployment 100 percent above the national average for one of the preceding two calendar years. In addition, the ARA Act empowered the Secretary of Commerce to designate as redevelopment areas those areas (including Indian reservations) "which he determines are among the highest in num- bers of percentages of low-income families." Although the legis- lation directed the Secretary to prescribe detailed standards for designating areas on this basis, and indicated a few factors that should be considered in establishing such standards, it did not dictate specific criteria. With the aid of data provided by the Departments of Agricul- ture, Labor, and Interior, ARA administrators developed such criteria. These included specific standards for designating areas on the basis of median family income, percentages of low produc- tion farms in the area, and median farm family income. The ARA criteria were used as a basis for preparing the EDA legislation, which specifies standards for determining area eligibility. In addition to the unemployment measures cited in the ARA Act, the standards originally set by the EDA legislation permit designation of the following places: 8 CD areas with median family incomes not exceeding 4 percent of the national median; (2) Indian reservations manifesting the greatest degree of economic distress; (3) areas designated by ARA (subject to yearly review on the basis of EDA criteria) ; and (4) the one area that most nearly qualifies for designa- tion in states which otherwise would have no designa- ted areas. Places where economic changes have cause or threaten to cause substantial unemployment can also become eligible for EDA aid. Under the ARA legislation, the Secretary of Commerce had no authority to designate places where such changes threatened to result in high unemployment. To eliminate this inadequacy, the framers of the EDA legislation inserted provisions giving the Secretary power to respond to requests from such areas and de- clare them eligible for EDA aid. In addition, the Secretary of Commerce was given authority to make public works grants to those areas that had substantial unemployment during the preceding calendar year as determined by the Secretary of Labor on the basis of average annual unemployment statistics. CHAPTER TWO MISSION AND TOOLS Despite ARA's difficulties in maintaining a good public image, its success in creating jobs and generating income con- vinced Congress and the Administration that the mission of permanently alleviating conditions of substantial and persis- tent unemployment and underemployment in economically dis- tressed areas and regions was a feasible one. Indeed, the appeal of a comprehensive program of federal assistance to provide jobs and higher incomes for persons residing in areas where jobs were scarce and incomes low increased during ARA's tenure. The results of ARA assistance supported the program's premise that federal aid could be employed to effect economic viability in lagging areas. "Affecting Out-Migration" While reaffirming the original ARA mission, the framers of EDA's legislation also emphasized the related goal of stemming migration from the nation's depressed areas. Those involved in structuring the EDA program recognized the endless cycle of economic distress that plagues many areas of the country. This cycle is caused by the fact that an area with a declining economic base cannot finance the public improve- ments necessary to attract new industry. As a result, the young people and more aggressive members of the labor force who are unable to secure local employment and are concerned about careers are forced to leave the area. Prospective employers thus find the area lacking not only in public facilities, but also stripped of the most important ingredient for rehabilitation - the availability of a high-quality labor force. The EDA legislation was designed to help local resi- dents break this crippling cycle. "Taking Advantage of Natural Growth Centers" The framers of the EDA legislation also stressed the need to encourage expanded economic growth in the natural growth centers of depressed regions and areas. Accelerating the creation of employment opportunities in or near such centers was believed the most effective and timely approach to providing jobs for residents of neighboring depressed areas The growth center strategy outlined in the legislation was 10 included as one specific means of extending the benefits of natural growth centers to redevelopment area residents. 1/ "Importance of Long-Range Economic Planning" Those preparing the EDA legislation recognized one major deficiency in the ARA program: no particular importance had been attached to stimulating meaningful , long-range economic planning by residents of distressed areas. To remedy this situation, a clause requiring the use of such planning in conjunction with EDA financial and technical assistance was inserted in the Act's Statement of Purpose. In addition, the legislators provided for grants to organizations with planning responsibilities under Title III and specifically discussed the use of regional commission funds for planning purposes in Title V. These provisions identified EDA's responsibility to stimulate planning at local, district, state, and regional levels as one strategy for achieving its mission.' "Interpreting the EDA Legislation" The EDA legislation states that the Agency's mission is "to provide grants for public works and development facilities, other financial assistance and the planning and coordination needed to alleviate conditions of substantial and persistent unemployment and underemployment in economically distressed 1/ For further information concerning growth centers and a growth center strategy, see: Berry, Brian J.L. Potential Growth Centers and Growth Center Potentials in the Upper Great Lakes Region . A Report to the Upper Great Lakes Regional Commission, Oct. 19, 1968. Darwent, David F. "Growth Poles and Growth Centers in Regional Planning." Environmental and Planning , Vol. I (1969), pp. 5-32. yj (UL< es y Hansen, Niles M. "A Growth Center Strategy for the United States." Review of Regional Studies , Vol . I (1969?) , pp. 161-173 Kuehn, John A. and Lloyd D. Bender. "An Empirical Identifica- tion of Growth Centers." Land Economics , XLV, Number 4 (November 1969), pp. 435-443. 11 areas and regions." However, responsibility for establishing priorities is left to Agency administrators. The Act's general nature invites a variety of interpre- tations. It gives no indication whether the Federal Govern- ment has accepted responsibility for the revitalization of all distressed areas or only a limited number. Is an area with greater need to be assisted before an area with more potential? Are the creation of jobs and generation of income the most important measures of the Agency's success? How much emphasis is to be placed on the stimulation and develop- ment of long-term planning and problem solving capabilities at the local level? Although several area development strat- egies are outlined in the Act, no explanation is given as to the relative importance of each. In short, Congress structured the EDA legislation to allow Agency policy makers to determine program direction. The Act also provided EDA administrators with the flexibility to respond to local development problems on an individual basis. "Defining EDA Goals and Priorities" The interrelated tasks of defining EDA goals and pri- orities posed problems for Agency policy makers. The nature and causes of chronic depression and unemployment in certain areas of the nation had not been satisfactorily identified when EDA began operations. Although ARA's research program was responsible for some pioneering in this field, data describing economic conditions on a regional or area basis was far from adequate. Even had this information been available, there was no widespread agreement on solutions to economic problems. While one school of thought argued that the provision of job opportunities and the generation of increased income were the most important ingredients in building viable economies in depressed areas, another contended that devel- opment assistance alone could not produce self-sustaining growth. This group emphasized the necessity of involving local residents in such development activities as the iden- tification of needs, the establishment of priorities, and the formulation of an approach for addressing priorities. 12 "Different Development Needs" Efforts to set goals and assign priorities were further complicated by the diversity of the economic problems con- fronting the nation's depressed areas. In operational terms, economic development obviously entailed different activities in different places. For instance, an area designated for EDA assistance on the basis of a low median family income would not necessarily benefit from the generation of new job opportunities. If the jobs offered salaries no higher than those already earned and were not filled by workers seeking to supplement family incomes, residents of the area would still suffer the discomforts associated with a low standard of living. In such a case, training projects to upgrade the skills of the local work force and loan assistance to better paying industries would appear more appropriate. On the other hand, in areas designated on the basis of substantial unemployment, the creation of jobs at any salary level would partially alleviate the employment problem. EDA policy makers agreed that the Agency's overall mission was to assist areas of substantial and persistent unemployment and underemployment to achieve lasting economic gains through the establishment of stable, diversified local economies. The difficulty lay in identifying goals and priorities that would be relevant to the various situations likely to be encountered by the Agency; obtaining Agency-wide commitment to those goals and priorities; and insuring that EDA resources were applied in conjunction with them. The easiest course to follow would clearly have been to set broad goals, never identify Agency-wide priorities, and evaluate each proposed project in terms of the individual needs of the area involved. "Continued Examination of EDA's Role" Although EDA has functioned as an operating agency for more than six years, the approach to achieving the Agency's mission is still a subject of discussion. Each administrator has struggled to determine precisely what constitutes economic development, which strategies would be most effective in improv- ing the economies of depressed areas, and what priorities should be enforced. The fact that few Agency-wide policies have been established testifies to the complex nature of such problems and the lack of unanimity among those responsible for solutions. Pragmatically, the director and staff members of each program office have set priorities and used their own judgment in determining the exact nature of EDA's mission. 13 "Furnishing Program Tools" Arming the Agency to accomplish its mission required more skill in developing policies and procedures to success- fully implement traditional programs than in introducing new concepts. The consensus among those connected with the ARA program was that except for the lack of planning funds, the tools furnished to the Agency were suitable and sufficient for accomplishing its mission. It was commonly believed that ARA's problems stemmed from the manner in which the tools were applied and the low level of funding. As a consequence, the basic tools furnished to EDA were substantially the same as those provided in the ARA legis- lation. Public works grants and loans were continued as a means of improving the social and economic overhead of com- munities and regions. Business loans were again provided to aid businesses creating employment in designated areas. Technical assistance grants were retained as aids in identify- ing development opportunities in economically distressed counties and towns, and funds were provided to support economic research. In addition, the EDA legislation introduced plan- ning and administrative grants to finance full-time planners at the local level. "Public Works Grants And Loans" Introduced as a supplementary inducement to acquire congressional approval of the ARA legislation, the Public Works Program of grants and loans emerged under EDA as the major tool for stimulating economic development in depressed areas. Never has the annual percentage of public works expenditures fallen below 60 percent of EDA's total obligations, and, in the first year of operation, public works obligations accounted for 73 percent of the Agency's outlays. As ARA and APW experience resoundingly demonstrated, business loans and technical assistance are not sufficient tools for waging a fight against economic problems. Unless a community or area possesses the basic infrastructure to support economic activity, efforts to establish or expand businesses and educate residents to make the best use of available resources have small impact. Adequate water and sewer systems, industrial and commercial provisions, health centers, and transportation systems are among the facilities necessary if economic develop- ment is to occur. EDA public works grants and loans are used to help communities develop this infrastructure. 14 "Business Loans" The legislators and interest groups who campaigned in the 1950' s for a federal program to aid depressed areas per- ceived the major handicap to such areas as the unavailability of credit for establishing or expanding businesses. In accordance with this view, more than 50 percent of the funds authorized by the Area Redevelopment Act were earmarked for loans to industrial and commercial enterprises in desig- nated areas. Although ARA operations revealed the grass- roots belief that a lack of public facilities and not the unavailability of credit was the major deterrent to area development, the Business Loan Program continued to be regarded as an essential feature of the effort to transform lagging areas into viable economic units. The EDA legislation not only dictated a substantially increased program of loans, but also removed the constraints precluding loans to sizable corporations. The Area Redevelop- ment Act allowed the Agency to extend loan assistance to a business only if such aid were not otherwise available from private lenders or other federal agencies on reasonable terms. Thus, multi-million dollar enterprises that could have con- tributed significantly to the economies of depressed areas were excluded from participation in ARA's Business Loan Pro- gram because they could have obtained financial aid from other sources. Without the inducement of a long-term, low-interest loan, few such companies elected to locate in designated areas. EDA was spared this limitation through the inclusion of a clause that allows the Secretary of Commerce to make loans if the aid is not otherwise available "on terms which, in his opinion, will permit the accomplishment of the project." Therefore, if a firm's location in a depressed area as opposed to another site is contingent on receipt of an EDA loan, the Secretary can approve such aid. "Technical Assistance" EDA's Technical Assistance Program is regarded by many as the most flexible tool furnished any federal agency. Un- like the public works and business development loans and grants, technical assistance can be provided to any area that exhibits substantial need. In addition, the legislation places few limitations on the types of projects that can be implemented with technical assistance funds. Feasibility studies, manage- ment assistance, and reports evaluating and recommending re- source usage are all outputs of the Technical Assistance Program, which enables communities and organizations to overcome specific economic development problems . 15 Under ARA, technical assistance assumed a supporting role with respect to the Agency's other program tools. Technical assistance funds were often used to finance background studies to help ARA officials decide whether to furnish public works or business loan aid. Of all the categories of studies sup- ported by ARA technical assistance grants, those studies ini- tiated to develop regional action programs received the highest level of funding. Projects involving central city action pro- grams, tourism and recreation, and mineral industries and ore processing also received a substantial percentage of the $16.1 million expended by ARA under its technical assistance provi- sions. In addition, ARA technical assistance funds financed the studies that recommended the formation of an Appalachian Regional Commission, and defrayed some of the expenses incurred by groups establishing training schools for minority unemployed and underemployed in a number of cities. The unique value of a program of this type did not go un- heeded by ARA administrators, congressmen, or Bureau of the Budget (BOB) 1/ representatives. The EDA legislation contained an expanded discussion of technical assistance and provided a substantially increased authorization for technical assistance, research, and information services. "Planning and Administrative Grants" The framers of the Public Works and Economic Development Act of 1965 were cognizant of the problems encountered by ARA as a result of inadequate planning at local, county, and state levels. In most instances, planning was limited to preparation of the Overall Economic Development Programs (OEDPs) required for designation, and these documents were weak in several respects. Written by local residents who often viewed the documents as just another paperwork requirement of the Federal Government, the OEDPs prepared under ARA lacked sophis- tication and were frequently disregarded during the process of developing projects. In addition, the OEDPs dealt with county problems and resources, while ARA funded projects through towns. These shortcomings handicapped ARA administrators and forced them to employ an individual project approach that decreased the program's effectiveness and drew criticism from Congress. — Renamed the Office of Management and Budget in 1970. 16 The ARA administrators, BoB personnel, and congressmen involved in preparing the EDA legislation recognized that these shortcomings did not indicate a lack of interest or intelligence on the part of state and local planners. The major problem was insufficient funds. Planners were left to their own devices to finance economic development organiza- tions, and, at the local and county levels, this resulted in part-time volunteer workers whose effectiveness was hindered by the absence of a full-time staff to direct and coordinate their efforts. The situation at the state level was somewhat improved in that the use of part-time volunteers was not necessary. However, in most states, the funds allocated for economic development efforts were far from adequate to establish an effective planning organization. In response to these difficulties, those drafting the EDA legislation included provisions authorizing grants-in-aid to defray up to 75 percent of the staff and administrative expenses of "appropriate public or private non-profit state, area, district, or local organizations." It was anticipated that these planning grants would allow local and district groups to hire full-time planners to organize the local effort, study the broader aspects of economic development, and pro- pose projects conforming to the area's OEDP. In addition, it was expected that the grant program would make it possible for state planning organizations to increase the scope of their activities in the field of economic development. "Economic Research Funds" The remaining program tool supplied to EDA was funds for economic research. The Economic Research Program dictated by the EDA legislation represented a continuation and expansion of the ARA practice of funding studies considered valuable to those working in the field of economic development. Among the subjects designated for investigation were the causes of un- employment, underemployment, underdevelopment and chronic depression in various areas and regions, and the formulation and implementation of national, state, and local programs to raise income levels and solve other related problems. In addi- tion, research funds were to be used to assist in providing the personnel necessary to conduct such national, state, and local programs . 17 "Training Provisions" As previously noted, another tool used by ARA to stim- ulate area redevelopment emerged from the legislative debates in a somewhat altered form. Instead of allotting Agency funds for training unemployed or underemployed residents of desig- nated areas, Congress and the Administration chose to limit EDA training funds to the annual appropriation provided by the Manpower Development and Training Act of 196 2 (MDTA) . Thus, EDA was given responsibility for stimulating, review- ing, and recommending applications for the expenditure of the MDTA funds. However, the Department of Labor controlled the funds, and EDA lacked the authority to see that its recommenda- tions were followed. This arrangement has never been completely satisfactory from EDA's point of view. Without direct access to training funds, Agency officials cannot insure that funds are allocated to training projects directly related to EDA grants or loans. In addition, although $22 million has been appropriated each year for use in training residents of EDA-designated areas, the Agency staff has often experienced difficulty in communicating its recom- mendations for use of this money to the Department of Labor. The MDTA legislation requires only that special funds be set aside for job training programs in designated areas of economic distress; no minimum amount is mentioned. Therefore, the Department of Labor can legally justify furnishing only a small portion of the $22 million appropriation to fund EDA-associated projects . "Applying the Tools" As inheritors of the ARA/APW legacy and recipients of a broadly stated mission, the first EDA administrators shouldered a sizable burden. The infant Agency was obligated to expand a year's appropriation in eight months, despite the concurrent responsibilities of recruiting a staff, organizing the program, and establishing assistance priorities. On the positive side, however, were the existence of a holdover staff of ARA employees, the lessons learned from ARA experience, the optimism and enthu- siasm of the new officials, and the possession of a proven set of program tools. 18 CHAPTER THREE PROGRAM IMPLEMENTATION - SEPTEMBER 1965 TO SEPTEMBER 1966 The EDA legislation was signed into law on August 26, 1965, and an Assistant Secretary of Commerce and Director of Economic Development was appointed in September. The following three months were devoted to acquiring a qualified group of individuals to assume leadership responsibilities in the new Agency. The majority of those recruited were economists or lawyers with ex- perience in the business and academic communities. These pro- fessionals were widely regarded as an exceptionally talented group. In addition to staffing efforts, the EDA administrators quickly became involved in soliciting project applications from designated areas. Although the ARA/APW project backlog was publicized as a rationale for rejecting applications, a substantial number of the holdovers failed to meet EDA criteria. As a result, the lack of feasible project applications was a major problem confronting EDA administrators in the fall of 1965. "Acquisition of Project Applications" The strategy devised for obtaining project applications was based on the theory that the more applications acquired, the better the chances of obligating the full appropriation and of selecting successful projects. This strategy also enabled EDA administrators to cite impressive demand sta- tistics to Congress and the Bureau of the Budget (BoB) in attempting to acquire funds for the next fiscal year. In mid-November, a conference was held in Washington for briefing field coordinators on their role in EDA's operation. At this meeting, EDA administrators stressed the need for aggressive project solicitation and the importance of local planning. Following this orientation conference, the field coordinators returned to EDA-designated areas with the goal of stimulating as many project applications as possible. Ironically, this approach necessitated a policy of disregarding local OEDPs , as there was insufficient time for examining every project in terms of its relation to the plans contained in an OEDP. 19 "Organizing the Program" While field coordinators (currently referred to as Eco- nomic Development Representatives - EDRs) worked to spark local interest in the EDA program and assisted in the preparation of OEDPs and project applications, EDA personnel in Washington concentrated on organizing the program, developing a project scoring methodology, and establishing Agency priorities. As noted, the enabling legislation did not dictate approaches to these tasks, allowing EDA officials to make decisions in such areas. When ARA was created, all decision-making power was lodged in the headquarters staff in Washington. This staff included legal and technical specialists to answer questions and solve problems stemming from the experiences of field representatives. ARA administrators believed a direct link between the field personnel and the Washington decision makers would reduce the possibilities for misinterpretation and, therefore, refrained from establishing intermediate levels of authority. "Centralized Structure" Under ARA, the personnel situated in the Washington head- quarters were organized in geographic units. Those assigned to a particular division were responsible for the use of all program tools within the area overseen by that division. For example, the chief of the Northeast Division coordinated all public works, business development, technical assistance, and other ARA activities in the region represented by that division As a result, if a town in his area applied for a high risk business loan, he could suggest and fund a technical assistance study to determine a more feasible undertaking. ARA officials suggested that this coordinated use of program tools increased their effectiveness in alleviating the problems of depressed areas . ARA's centralized structure drew considerable criticism from members of Congress, who charged the program was too Washington-oriented to be responsive to the actual needs of local areas. Although ARA administrators resisted pressure to decentralize, sentiment for increasing field input to the decision-making process prevailed in the EDA organization. Impressed with the concept underlying ARA's experience with an experimental service office in Huntington, West Virginia, the first Assistant Secretary decided to staff field offices in different areas of the country. Each office was responsible 20 for coordinating and supervising EDA activities for the region in which it was located. This served to diffuse decision- making responsibilities and increase interaction between EDA personnel and residents of depressed areas. Congress also acted to insure that the EDA organization was less centralized than that of its predecessor. The Develop- ment District Program was legislated not only to improve planning and projects by combining the efforts of two or more redevelop- ment areas, but also to give local citizens more voice in deter- mining priorities. It is also possible to view the regional commission provisions as a further means of decentralization. "Washington Staff Organization" Primarily an innovator, EDA's first administrator has been criticized on the grounds that he devoted too little time to or- ganizing his staff. A large number of his recruits reported directly to him, as did the directors of each of the program tool offices. According to some staff members, this loosely structured organization resulted in considerable confusion and a lack of coordination between the various offices and divisions. However, the Assistant Secretary was among those responsible for reordering the organization of the Washington headquarters staff. Citing the institutional biases of certain ARA holdovers and the nature of the new legislation as reasons for a change in structure, EDA officials established the program tools as line functions. All public works projects were administered by one office; all business loans were handled by another; and EDA techni- cal assistance efforts were grouped under the jurisdiction of a third unit. Staff members of each of the three offices were expected to coordinate projects with staff members of the other offices . "District and Regional Programs" In addition to establishing EDA field offices and organizing the Washington staff, the Assistant Secretary appointed a task force in February 1966, to develop and recommend an approach for implementing the District Program outlined in the EDA legislation. In conjunction with the establishment of this group, the Assistant Secretary also invited the governors of 13 states in the Ozarks, Northeastern, and Upper Great Lakes areas to submit recommendations on the 21 establishment of three regions. The recommendations were to provide statements concerning the need for designation and the initial boundaries of the economic development region. At the same time the Assistant Secretary was issuing his invitation, the Office of Regional Economic Development was formally established and given responsibility for administer- ing EDA's contributions to this regional development program. "Evaluating Project Applications" During this early period in EDA's history, considerable emphasis was placed on developing an effective system for evaluating project applications. Efforts toward this end were initiated before the close of 1965. These initial en- deavors were important because they indicated the potential value of analysis techniques in preparing an EDA project selection methodology. Planners, operating officials, and program analysts were all engaged in these activities. Be- cause these groups were particularly concerned with develop- ing a scoring system and selection criteria to represent the Agency's stated objectives, their efforts also emphasized the importance of articulating priorities. Unfortunately, the time constraints governing evaluation of the hundreds of projects being submitted through the field coordinators prevented EDA administrators from coming to grips with the priority problem during the first year of operation. The pressure to expend the appropriation before June 30 over- shadowed other considerations, although the importance of planning and funding projects that provided direct aid to the unemployed and underemployed were continually stressed. "Characteristics of Projects Funded" Despite the absence of specific Agency guidelines, sur- prisingly uniform selection criteria evolved. Throughout the Agency, decision makers favored projects from those areas closest to de-designation and from areas evincing the most severe economic depression. No conscious decision was made to support projects from such areas, but hindsight suggests several explanations for the high incidence of such choices. These include the belief that assisting the least depressed areas would effect their rapid de-designation, thus freeing the Agency to concentrate on the more needy areas. Political pressure to produce immediate, visible results has also been given as a reason for the choice of such projects, which often were the best planned and promised the greatest success 22 As for the preponderance of aid to extremely depressed areas, it has been suggested that this trend was a reflection of an Agency-wide recognition of the political necessity of select- ing justifiable projects. "Public Works Projects" The type of projects funded through EDA's program tools during the first year of operations followed in the pattern established under ARA. As anticipated from responses to the APW Act, requests for funds to construct water and sewer sys- tems to serve industrial parks significantly outnumbered applications for other types of public works projects. Com- bined with allocations for waste and sewage treatment, funds expended for water and sewer systems during the 1966 and 1967 fiscal years composed approximately 60 percent of the Office of Public Works budget. Grants and loans for developing harbor facilities in depressed areas also ranked high on the list of public works expenditures, as did funds for tourism and road construction projects. Statistics for this period suggest that public works assistance was heavily focused on the least populous areas. "Business Loan Projects" The Business Loan Program directors recognized the difficulties incurred by ARA as a result of its lending policies and attempted to avoid similar problems by empha- sizing the importance of experienced management, proven indus- try, and a practical debt ceiling. In addition to establishing the advisability of dealing with experienced management and established businesses, the ARA background provided information on specific industries. For example, the unfortunate results of loans to wood products industries and certain tourism efforts led EDA to be particularly careful in dealing with such enter- prises. Concurrently, the success of ARA loans to small steel mills utilizing a continuous casting process paved the way for EDA assistance to similar projects. During fiscal year 1966, EDA's Office of Business Loans made loans primarily to manu- facturers, including producers of wrought iron and wood prod- ucts, a manufacturer of glass containers for medicines and cosmetics, a steel products firm, and an electronic parts manufacturer . 23 "Technical Assistance Projects" Under EDA, technical assistance continued to serve as a device for funding experimental studies and for answering specific questions posed by communities and economic develop- ment organizations. The latter type of assistance, often referred to as informational projects, predominated during the first two years of EDA's existence. Local communities and organizations requested feasibility studies, particularly for tourism and recreation projects; aid in determining op- timal locations for factories and industrial parks; and advice on which management techniques to apply in particular situa- tions. Another widely requested type of assistance involved determining new uses for resources no longer in demand. Before funding such studies, EDA officials examined the circumstances surrounding each request to determine if there were a reasonable chance of obtaining favorable results and if those in a position to act on the results of the study were likely to do so. In a number of instances, a feasibility study was performed to facilitate a decision on funding a public works project or awarding a business loan. This prac- tice also represented a continuance of ARA procedures. It was also during this period that the first technical assistance grants to support institutions were funded. "Planning Grant Projects" EDA's Planning Grant Program was inaugurated in the spring of 1966, and by the end of June, 11 grants worth $574 thousand had been awarded. During this period, emphasis was placed on aiding the infant District Program, a trend that has continued to the present. No attempt was made to solicit grants from single areas; a policy of responding to unusual needs as they arose was established in dealing with these units. Another practice instituted during the first year of the Planning Grant Program involved awarding grants to state groups to secure their aid in forming districts and writing OEDPs. These policies were applied by program administrators with relatively few modifications during the first 18 months of the program's operation. Even in this early stage of the program, it was recognized that one of the most important benefits of planning grant funds was the increased capability of communities to mobilize to determine problems and outline goals . 24 "Economic Research Projects" When EDA was created, few major university economics departments specialized in the study of sub-national economics. Moreover, as previously noted, data describing economic condi- tions on a regional or areal basis were far from adequate. EDA's Economic Research Program addressed both these deficiencies Several broad problem areas were identified during the first year of operations, and research funds were made available for analyses related to those areas. These actions were taken not only to increase the data base as a first step toward identifying effective measures to stimulate local, areal, and regional economic development, but also to attract the attention of com- petent specialists to the field of sub-national economics. Guidance was sought from the academic community, and within the predetermined broad problem areas, university researchers were given latitude to investigate topics of special promise or interest. One premise underlying the policy of awarding con- tracts to university scholars was that the knowledge obtained by such individuals would be disseminated through the academic community. In addition, it was expected that such research projects would occasionally result in the introduction of new courses in the field of economic development. EDA's Office of Economic Research also awarded research contracts to public and private groups interested in economic development. In an attempt to interest more students in the problems of economic development at local, areal, and regional levels, the Office of Economic Research established a student intern program during the first year of the Agency's existence. This program, which was launched in the summer of 1966, was designed to familiarize college students with the economic development problems facing communities and to give the students first-hand experience in dealing with local organizations. Another objec- tive of the program was to involve educational institutions and other federal, state, and private agencies in similar under- takings . "The Oakland Experiment" While cognizant of the necessity of expending the fiscal year 1966 appropriation of $332.4 million by June 30, EDA administrators, particularly the Assistant Secretary, viewed the program as innovative in nature and accordingly sought avenues of experimentation. As early as December 1965, the Assistant Secretary met with minority leaders in Oakland, California, to discuss their problems and consider ways in 25 which EDA could assist them. After a number of follow-up con- ferences with the mayor, representatives of the business and financial communities, and other interested persons, a decision was reached to concentrate and coordinate EDA resources in the Oakland area in an all-out effort to reduce the city's unemploy- ment problems. Technical assistance funds played an important role in plans for the Oakland experiment, and members of the Office of Technical Assistance staff were leaders in the field work involved . The significant feature of this program was the intro- duction of Employment Plans to insure that the jobs created reached the unemployed and underemployed. This approach was con- ceived in February 1966 on the basis of on-site observations by EDA personnel. Developed in conjunction with Oakland officials and interested citizens, these documents were addressed to employers receiving EDA business loans or leasing or acquiring property developed by an EDA public works grant. The Employment Plan re- quired employers to specify the ways in which they proposed to provide maximum employment opportunities for the long-term unem- ployed residing in Oakland, including training where needed. An integral component of this approach to solving Oakland's problems was the creation of an Employment Review Board. Composed of representatives of Oakland's most severely depressed neighborhoods, labor, management, and EDA, this seven- member panel was responsible for reviewing Plans and advising EDA as to their quality. Once Plans were approved, employers were required to submit monthly reports to the Review Board, which notified EDA of the degree to which actual practices con- formed to the original Plan. Failure of the employer to comply with the Plan was considered a default and justification for with- drawal of EDA funds. "EDA and Urban Development" At the time of its inception, the Oakland project was en- visioned not only as an experimental attempt to directly link EDA-stimulated jobs with an area's unemployed population, but as a model for future EDA and other federal agency involvement in selected areas of the nation's urban centers. During this period, EDA ' s legislation precluded the Agency from designating most cities. The only way for EDA to assist non-designated urban core areas was through the Technical Assistance Program, which could fund projects for any area demonstrating substantial need. However, technical assistance disbursements in the first year of operations totalled only $6.9 million, of which approxi- mately $1.9 million was expended to aid urban areas. Thus, urban involvement constituted only a small portion of the overall economic development program administered by the Agency. 26 The Assistant Secretary and other top EDA officials con- tended that the concentrated poverty areas located in major cities should be eligible for EDA assistance. They persis- tently lobbied for the authority to enter more cities and re- quested additional funds for activities in these metropolitan areas. Although the requests were denied during this period, EDA's role in American cities continued to be the subject of numerous debates among Agency personnel, congressmen, BoB representatives, and other individuals concerned with the crises of urbanization. "Organizing the District Program" The Task Force on Economic Development Districts appoint- ed by the Assistant Secretary in the spring of 1966 spent several months discussing such topics as regional commission administration of the program and gubernatorial authority without reaching any concrete decisions. Pressure to expend the appropriated funds obscured other considerations , and the new fiscal year with its funds for the District Program was only a month away when EDA's administrator delegated authority for organizing the program to an individual designated as his Special Assistant. The situation confronting the new program director and his staff necessitated prompt action. Not only was the es- tablishment of organization guidelines essential, but prelimi- nary recognition of districts and economic development centers also required immediate attention. Responses to the Assistant Secretary's request for district boundary proposals had provided more potential districts than could conceivably be funded during the 1967 fiscal year. In determining which districts to assist, EDA officials considered the percentage of district population living in redevelopment areas; per capita income in the district; percentage of families with annual incomes under $3,000; trading area and transportation patterns; and existence of a well-lo- cated economic development center. A decision to organize and administer the program from Washington was reached shortly after the appointment of the program director. This decision reflected the fear that state or local level administrators would be subject to gubernatorial control and program direction. The feeling was that governors might not devote enough effort to involving the unemployed and underemployed residents in planning for the district. Nonethe- less, in administering the program from Washington, EDA adminis- trators worked closely with these elected officials, emphasizing the need to involve the unemployed and underemployed in planning for the district. EDA personnel also stressed the importance 27 of minimizing state involvement after district boundaries were designated. If an established group of developers or planners existed within the district boundaries, EDA sought to use that group as a basis for the district organization. By September of 1966, 67 districts had been authorized for establishment, and a number of these newly formed entities had been designated as recipients of EDA-funded planning grants. Program officers in Washington assisted these state and local units in organizing district boards of directors, incorporating as official organizations, and applying for EDA planning and administrative grants. Aid was also provided in evaluating the qualifications of prospective district directors and other district staff members, as well as in advising the staff on how to be effective in directing a development organization. During this early period of development, the need for haste in organizing districts often resulted in less representa- tion for unemployed and minority groups than Washington leader- ship desired. However, the Agency succeeded in resisting pres- sure to require that all district board members be local offi- cials/ as a result of EDA efforts, only 51 percent of a board's membership must be local officeholders. "Formation of Regional Commissions" Gubernatorial responses and EDA efforts resulted in the designation of three economic development regions during the 1966 fiscal year: the Ozarks Economic Development Region; the Upper Great Lakes Economic Development Region; and the New England Economic Development Region. The EDA legislation dic- tates that regional designation be followed by requesting the governor of each state comprising that unit to appoint one individual to serve as a member of a regional commission. This commission is headed by a Federal Cochairman appointed by the President. In addition, a State Cochairman is elected by the commission members. At the close of the 1966 fiscal year, a Federal Cochair- man had been appointed for one commission, and similar pro- cedures were being followed in organizing the other two. In addition, EDA had supplied all three commissions with funds to cover administrative costs and finance technical assistance studies. The Office of Regional Economic Development had authorized the expenditure of $932,000 for 15 research projects related to regional development planning. Three of these proj- ects provided economic data on the newly designated regions. Activities during this period also included discussions on the future designation of other regions. 28 "Seminar on Regional Economic Development" In June of 1966, with only a small percentage of the appropriated funds unobligated, Agency officials were free to consider matters not directly related to approving and funding projects. An EDA administrator was appointed to handle staffing and organizational responsibilities. This allowed the Assistant Secretary to direct his attention to establishing policies, identifying priorities, and developing innovative approaches to the problems of economically depressed areas. It was during this period that plans for a six-week seminar on regional economic development were formalized. This meeting, which combined the expertise of social science scholars with that of development planners and administrators, contributed to a redirection of the energies and efforts of individuals working in the field of regional economic develop- ment. Essentially, this involved concentrating on the depressed sections of a region instead of the entire area. Data collec- tion and planning that had formerly been accomplished on a regional basis were narrowed to reflect the problems of the region's depressed areas. Other activities engaged in by EDA during the summer and fall of 1966 included further development of guidelines for use in project evaluation and work on an Agency-wide planning, programming, and budgeting system. In addition, the first in a series of steps designed to decentralize EDA's Public Works Program occurred on July 1, at which point area office personnel were given responsibility for preliminary processing of public works projects. Efforts to establish meaningful project selection criteria received particular emphasis during this period. The Assistant Secretary requested that all pending public works projects be ranked separately by area office personnel, officials in the Washington Office of Public Works, and a group of EDA economists When this had been accomplished, the three groups met in Washington and compared rankings. The economists had ranked projects according to the esti- mated EDA investment per job and the degree of distress in the area, while the other two groups had employed a variety of criteria. For this reason, the project rankings differed. However, a joint meeting resulted in a consensus on project rankings. The outcome of this effort was a marked increase in emphasis on two project selection criteria: the estimated EDA investment per job; and the hardship suffered by the area. 29 CHAPTER FOUR PROGRAM IMPLEMENTATION - OCTOBER 196 6 TO JANUARY 19 6 9 In September of 1966, the Assistant Secretary of Commerce resigned his position, leaving the year-old Agency leaderless. The gap was quickly filled. In mid-October, the recently appointed EDA Administrator was sworn in as Assistant Secre- tary and immediately turned his attention to those problems he considered most pressing. The first Assistant Secretary had been concerned with using EDA tools in the nation's cities, experimenting with techniques and projects, and encouraging local long-term planning. The new appointee shared his predecessor's enthu- siasm for local planning and experimentation. However, the new administrator was convinced that top priority should be given to developing Agency guidelines and reorganizing the EDA staff. In articulating the reasons for this emphasis, he specified the necessity of assuring Congress that EDA was an intellectually honest agency, applying relevant criteria to evaluate project applications. He also expressed the need to increase EDA's impact. "Reorganizing the EDA Staff" The new Assistant Secretary restructured EDA with the goal of creating a chain of communication that would enable him to determine if his directives were being observed at all levels of operation. This reorganization, which took place in December of 1966, established four major areas of respon- sibility, covering all EDA functions. Deputy Assistant Secretaries were appointed to head each of these areas, which included: (1) responsibility for assist- ing the Assistant Secretary in all matters affecting EDA, as well as for coordinating all EDA field activities to provide uniform operating policies in EDA area and field offices; (2) responsibility for overseeing all EDA public works, busi- ness loans, and technical assistance projects to assure maximum resource coordination; (3) responsibility for recommending policies and procedures for coordinating EDA's programs with those of other federal, state, and local agencies; and (4) respon- sibility for planning for regions, districts, redevelopment areas, and other areas of substantial need. It was anticipated that this reorganization would increase the efficiency and effectiveness of EDA operations. 30 "New Name for Business Loan Program" It was during this period that the Assistant Secretary met with the administrators of the Agency's Business Loan Program to discuss his decision to rename the program. Ex- plaining that the program should be viewed as a means of building the private sector of the economy and not simply as an instrument for processing loans, he announced that the program would subsequently be referred to as the Business Development Program. "Introduction of the Program Manager Concept" Early in 1967, the EDA organizational structure was further amended by the introduction of a new position. The Assistant Secretary announced the appointment of a program manager to oversee activities in the Oakland area. This action was precipitated by the need for a Washington level authority to advise the Assistant Secretary on the details of the Oakland project and to make day-to-day decisions. Envisioned as the Agency-wide focal point for information on activity in Oakland, the program manager reported directly to the Assistant Secretary and was charged with reviewing and recommending every application submitted in regard to Oakland. The program manager was also responsible for coordinating EDA efforts in Oakland with those of other agencies. The concept was subsequently refined and formalized, and program managers were appointed for the Watts section of Los Angeles, the stockyards area in Chicago, the Brooklyn Navy Yard, the Mexican-American border area, Puerto Rico and the Virgin Islands, EDA-designated Indian reservations, and Alaska. Although the efforts of these officials were handi- capped in some instances by insufficient cooperation within the Agency, the concept gained widespread acceptance and approval. The program managers became particularly effective in expediting the processing and approval of projects connected with their areas of responsibility. "Identification of Agency Guidelines" The second phase of the effort to increase EDA's impact entailed the identification of Agency guidelines. Although the first Assistant Secretary had established a group to study and recommend policies, no directives had been issued, and no Agency-wide strategy for allocating funds had been employed. As a consequence, there was no consistent rationale for select- ing or rejecting applications that met the very general criteria 31 of the Act. Without such a rationale, it was difficult to overcome pressure from applicants and their congressmen to approve certain projects. This tenuous position caused Congress to view the program with considerable skepticism and disfavor. The need for specific policies was also emphasized by the fact that 110 of the 364 projects funded during the first year of operation were located in areas that were declared ineligible after the annual designation review. The majority of the 110 projects had not progressed beyond the planning stage when this designation review was held. Therefore, it was obvious that their impact had been minimal, and that EDA assistance had played little or no role in effecting the de-designation of such areas. A result of the natural in- clination to select the most promising projects, this occur- rence was regarded by Agency administrators as one that could have been avoided with proper planning and the identification of guidelines. In addition, despite the abundance of rhetoric on the subject of EDA's mission, no consensus had been reached. Generating jobs and raising incomes in depressed areas, devel- oping local capabilities to plan for economic growth, and providing residents of lagging areas with the economic benefits enjoyed by those in other sections of the country were among the mission definitions offered by various staff members. The Assistant Secretary contended that this ambiguity had to be resolved before the program could achieve total effectiveness. He also emphasized the necessity of accomplishing these tasks in as short a time as possible to maximize their effects on fiscal year (FY) 1967 expenditures. "Worst First Policy" After conferring with the Deputy Assistant Secretary for Economic Development Planning and other members of the staff, the Assistant Secretary announced the selection of a funding strategy in December of 1966. This strategy, which the Assistant Secretary envisioned as an interim measure, called for giving first consideration to the "worst areas - those with the highest unemployment rates and lowest family incomes."-'- It was to be Ross D. Davis, "Planning for Growth," Economic Development , Vol. 4, No. 2 (February 1967), p. 1. 32 applied in conjunction with. EDA efforts to improve the capa- bilities of communities, districts, and areas in the prepara- tion and implementation of plans for local economic develop- ment. The new strategy also gave priority to projects that promised to have a clear and direct impact on unemployed and underemployed residents of depressed areas. The Assistant Secretary outlined a system whereby areas experiencing the worst problems in each of the seven categories on which designation is based would receive top priority for EDA aid. These categories cover areas with substantial unem- ployment, persistent unemployment, substantially decreasing populations, low median family incomes, and sudden rises (or threatened sudden rises) in unemployment. The remaining two categories are economically depressed Indian reservations and areas that qualify on the basis of the "one redevelopment area per state" regulation. This legislative requirement stipulates that in states in which no areas meet the Act's designation criteria, that area which comes closest to meeting the criteria shall be designated as a redevelopment area. To determine the order or priority within the categories, Agency officials were to compute the "job gap" in each eligible area. This measurement was identified as the number of jobs that would have to be created to lower the rate of unemployment or raise the median family income to that level necessary to remove an area from eligibility for EDA assistance. The "job gaps" were then to be used to set target budgets to indicate how much the Agency would consider investing in an area during a specific time period. In explaining the chosen strategy to his staff, the Assistant Secretary identified EDA's mission as one of chang- ing "the statistics to bring the unemployment figures in the lagging areas down closer to the national rate." ±/ However, the fact that he alluded to other goals in the same meeting forecast the difficulties he would experience in obtaining agreement on one specific mission. While the "worst first" strategy satisfied Congress and furnished EDA personnel with a more rational approach for allocating funds, economists and others within EDA were quick to spot possible weaknesses. The major complaint voiced by critics emphasized the futility of funding areas with extremely limited potential for economic development. The advice of these strategists was to fund projects and locations with a tradeoff between area distress and project cost/benefit ratios. i/ Davis, "Planning for Growth," p. 1. 33 Opponents of worst first also submitted that the policy was in direct contrast to the principle of the District Program legis- lated by Congress. They contended that it eliminated the growth center approach to economic development, assumed that all areas were independently capable of economic transformation, and pre- cluded area and regional planning. Another argument against the policy was the one-sidedness of the criteria established for defining the worst areas. Critics maintained that judging areas solely on the percent- age of unemployment and level of median income overlooked abso- lute numbers of unemployment. Others suggested that such indi- cators as labor force participation might be better measures of need than unemployment. "Worst First Policy's Impact on EDA Operations" As noted previously, the worst first strategy was success- ful in that it allowed EDA administrators to convince Congress that theirs was not a "pork barrel" agency. The policy also was partially responsible for a deviation from the previous year's funding strategy, which favored projects that promised the greatest results and led to the funding of a substantial number of projects in areas that would have improved econom- ically without EDA assistance. In addition, the worst first strategy provided Agency officials with an acceptable ration- ale for rejecting projects. Unfortunately, in many cases, the policy applied differed substantially from the theoretical concept advocated by the Assistant Secretary. The system he envisaged contained pro- visions for considering the merits of projects from severely depressed areas and rejecting them if the chances of success were minimal. The procedures that developed ranged from almost automatic acceptance of projects from such areas to the more prevalent practice of camouflaging disregard for the policy with lip service to its principles and a few "show" projects from severely depressed communities. The worst first policy's impact on the Public Works Pro- gram was limited to a temporary emphasis on funding projects from such areas. Statistics for the 1967 fiscal year indicate a 32 percent reduction in the average cost per project, which allowed an increase in the number of projects funded. This decline in average cost was largely attributed to the smaller scope of projects submitted by communities with the greatest degree of economic distress. Three factors led to the gradual relaxation of this policy: (1) the inability of depressed 34 communities to contribute their proportion of project costs; (2) the stringency of administrative regulations such as those concerning compliance with civil rights measures; and (3) a general feeling that a substantial number of the worst first areas lacked the initiative and resources to take advantage of EDA projects. The worst first policy found few advocates in the Business Development Program. As an argument against the application of this criterion, program directors produced findings that loan funds could not be better used in the most severely depressed areas. They argued that the Business Development Program was not suited to the policy because such factors as reasonable assurance of repayment must be considered in allocating loan funds. Their contention was that the program would quickly be riddled with unpaid loans and either die completely or evolve as a grant program if the worst first policy were applied . The problem was resolved when the Assistant Secretary met with the officials in the Office of Business Development and explained that loan applicants from the neediest areas should not be awarded loans automatically. Only when all other factors were equal or when the aid promised unusual benefits to the target population or the area ' s economy were the neediest areas to be given priority in awarding loans. The worst first policy also had limited appeal for the economists administering the Office of Technical Assistance, who regarded it as inefficient and retrogressive. They con- tended that the needs of the most depressed areas were obvious; no technical assistance studies were necessary to determine local problems. As a result, lip service and a small number of studies for severely depressed areas were the only manifes- tations of the worst first strategy. Efforts to aid local and regional organizations formulate plans continued to receive considerable attention, as did projects aimed at developing and improving the human resources of particular localities. Priorities for awarding EDA planning and administrative grants were not measurably altered as a result of the worst first policy. Groups involved in the organization of develop- ment districts and the preparation of OEDPs continued to receive a majority of the Agency's planning grant funds. Although the Office of District and Area Planning awarded some planning grants to individual areas exhibiting unusual need, this prac- tice did not indicate adherence to the worst first strategy. Rather, it represented an extension of an earlier posture, which was originally adopted because no better allocation formula had been developed. 35 Although figures cited at the conclusion of the 1967 fiscal year revealed a considerable redirection of funds in the months following the worst first pronouncement, the trend did not carry over into FY 1968. Seriously depressed areas continued to receive EDA attention, but operating officials allocated funds with little or no regard for the policy, and its proponents gradually lowered their voices. "Preparation of Area Policy Papers" The December 1966 memorandum that announced the selection of the worst first policy also described a new approach to planning for economic development. Concerned with EDA's tendency toward project-by-project spending, the Assistant Secretary proposed a system that would result in programmed funding and, at the same time, inform administrators of the field coordinators 1 activities and the problems of specific localities. Under this system, field coordinators and area office personnel were to prepare plans (later referred to as Area Policy Papers) that contained a simplified analysis of an area, proposed an EDA program to eliminate the existing problems, provided a cost estimate for the proposed activities, and outlined the expected results. These papers were to be reviewed and approved by EDA personnel in Washington. The Assistant Secretary anticipated that the use of the Area Policy Papers would provide continuity of effort, as projects could be identified and funds earmarked at least a year in advance. Such documents with their descriptions of area potential were viewed as essential to the success of the worst first policy, which called for EDA funding in an area only if achievement of project goals appeared possible. The Assistant Secretary also believed that the identification of goals and priorities in specific areas would increase the effectiveness of EDA field coordinators and facilitate evalua- tion of the Agency's performance. It was expected that field coordinators would work with local residents in composing these documents and, in the process, aid in the establishment of a local capability to plan, coordinate, and implement an economic development program. The policy papers developed during bhe following year failed to accomplish the desired results. There were a number of reasons for the lack of success. These included the fact that the field coordinators were neither interested nor nu- merous enough to perform their roles and the reluctance of Washington staff members to go into the field and assist the coordinators in composing the documents. The plans eventually had to be prepared in Washington by the Washington staff. As 36 a result, the documents consisted primarily of descriptions and were short on analysis and evaluation; they reflected no real feeling for the problems confronting local residents. These shortcomings made the papers of little use, and EDA administrators called for the development of a new system to achieve the goals of the Area Policy Paper program. "Economic Development Process" In his December 1966 memorandum announcing the worst first policy and the decision to prepare individual strategy plans for all designated areas, the Assistant Secretary stated that one of the Agency's strategies would be to emphasize "a process for economic development." 1/ On July 1, 1967, the Office of Public Works moved to implement this strategy through the in- stitution of a new procedure for developing and processing projects. Convinced that economic development responsibilities entailed more than funding isolated projects, administrators of the Public Works Program sought an approach that would directly relate public works projects to broader programs of economic development. The primary objective of the procedure was to stimulate and enhance the economic development process in depressed communities. The economic development process can best be described as the efforts of a community to achieve its economic potential. These efforts include a perception of the need for a conscious attempt to achieve this potential, and the organization and perseverance necessary to sustain such an attempt. The mission to foster and ameliorate this process is regarded by some as the factor that differentiates EDA's program from those of other federal and state agencies involved in funding public works projects. It is through the stimulation of this long-term process that EDA extends its impact beyond the actual jobs created or incomes increased. "Procedure for Developing and Processing Projects" The processing procedure introduced in 1967 emphasizes community participation in planning and implementing economic development activities. Among the features of this procedure is a pre-application conference, which is attended by the project applicant and community leaders, as well as the Economic Development Representative (EDR)2/ for the area, per- 1/ Davis, "Summary of EDA Mission and Objectives, and Prepara- tion of Office Planning Documents," December 30, 1966. 2/ — Formerly referred to as a field coordinator. 37 sonnel from the area office, and interested county, district, and state representatives. Regarded by many as the most sig- nificant step in the development of public works projects, the conference serves to introduce the potential applicant to EDA application forms, requirements, and the technical aspects of submitting an acceptable application. The pre-application conference also provides an oppor- tunity for a formal discussion of the status of the economic development process in the community. This discussion touches on such issues as the borrowing capacity of the community; the relationship of the proposed project to the area's OEDP; and the involvement of the management, labor, academic, and religious sectors of the community in sustained planning and problem solving related to economic development. The com- munity's responsibility and need to focus on those who are unemployed or underemployed is also considered. Advice and encouragement are offered by EDA personnel as a means of stimulating the process. It is this assistance that gives credence to EDA's role as an economic development agency, and not simply an organization for disbursing funds. Moreover, EDA's assistance in this capacity is not limited to offering advice and encouragement. If a proposed project lacks potential or fails to concur with established require- ments or priorities, the applicant is immediately apprised of the decision, and the EDR works with the community leaders to develop alternative projects. In instances where EDA funding is inappropriate, the EDR directs the applicant to that federal or state agency best suited to meet the community's needs. "EDA's Urban Development Policy" During the period between October 1966 and January 1969, EDA policy makers continued to debate the Agency's urban role. The Oakland experiment suffered a number of setbacks, and without the impetus supplied by the first Assistance Secretary's enthusiasm, efforts to salvage the project lacked the vigor that had characterized previous activities in that area. An Urban Projects Division was established in the Office of Technical Assistance in December of 1966, and the number of EDA dollars applied in urban areas increased every year. However, the absence of pressure to introduce legislation that would allow EDA to enter more cities illustrated the reluctance of the Assistant Secretary and various other Agency officials to substantially expand EDA's urban activities. 38 Among their arguments against such expansion was the lack of proof that the Agency's tools were relevant to the economic problems of cities, particularly the larger urban complexes. Convinced that the Agency was applying its tools effec- tively and efficiently in rural areas, and skeptical of EDA's potential to have a significant impact on urban problems, these Agency policy makers were reluctant to divert funds to what they felt might be a less effective use. They appeared ready to expand urban assistance activities only if the Agency received a budget increase. Nevertheless, those who favored increased aid to the poverty pockets located in the nation's major cities per- severed in their arguments, and were successful in some instances For example, in 1967, legislation was passed that allowed EDA to provide public works and industrial/commercial loans to urban units designated by the Office of Equal Opportunity (0E0) as special impact areas. In addition, EDA's Office of Technical Assistance became increasingly involved in urban development. This included encouraging and funding the estab- lishment of inner city private business development organiza- tions, and recruiting and training individuals to work in center city areas. Assistance was also provided to individuals applying for loan funds in connection with establishing businesses in such areas, and funds were furnished for feasibility studies to interest outside industry in locating branch plants in urban centers. Moreover, business counseling was provided to firms considering moves to eligible urban areas, and emphasis was placed on aiding minority entrepreneurs located in inner city neighborhoods. It was also during this period that the Office of Technical Assistance cooperated with the Model Cities Admin- istration by awarding grants to several officially designated model cities. However, despite such activities, the opposition to a substantial increase in urban expenditures remained, and no final decision on the extent of EDA's urban involvement was made during the second Assistant Secretary's tenure. "Preparation of District OEDPs" EDA statutes require the submission and approval of an Overall Economic Development Program (OEDP) before a develop- ment district can be officially designated. Until such desig- nation is accomplished, a district's growth centers are not eligible to receive EDA public works, business development, and technical assistance funds. In addition, a district's re- 39 development areas cannot take advantage of the 10-percent bonus grants available for projects in redevelopment areas participating in the program of a designated district. (Planning grants are available earlier for use in preparing OEDPs.) To meet the OEDP requirement, considerable effort was directed toward preparing these documents during the first year of operation. (For the District Program, this was fiscal year 1967.) In a number of instances, EDA District Program personnel assisted local district staff members in these endeavors, which attempted to identify the economic problems of a district and outline a plan for solving them. EDA District Program personnel were also involved in evalua- ting the OEDPs received from districts and determining whether to approve the plans or require their revision. Unfortunately, the process of preparing and approving an OEDP was a slow one. Under the system devised by the program administrators, approxi- mately one year was required to complete the procedures and declare a district eligible to receive the full spectrum of EDA assistance. However, despite this lengthy time factor, 22 dis- tricts had been designated at the conclusion of the 1967 fiscal year. In addition, a firmer position had been adopted in respect to the composition of district boards of directors. In fact, in their zeal to insure the participation of local unemployed and minority groups, EDA District Program personnel occasionally antagonized the local power structure, and were accused of neg- lecting those with the means and knowledge to provide beneficial assistance in the economic struggle. "Designation of Economic Development Regions" In December of 1966, the Assistant Secretary of Commerce for Economic Development announced the designation of two new regions. These were the Coastal Plains Region in the eastern section of Georgia, North Carolina, and South Carolina, and the Four Corners Region, which includes counties in Arizona, Colorado, New Mexico, and Utah. By August 1967, Federal Cochairmen had been appointed to head regional commissions for both areas. These commissions began to function shortly thereafter, bringing the number of operating commissions to five. "Policy Planning Board" A Policy Planning Board was established to assist the Assistant Secretary in the formulation of EDA policies in May of 1967. This board was composed of the four Deputy Assistant 40 Secretaries, the Chief Counsel, the Director of the Office of Program Analysis and Economic Research, and the Director of Administration ,±J The Policy Planning Board's primary function consisted of reviewing and commenting on proposed policy state- ments before submission to the Assistant Secretary. As part of the review process, board members were expected to prepare position papers on proposed policies and compose draft Economic Development Orders (MEDO's). In addition, board members were to provide staff assistance to the Deputy Assistant Secretary for Policy Coordination to aid him in performing studies and surveys necessary for preparing policy statements. "Effects of Time" As the Agency aged, EDA personnel became more adept at evaluating projects and allocating funds in a relatively short period of time. Increased attention was given to area OEDPs, and emphasis on funding projects that would directly aid unem- ployed or underemployed area residents was continued. In accord- ance with the general feeling that economic development remained an incompletely understood process, the program offices funded a number of experimental projects, i.e., projects that intro- duced innovative approaches to stimulating economic development. "Altered Scope of Business Development Program" By 1968, with interest rates increasing, borrowers had begun to seek sources with more favorable lending terms. As a result, previously uninterested corporations became aware of EDA's loan program and began to take advantage of its lower interest rates (two percent below the private rate) and longer repayment periods. For the most part, these corporations were considerably larger than former loan applicants. This circumstance combined with the termination of aid to such traditionally depressed areas as Carbondale, Illinois, and Wilkes-Barre , Pennsylvania, which had historically received substantial amounts of ARA and EDA loan assistance, to alter the scope of the Business Develop- ment Program. ±/ The Office of Administration was renamed the Office of Admin- istration and Program Analysis in November 1968, when the program analysis function was transferred. At the same time, the Office of Program Analysis and Economic Research became the Office of Economic Research. 41 Although the previous emphasis on creating permanent jobs was continued, fiscal year 1968 witnessed a definite shift in policy in EDA's Business Development Program. Not only were more sizable corporations funded, but the dollar value of in- dividual loans was increased. This was coupled with a decrease in the percentage of total project cost represented by EDA loans. For example, in fiscal year 1966, EDA loans consisted of approximately 50 percent of the total costs of the projects funded, a figure which dropped to 33 percent in fiscal year 1968 with the implementation of the new policies. These policy changes led to a decrease in the EDA investment per job. In conjunction with the increase in individual loan size, the directors of the program emphasized the selection of proj- ects with private industry backing and managers who possessed the capital necessary for success. Loans to businesses con- nected with a district program also increased during this period, as did loans to businesses run by minority entrepreneurs "Institutional Projects" As the Technical Assistance Program matured, institutional projects began to acquire considerable support and, after two years of operation, outnumbered informational projects. In attempting to establish permanent sources of competent tech- nical assistance, institutional projects provide funds to eco- nomic development centers at universities, organizations at- tempting to provide economic development planning, and other groups with similar functions. During the final year of the second Assistant Secretary's tenure, projects of this type were increasingly linked with inner city development, particularly in relation to blacks and other minority groups. Among the efforts instituted by the Office of Technical Assistance were grants to national business development organiza' tions and trade associations. With EDA ' s support , these groups work to stimulate the development of business and industry and help create meaningful jobs, usually in central city areas. The activities of the business development groups include loan packaging, franchise and dealership assistance, contractor bond- ing, contract procurement, technical assistance, business train- ing and various special projects. The activities of the trade associations include publications, technical assistance to mem- bers, national interaction with other trade associations, and conventions and seminars. 42 "Increase in Aid to Indians" EDA's Planning Grant Program, which was organizationally separated into district grants and single area grants during the 1968 fiscal year, was marked by a substantial increase in district planning grant expenditures. Another policy shift during FY 1968 involved a 50 percent increase in the total number of single area grants with a similar decrease in _ the dollar value of individual grants. These policies continued into fiscal year 1969 with a notable exception in the area of aid to Indian reservations. Funds directed toward these poverty pockets increased to more than 55 percent of the total single area grant expenditures, a trend that continued in fiscal year 1970. "Research Trends" When EDA was established, a major problem confronting officials of the Agency's Office of Economic Research was the lack of sufficient county data. This deficiency was also recog- nized by Congress and personnel of the General Accounting Of- fice, who requested that more current estimates of county income and employment be developed. In fiscal year 1967, the Office of Economic Research assumed the initiative in this area by supplying the Office of Business Economics with funds for the purpose of accelerating that agency's efforts to develop such estimates . It was also during fiscal year 1967 that the Assistant Secretary agreed to use EDA research funds to sponsor a study on federal program coordination. The study was undertaken in response to a recommendation by the National Public Advisory Committee on Regional Economic Development, which was created to advise the Secretary of Commerce on the EDA program. During the 1968 fiscal year, the Assistant Secretary in- structed personnel in the Office of Economic Research to place- more emphasis on studies directly related to the EDA program. The more general research efforts that characterized earlier operations were to be cut back and eventually eliminated. How- ever, several of these studies were continued because they had become highly specific and applicable to EDA activities with the passage of time. Among the studies initiated under the new policy were an evaluation of EDA's Business Loan Program and the development of alternatives to urban renewal and urban 30b creation . 43 The Public Works and Economic Development Act of 1965 re- quired that the Secretary of Commerce establish an independent study board to investigate the effects of government procurement, scientific, technical, and other related policies on regional economic development. The group created as a result of this re- quirement worked closely with EDA research personnel in accom- plishing its task. The board's report, which was published in December 1967, stated that "adjusting government purchasing patterns would not provide the stimulus needed to cure all regional economic ills." The board also concluded that major diversion of government procurement and science programs might bring undesirable side effects.i/ "Evaluation Efforts" Another significant change in the scope of EDA's research activities took place in fiscal year 1969 with the initiation of an accelerated effort to evaluate EDA's programs. The Office of Technical Assistance had undertaken evaluation studies of the Technical Assistance Program in fiscal year 1967 and an examination of 13 EDA business loans was initiated in FY 1968, but the other Agency programs had not been analy zed formally to determine their effectiveness. Several private consulting firms were awarded contracts to develop methodologies for evaluating each of the Agency's program tools, and plans for future activities were the subject of considerable discussion. "Expansion of the District Program" As previously noted, the District Program with its growth center strategy gained prominence during the period following EDA's first year of operation. By the close of fiscal year 1968, 101 districts had been formed, and project approvals in districts had increased from 8.5 percent of EDA's total resource allocations in fiscal year 1967 to 36.3 percent in fiscal year 1969. A significant portion of this amount was expended in towns and cities designated as growth centers, based on the theory that these entities were best equipped to use EDA assis- tance and would provide employment opportunities for residents of the surrounding area. 1/ Independent Study Board, Regional Effects of Government Pro- curement and Related Policies , (Washington, D.C., 1967), p. ix 44 The growth center approach reflects European influence and, while viewed rather skeptically by some Agency officials, received the full support of the Office of Development Organ- izations. However, despite this support, it was not until December 1966 - almost six months after the District Program was initiated - that the first growth center was designated. Moreover, 16 of the 23 towns identified as EDA growth centers during the 1967 fiscal year were not designated until June 1967. Thus, the growth center concept had little or no influence on EDA operations until the Agency had been in existence for almost two years. "Positive Action Programs" In fiscal year (FY) 1967 when EDA began funding projects in growth centers, there was no Agency policy regarding a center's obligation to nearby redevelopment areas. Determined to insure that the unemployed and poorly paid residents of depressed areas derived the benefits of EDA expenditures in growth cen- ters, administrators of the District Program developed the Positive Action Program approach. This approach, which was formalized in September 1968, was designed to make certain that a growth center community would accept its responsibility to less developed areas. The Positive Action Program policy called for members of the power structure of each proposed center to meet with rep- resentatives of the surrounding depressed areas and explain the ways in which they would assist residents of the deprived regions. These intentions, which ranged from giving special attention to hiring depressed area inhabitants to providing such areas with transportation facilities, were expressed in document form for EDA's approval. In addition to these orig- inal plans, designated growth centers were required to submit supplementary material with each new request for project funds, explaining the relation of the proposed project to their efforts to improve the economies of the depressed areas. "Special Assistant for Regional Economic Development" In FY 1968, an Executive Order from the White House authorized the Secretary of Commerce to transfer responsibility for coordinating regional commission activities from EDA to a Special Assistant for Regional Economic Coordination, who would report directly to the Secretary. This action was partially a response to the complaints of the Federal Cochairmen that EDA officials were not interested in the program. It also reflected 45 concern that the individual to whom the Cochairmen reported was too far beneath them in rank to have much effect on their activities . However, except for temporarily appeasing the Federal Cochairmen, the reorganization had little impact. The Assistant Secretary for Economic Development retained responsibility for delegating commission funds, and neither the new Special Assistant nor the Federal Cochairmen had sufficient leverage to acquire the full cooperation of the governors of states com- posing the commissions. "Expanded Activities" Despite administrative problems, the regional commissions continued to expand activities. In FY 1968, the commissions began to develop projects and submit applications for supple- mentary grant money to the EDA Office of Public Works. Since that time, the commissions have cooperated with various eco- nomic development districts in structuring and funding proj- ects; and, in some cases, commission members have worked close- ly with EDA area office personnel to plan and implement multi- state projects. Regional commission planning has also been used by governors whose staffs are not equipped to plan for the state's long-range development. "Efforts to Develop an Improved Planning System" In June 1968, EDA policy makers initiated efforts to develop an improved planning system. This action was taken with the knowledge that a new President would be elected in five months, an event almost certain to result in the appointment of a new Assistant Secretary for Economic Development. Cognizant of the inadequacies of the existing Area Policy Papers and mindful of their own problems in acquiring a working knowledge of EDA's programs and aims, EDA officials deemed it important to present the future Assistant Secretary with as effective and complete an organization as possible. The Resource Planning and Manage- ment System that evolved from this effort represented an attempt to improve and expand the earlier Area Policy Paper program. The new Action Programs were prepared by EDA Washington staff personnel, field office workers, Economic Development Re- presentatives, state agency representatives, and local resi- dents. These were essentially blueprints to help areas solve their problems. They included plans, possibilities, long-term goals, short-term goals, strategies, and specific three-year 46 programs. In addition to specifying EDA ' s role in a particular locality, the documents outlined areas in which other federal agencies could lend assistance. To insure the use of these plans, each area's Economic Development Representative was required to submit a monthly progress report to EDA administrators. The three-year programs were to be keyed into the Agency's internal program and budgeting system, and the Washington Review Committee was established to evaluate completed Action Programs. When the new Assistant Secretary was appointed in February 1969, a substantial number of Action Programs were in various stages of development, and the Resource Planning and Management System was explained and recommended by the outgoing administra- tion. As described on the following pages, consideration of the proposed System was one of the first items on the new Assistant Secretary's agenda. 47 CHAPTER FIVE PROGRAM IMPLEMENTATION - FEBRUARY 19 69 TO JAN31KKY 1972 The new Assistant Secretary for Economic Development differed from his predecessors in that he had no previous experience in directing a Federal Government program. Ac- knowledging his inexperience in administering a program like EDA's, he assigned top priority to acquiring a working know- ledge of the Agency, its tools, and its mission. In conferring with the outgoing Assistant Secretary, the new administrator placed particular emphasis on learning the capabilities of his inherited staff. "Consideration of Two Proposals" During the first six months of his tenure, the new appointee's activities also included consideration of two proposals initiated by his predecessor: the Resource Planning and Management System and a plan for restructuring the organ- ization. The Resource Planning and Management System was in the final stages of development when the change of administra- tion occurred, and by June 1969, the Washington Review Committee had recommended 75 Action Programs for approval by the Assistant Secretary. Although a number of these documents have been used by area offices, districts, and local workers, no official Agency decision was ever rendered. Numerous explanations for this inaction have been advanced, ranging from claims that the Action Programs were not relevant because they did not present a true picture of area conditions to charges that too much authority was lodged with Washington officials and not enough at the local level. The Assistant Secretary himself emphasized EDA's role in motivating local leaders and outside concerns to work for economic development, asserting that the Action Programs were not primary motivating factors. The other action proposed to the Assistant Secretary soon after his appointment involved reorganizing the Agency staff. Experience had revealed certain shortcomings in the organization of program tools as line functions. Theoretically, the staff members of each of the program tool offices were to coordinate projects with staff members of the other offices. This prac- tice was expected to result in a program approach to the problems of depressed communities and eliminate the funding of isolated 48 projects with no ties to broader development programs. How- ever, no framework was developed to structure such coordination As a result, EDA personnel in each program office suffered from a tendency to become immersed in the operations of their particular program and neglect coordination with other offices. "New Organization" The coordination problem led a substantial number of EDA officials to agree that a better organizational structure could be devised. The plan, which was proposed in the spring of 1969 after several months of deliberation, called for organizing the program tools as staff functions at the dis- posal of various offices. Among these were an office for rural areas, another for urban areas, and a third for dis- tricts and growth centers. A number of special area (e.g., Indian reservations and Puerto Rico) offices were also in- cluded. This arrangement was expected to be instituted in conjunction with continued efforts to decentralize EDA's organizational structure. Among the arguments advanced by the plan's proponents was the beneficial effect the altered structure would have on the Agency's capability to focus on the individual prob- lems of different types of economically depressed areas. It was also contended that this approach would allow the Agency to design blueprints for the economic development of areas over a multi-year period, thus substituting a program approach for single project planning. Uppermost in the thinking of some was the urgent need of the center sections of the nation's major cities. Such advocates of the reorganization envisioned the consolidation of EDA's activities in the city under one division as a step toward increased and more effective efforts in these pockets of concentrated economic depression. The Assistant Secretary agreed that the reorganization might facilitate implementation of EDA's policy to offer a coordinated program of aid to depressed areas. However, he de- cided to postpone a final decision until he had acquired more experience with the existing organization and Congress had made a decision on the Agency's future. "Preparing for Congressional Hearings" The new administration's orientation period was compli- cated by the impending expiration of the Agency's authorization Because of the June 30, 1970 expiration date, the learning 49 process necessarily included an appraisal of EDA ' s operations and consideration of the Agency's position on such issues as urban involvement and implementation of the growth center strategy. Relying heavily on the expertise of EDA' s veteran staff, the Assistant Secretary prepared to face Congress and the Bureau of the Budget in the forthcoming debate over the Agency's future. In this effort, which culminated in the summer of 1970, the new administrator was successful in obtaining a one- year extension for the EDA program. This was the first of two similar situations that confronted the third Assistant Secretary during his first three years as EDA ' s chief policy maker. The second, which arose as a result of the June 1971 expiration of the one-year extension, is discussed in the following chapter. "Efforts to Improve Existing Activities" Faced with the possibility that EDA ' s charter might not be renewed and convinced that major policy issues could only be de- cided at higher levels, the Assistant Secretary concentrated on improving existing activities during his first year at EDA. Em- phasis was placed on selecting good projects, improving the quality of business loans, and increasing the business community's involve- ment in economic development activities. During the last months of 1969, EDA staff members began to work with congressional leaders to develop legislative amendments that would improve the Agency's program. However, no drastic shifts in emphasis were announced, and the assistance channeled to the Mississippi areas devastated by Hurricane Camille represented the only major funding alteration. The philosophy underlying these policies, which were per- petuated during the second year of the Assistant Secretary's term, was that if the Agency invested the available resources effectively, Congress and BoB would recognize EDA ' s potential contribution to efforts to achieve more balanced national growth and expand its mandate and appropriation. This posture placed responsibility for substantially altering the program outside the Agency and freed EDA personnel to concentrate on the current program. The value of such a practice is clear. For example, since an in-house decision to increase involvement in urban areas would be relatively meaningless unless additional funds were provided, extensive deliberation on the subject would consume valuable time without substantially affecting aid to the cities. Policies dur- ing fiscal years 1969 and 1970 called for this time to be devoted to identifying more effective ways of applying the funds available for use in urban areas and to assisting area and district planners involved in urban economic development . 50 "Expanded Evaluation Program" As one means of preparing for the congressional hearings, Agency administrators ordered the acceleration and expansion of the evaluation effort initiated by the preceding administra- tion. This decision, which was made in December 1969, also reflected (1) the fact that enough time had elapsed to accurate- ly analyze the impact of a significant number of projects and (2) a request from BoB, stimulated by a directive from the White House, to undertake expanded evaluation activities. It was expected that these activities would provide some indication of EDA's success in creating jobs, generating increased income, and stimulating the economic development process in the nation's depressed areas. Private contractors implemented the evaluation methodologies developed previously to weigh the impact of each of the Agency's program tools. The contractors also joined with EDA personnel in conducting in-depth case studies of various EDA-designated areas. The intent of these studies was to acquire a valid perception of EDA's overall impact in a given area. Emphasis was placed on identifying EDA cost per job created, the percentage of jobs that were taken by members of the target population, and EDA projects' impact on local development activities. "EDA's Contributions in Urban Areas" While advocating that less time be allotted to in-house discussions on EDA's role in the cities, Agency administrators were eager to inform Congress and BoB of EDA's unique contri- butions in urban areas. A special study was structured as part of the program evaluation to report on EDA's impact in five major urban areas. During this period, most EDA officials agreed that if the Agency's charter were renewed, it would only be a matter of time until EDA expenditures in urban areas matched the Agency's aid to rural America. The basis for this consensus lay in a political phenomenon: the power structure of Congress had shifted since 1965, and urban representatives were demanding increased assistance. In November 1969, Congress passed legislation directed toward extending EDA's urban program. The EDA Act was amended to allow the Agency to designate any 0E0 Special Impact Area that submitted an acceptable OEDP . Such areas would then be eligible for EDA public works grants . 51 "Continuation of Policies" During fiscal years 1969 and 1970, operations in the Agency's program tool offices continued in established patterns, reflecting the Assistant Secretary's decision to perpetuate previous policies. However, in-house planning activities declined, as did vocal emphasis on directing EDA-provided benefits to the unemployed and underemployed. The period was also characterized by efforts to increase communication between EDA and residents of depressed areas and improve procedures for dispensing aid. Both the Office of Development Organizations (District Program) and the Office of Public Works continued to de- centralize operations during the 1969 and 1970 fiscal years. This trend, which was directed toward increasing local par- ticipation in the EDA program, was reflected in the Office of Public Works by changes in staffing levels and program responsibility. The office trimmed its Washington staff by more than 20 employees, while substantially increasing pub- lic works personnel in regional offices . In addition, administrators in the Office of Public Works delegated substantial authority to the regional office directors and their staffs. Where staffing and experience permit, regional office personnel now handle the development and processing of public works projects from receipt of the initial forms to a final recommendation. In most instances, a positive recommendation by the regional office is tantamount to final approval . Changes in the Office of Development Organizations also reflected a continuation of the decentralization philosophy. The period was marked by increased delegation of authority to regional offices, and economic development districts were consistently encouraged to shoulder the major burden of responsibility for planning and project implementation. More- over, a number of EDA officials continued to advocate the ultimate independence of these entities. "Introduction of Two-Stage OEDP" Notable among FY 1969 and 1970 efforts to improve EDA aid distribution was the development of the two-stage OEDP for designating economic development districts. Since the District Program's inception, EDA personnel had sought to decrease the time required for preparing and processing ^-Formerly referred to as area offices. 52 OEDPs prior to designation of districts. However, no real progress was made toward achieving this objective until the two-stage OEDP was introduced in the final months of 1968. Use of this formula reduced the time required for district designation from one year under the previous formula to from three to five months. Conceived with the dual purpose of accelerating the designation process and increasing the amount of local in- put to the planning process, the two-stage OEDP was welcomed by Washington EDA personnel, district staff members, regional office employees, and district board members. The first stage of this document consists primarily of a statistical portrait of the district, its resources, and problems. It is prepared by the district organization and its planning staff with assistance from EDA. With the acceptance of this portion of the OEDP, the district is automatically designated, and its redevelopment areas can take advantage of the 10 percent bonus on grants to designated counties in economic development districts. It is at this point that regional offices assume respon- sibility for assisting in the further development of the dis- trict, including preparation of the second stage of the OEDP. This stage of the OEDP reports on the further development of the district. Preparing it involves organizing special- purpose citizens' committees to insure that the district's program reflects local needs and desires; interesting dis- trict residents in the problems of their area; stimulating a planned approach to problem-solving; and marshaling local citizens to take action on such aspects of econonomic devel- opment as industrial promotion, tourism, and education. EDA personnel place particular emphasis on the importance of involving the local unemployed, low-salaried workers, and members of minority groups in these discussions. "Additional Support for District Program" It was also during this period that other federal and state agencies recognized the value of development districts as basic planning vehicles. This recognition, which was encouraged by EDA personnel, was evidenced by the support given to district projects. For example, by January 1970, the Department of Housing and Urban Development (HUD) was funding projects in 17 EDA-designated districts, and the 53 Department of Health , Education and Welfare (HEW) was involved in comprehensive health planning and implementation efforts in 12 districts. A number of these projects entailed a con- siderable amount of interagency coordination, much of which was handled by district staff members. The major shift in policy in the District Program during fiscal years 1969 and 1970 was the expected progression from emphasis on OEDP preparation to emphasis on implementation of programs. Districts that received funds to hire staffs and write OEDPs in 1966 and 1967 began using EDA grants to implement the plans developed in those OEDPs. In addition, considerable attention was devoted to formulating a plan for decreasing EDA planning and administrative support to the oldest and stablest districts . "Shift in Emphasis Concerning Public Works Projects" Fiscal year 1969 was characterized by an increase in public works funds to growth centers and development districts. In addition, there was a shift in policy concerning the types of public works projects funded. In the years since EDA's inception, a small number of projects with less traditional ties to economic development had been proposed locally and supported by the administrators of the Agency's Public Works Program. These included an educational television station, a cultural center, and other projects designed to enhance the quality of life by means other than directly creating jobs, raising incomes, or providing services such as water and sewer lines. Projects of this type were usually located in EDA- designated growth centers. Proponents of a broad definition of economic development consider projects of this type important elements in stimulat- ing economic growth. Members ot this school of thought argue that such facilities as libraries and cultural centers influence industrial location decisions. They assert that when other factors are equal, ultimate industrial location decisions are based on the amenities a town has to offer. This approach is opposed by supporters of a more narrow definition of economic development, who assign top priority to the direct creation of job opportunities. With the change in Agency leadership during fiscal year 1969, the latter viewpoint temporarily gained ascendancy. Amenity- oriented projects were discouraged, and public works officials were instructed to stimulate and fund time-proven projects direct- ly related to job creation. Given EDA's limited resources, the Assistant Secretary deemed it more appropriate to fund projects with proven job creation capabilities than to risk failures by experimenting with demonstration projects of unknown potential. 54 "Continued Need for Basic Infrastructure" Although this decision was viewed as particularly signifi- cant by administrators of the Public Works Program, the actual number of projects affected was small. For the most part, the types of projects supported with public works grants and loans remained relatively constant during the period between February 1969 and September 1971. Water and sewage systems, industrial parks, health facilities, and public buildings con- tinued to be regarded as essential to the development of viable economies, and the economically deprived areas of the nation continued to exhibit substantial need for these basic facilities. The construction of skill centers to train and educate the un- employed and underemployed residents of an area received particu- lar emphasis. Approximately 7 such centers had been designated as recipients of EDA public works funds by September 1971, and in many cases the Agency's Technical Assistance Program provided supplementary funds for instructional costs and equipment. "Emphasis on Loans to Large Corporations" The third Assistant Secretary devoted considerable atten- tion to revitalizing the Agency's Development Loan Program. Al- though policies initiated during his predecessor's administra- tion had included emphasizing loans to sizable corporations, progress in this direction failed to satisfy the new administra- tor. In addition to stressing the importance of dealing with large corporations, he called for increasing the size of the loan program and consideration of more effective methods for attracting multi-million dollar companies to the nation's de- pressed areas. Emphasis was also placed on acquainting large corporations with the financial incentives offered by the pro- gram and decreasing the time required to process loans. "Policy for Assisting Indians" Two organizational modifications instituted during the 1970 fiscal year indicated a change in the Agency's policy with regard to Indians. These actions involved the transfer of the Office of the Special Assistant for Indian Affairs from the organization under the Deputy Assistant Secretary (DAS) for Policy Coordination to a position directly beneath the DAS for Economic Development and the placement of Indian affairs officers in three area offices. The changes were evidence of officials' intention to place increased emphasis on providing employment opportunities and higher wages to the unemployed and underem- ployed residents of designated Indian reservations. 55 "New Articulation for Technical Assistance Program" Under the third Assistant Secretary for Economic Develop- ment, the Agency's Technical Assistance Program began to be articulated somewhat differently. Prior to fiscal year 1970, Technical Assistance was regarded as a place-oriented program like Public Works and Business Development. However, at the urging of the program's directors, the Assistant Secretary decided to change its image to that of a program related to human resources. It was also agreed that Office of Technical Assistance officials should take advantage of the program's flexibility to emphasize the possibilities of using technical assistance grants to finance demonstration projects and innova- tive proposals. Directors of EDA's Office of Technical Assistance were not in a position to immediately realign the program on the basis of these decisions. Although personnel in that office began to consider such projects as demonstration programs to test industrial processes, the President and his advisers were the first to take advantage of the new articulation. Recognizing the tremendous flexibility of the program, they increasingly called upon it to meet Presidential initiatives. These included aid to the Office of Minority Business Enterprise (OMBE) , the Interagency Economic Adjustment Committee, and the Trade Adjust- ment Assistance Program. While the Office of Technical Assistance had previously established a practice of coordinating with other agencies, this marked the first time a substantial portion of EDA's technical assistance funds had been used to support such agencies' programs. "Technical Assistance Funding" In addition to supporting Presidential initiatives, EDA's Technical Assistance Program continued to provide aid directed toward inner city development, funded feasibility studies, helped foster the establishment of training centers, and supported efforts to help inexperienced local government officials attract and retain industry. Feasibility studies on the development of industrial parks were favored by administrators in the Office of Technical Assistance during the period, as that type of proj- ect had been particularly successful in the past. The Technical Assistance Program's role in establishing training centers was also emphasized. These facilities were actively needed because a number of business loan and public works projects had been completed, and the local unemployed and underemployed had to be trained to fill the jobs created. 56 During FY 1970 , a new policy was introduced in regard to funding institutional projects. These projects, which are designed to establish permanent, competent sources of tech- nical assistance, had been emphasized by personnel in the Office of Technical Assistance since EDA's second year of operations. The new policy called for reasonable assurance before project approval that if EDA withdrew its support after a certain period, the organization would possess the independent means to continue. The Office of Technical Assistance also continued the practice of coordinating projects with other agencies. For example, during FY 1970, the office funded a project to assist in the development of minority-owned shopping centers. This project, which was developed in cooperation with the Office of Minority Business Enterprise, also received funds from the Small Business Administration and involved dealings with local representatives of HUD. "Evolution of Regional Commission Program" With the change of Administration in January 1969, a new Secretary of Commerce was appointed, and new Federal Cochair- men were named to head the five regional commissions. The incoming Secretary showed considerable interest in the Regional Commission Program and worked closely with the Federal Cochair- men in planning future activities, estimating budget figures, and evaluating methods of strengthening the program. In November 1969 the Public Works and Economic Development Act was amended to expand the authority of the commissions to provide funds for technical and planning assistance, including demonstration projects, and to authorize "first dollar" grants. The latter provision permits a commission to use its funds for all or any portion of the basic federal grant for any project authorized by a grant-in-aid program without sufficient funds to cover the project's cost. Concurrently, the new Administration moved to rationalize the relationships between the regional commissions and EDA. This move culminated in the issuance of Departmental Orders on April 1, 1970, which clearly identify the independent au- thority of the regional commissions and the relationships with the Secretary of Commerce and his Special Assistant for Regional Economic Coordination. Under the new orders, regional commission appropriations are allocated to the Secretary of Commerce, a change supported by EDA officials as early as the spring of 1969. The Secretary's Special Assistant administers the distribution of 57 these funds to the commissions on the basis of financial plans submitted to the Secretary by the commissions. However, the Special Assistant continues to coordinate commission activities with EDA operations. This includes tracing the progress of commission projects moving through EDA funding channels. "Evaluation Results" The accelerated evaluation program initiated in January of 1970 was completed during the summer of the same year. The results were primarily positive, indicating that, within the limitations imposed by low funding levels, EDA had demonstrated competence in solving economic development problems. Agency projects were judged to have alleviated economic distress in many areas at a reasonable cost to the government. However, while praising the innovative approaches applied in some instances, the evaluators noted a number of deficiencies. Prime among these was the lack of control to insure timely provision of training in connection with EDA projects. Training funds, which are obtained through the Department of Labor, play an important role in reinforcing public works and business loan assistance. "One-Year Extension of EDA Program" By June 1970, it was apparent that neither the Administra- tion nor the Congress was prepared to propose a new program; further consideration of EDA and its relation to other govern- ment programs was deemed necessary. To insure that economically depressed areas would continue to receive federal assistance while the program was being considered, Congress voted to ex- tend the Public Works and Economic Development Act for one year. The decision was approved by the President on July 6, 1970. During the 12-month period between passage of the amend- ment that extended EDA's authorization and June 1971, the Assistant Secretary and his staff continued in the pattern fol- lowed in the preceding 18 months. No major redirection of pro- gram funding was initiated, and emphasis was placed on improving existing activities. In addition, the Assistant Secretary and his staff continued their efforts to develop a legislative pro- gram that would increase the Agency's effectiveness. 58 "Compliance With President's Program" In mid-July of 1970, EDA opened a regional office in Philadelphia. The significance of this action was twofold. In March 1969, the President asked Congress for reorganizational authority to allow him to introduce changes aimed at improving the delivery of government services to the public. Upon receipt of this authority, he announced a program designed to concentrate federal agency activities in 10 regional centers across the nation. Since Philadelphia is one of these centers, the consoli- dation of EDA's Wilkes-Barre and Portland regional offices there represented the Agency's first step toward complying with the President ' s program . As of September 1971, EDA had relocated its Duluth regional office in Chicago, which is one of the 10 centers designated by the President. Moreover, plans were being finalized for the combination of the Huntington and Huntsville regional offices in Atlanta, and the creation of a new region to be served by a regional office in Denver. The new region was to be composed of states formerly under the jurisdiction of the regional offices in Austin and Chicago. Both Atlanta and Denver are among the regional centers named by the President. "Modification of Regional Office Organizational Structure" The opening of the regional office in Philadelphia was also significant because it marked the institution of a new organiza- tional structure within a regional office. This structure, which came to be known as the "Philadelphia Plan" within the Agency, was developed to accomplish two major objectives: to make field financial and engineering operations more efficient; and to provide greater emphasis on a balanced program rather than individual project promotion. This was accomplished by grouping technical specialists in a single division and by establishing closer coord- ination between regional office program division personnel and Economic Development Representatives in evaluating local economic problems and developing approaches to their solution. This approach was consistent with the reorganization proposal considered when the Assistant Secretary first assumed leadership of the Agency. That proposal, which called for organizing by enti- ty programs (e.g., urban program, Indian program, etc.) instead of program tools, was also designed to substitute an affirmative pro- gram approach for single project development. The new structure was also similar to that proposed in the reorganization in that technical personnel are separated from those concerned with program development, enabling the latter group to concentrate on helping design and implement balanced development programs. 59 By September 1971, initial problems had been resolved, and the regional office structure had resulted in such an increase in efficiency that it had been introduced in EDA's regional offices in Huntington and Austin. Five months later, this organizational structure had been implemented in all the regional offices, in- cluding the new offices in Atlanta and Denver. "Establishment of Office of Development Lending" As part of the Agency's continuing effort to improve existing activities, the Assistant Secretary established the Office of Development Lending in August 197 0. This unit, which was originally staffed by personnel from the Office of Business Development, was assigned responsibility for involving large private corporations in EDA activities and solving development problems through the coordinated application of the Agency's various tools. Acquainting corporations with the benefits of EDA's Business Loan Program and encouraging them to open branches in designated areas were primary functions of this office. Soon after the Office of Development Lending was established, its functions were expanded to include assistance to minority entrepreneurs. Working closely with OMB E , personnel in this office used the communications network they had built with private industry and banking establishments to help minority businessmen gain en- trance to the nation's complex economic system. This office also assisted minority enterprises in acquiring EDA funds and in nego- tiating complicated business transactions. By 1972, the need for the types of projects and activities undertaken by personnel in the Office of Development Lending had been demonstrated. Since that Office had been established primarily to determine if such a need existed, its purpose had been served. As a result, plans were made to transfer the personnel and functions of the Office of Development Lending to EDA's Office of Business Development in early 1972. "Expansion of Student Intern Program" By fiscal year 1971, the student intern program initiated by EDA's Research Program had spread from the southern states to the Midwest, West, and New England. In addition, the number of students participating in the EDA-funded portion of the program annually had increased from 19 to 250, and the Agency's support had grown from $71,000 in FY 1967 to $318,000. Moreover, the program had resulted in the preparation of approximately 280 reports for use by local organizations. Even more impressive than the increased scope of the program was the assumption of cost by state agencies. In FY 1971, the State of North Carolina funded all but a small part of that state's student intern program, and a trend toward state fund- ing appeared in Georgia, Texas, and Virginia. 60 "Shifts in Policy Concerning Indians" Perhaps the most significant shift in policy during the first six months of fiscal year 1971 involved EDA assistance to residents of designated Indian reservations. In 1969, Congress amended the Public Works and Economic Development Act of 1965 to allow EDA to make 100 percent public works grants in connection with projects on designated Indian reservations. However, the Agency did not adopt such a policy until October 197 0. At that time, the Assistant Secretary for Economic Development announced at an EDA/OEO seminar on economic development planning that EDA-designated reservations would no longer be required to furnish 20 percent of public works project costs. Under the new policy, the Agency would be capable of providing grants to cover the entire costs of public works proj- ects on Indian reservations. In instituting this policy, EDA responded to a long-standing complaint by Indian leaders that the 20-percent requirement prevented reservations from acquiring proj- ects that could provide badly needed jobs._/ Another policy shift affecting EDA's assistance to Indian reservations occurred during the summer of 1971. Prior to that time, a significant number of public works projects on Indian re- servations were never completed. Such situations were a result of cost overruns during the period between project approval and the actual letting of bids for project construction. Regional office practice was to compensate for such overruns by persuading tribes to identify deductible alternates, i.e., project features that could be eliminated: Such features could then be dropped from project specifications, and the project could be completed within the limits of the original grant or loan amount. This approach was not successful, as manifested by the incidence of incomplete projects. Tribes were usually unwilling to modify project plans; moreover, they lacked the resources to complete the projects with local funds. When EDA officials in Washington belatedly learned of the in- complete projects in the summer of 1971, immediate action was taken to remedy the problem. Through discussions with EDA's Deputy Assistant Secretary for Economic Development and his staff, regional office personnel were instructed to fund cost overruns for projects on Indian reservations rather than continue the past practice. The adoption of this policy insured that EDA would provide the addi- tional funding necessary to complete Indian reservation projects according to originally approved specifications. i7~7 ~~ — The Economic Development Order stating this policy became effective January 15, 1971. 61 "Emphasis on Interagency Coordination" During the period between July 1970 and September 1971, Agency policy makers continued to emphasize the importance of coordination with other federal and state agencies. Among those agencies that received EDA support for their programs were the Office of Minority Business Enterprise, the Bureau of Domestic Commerce (BDC) , the Farmers Home Administration (FHA) , and the Federal Water Quality Administration (FWQA) . This support in- cluded assistance to organizations designated as OMBE affiliates, aid to BDC ' s Trade Adjustment Assistance Program, and cooperation with FHA in coordinating development activities with housing programs . The Agency's assistance to OMBE was perhaps the most substan- tial of these efforts. When OMBE was created in March 1969, EDA was already engaged in efforts to assist minority entrepreneurs, and provided both advice and financial help to the new agency, which had no grant-in-aid or loan funds of its own. EDA's support of OMBE ' s efforts increased in fiscal year 1971, when $3.5 million in technical assistance funds were used to finance OMBE affiliates in approximately 20 cities. These affiliates are local organization that provide general information, assistance in loan packaging, and post-loan and other business counseling to minority entrepre- neurs . The period between July 1970 and September 1971 was also marked by increased emphasis on coordinating with the five regional commissions. In mid-July 1970, a directive was issued advising Agency personnel to notify Federal Cochairmen of EDA project activi- ty within regional commission boundaries or projects of national or regional significance. This notification was to be accomplished during the early phases of project development, and the Federal Cochairmen were to reciprocate by providing similar information concerning projects being developed by the commissions or under their auspices. "SODA Demonstration Project" EDA also continued to play a major role in the SODA Demonstra- tion Project. This effort, which was proposed by the Southern Oklahoma Development Association (SODA) in December 1968, repre- sents a local organization's attempt to obtain assistance from federal and state agency personnel in designing and implementing a comprehensive development program. In proposing the project, SODA identified a series of local, state, and federal actions that would lead to the formulation of a development plan for the 10- county district, as well as a priority ranking of needed projects. In addition to accelerating the socioeconomic growth of south cen- tral Oklahoma, it was expected that the SODA project would serve 62 as a model for other nonmetropolitan areas that suffer from the lack of a coordinated approach to development by federal, state, and local units of government. By January 1971, eight Federal Government departments and the Office of Equal Opportunity had signed a Memorandum of Agree- ment, pledging to identify their technical assistance capabilities that might be of use to SODA in its development efforts. In addi- tion, SODA had specified the area's needs by functional category, stated the functions and responsibilities of those involved in the project, provided a schedule of the project's phases, and ob- tained responses to its Specific Development Needs Report from the various federal participants in the project. (Responses from state agencies were delayed by gubernatorial changes, resulting personnel modifications, and the February 1971 creation of a Department of Community Affairs and Planning at the state level.) Between January and September 1971, SODA completed a multi- year program design for mobilizing state and federal capabilities, and using them to develop the 10-county district. During this period, EDA's role as the lead agency in the SODA project included having Agency staff members meet periodically with SODA personnel and board members to discuss the project's progress and report on federal responses. By January 1972, 35 state and 13 federal agen- cies had responded to SODA's program design. The responses ranged from high praise to severe criticism; no consensus emerged. Al- though none of the agencies indicated a willingness to fund the projects identified in the work program, both SODA and EDA profitted from the effort. Among the benefits to SODA were the development of a program design and the improvement of internal management procedures. EDA, on the other hand, learned a great deal about the amount of time and technical assistance necessary to assist an embryonic planning and development organization to reach operational maturity. "Federal Aid to Districts" In October 197 0, EDA's Office of Development Organizations completed a survey to calculate the amount of funding by other federal agencies, state agencies, and local residents in 100 econo- mic development districts. The study revealed that EDA's $4.5 million planning grant assistance to the 100 districts in FY 1971 was being complemented by $4.7 million from other federal agencies, $3.6 million in local funds, and $1.5 million in state funds. Of the 100 districts surveyed, only 32 were operating on EDA planning grant funds alone. Eighteen were funded by one other federal agency; 25 were funded by two other agencies; 22 were se- curing assistance from three other agencies; and 3 were receiving funds from four other agencies. 63 "Public Advisory Committee Recommendations" It was also during October 197 that the National Public Advisory Committee on Regional Economic Development met to review EDA activities. The Committee was briefed both orally and in writing on EDA's basic operations and on the Agency's progress. As a result of this meeting, the Committee reached several tenta- tive conclusions about the EDA program, and these were formally presented to the Secretary of Commerce in January 1971. These conclusions, which the Committee Chairman prefaced by emphasing the limited background on which they were based, included a recom- mendation that Congress "broaden and make specific the power of EDA to coordinate all economic planning in the country."!./ The Committee also concluded that EDA's technical assistance and planning grant authorizations should be expanded and emphasized, and indicated approval of the Agency's growth center strategy. "Responses to Evaluation Results" The activities during FY 1971 also included consideration of ways to correct the program deficiencies noted in the pre- ceding spring's evaluation efforts, and the design of new studies to answer questions raised by the analyses. These studies included evaluations of EDA's Selected Indian Reservation Program, the Agency's training activities, and national organizations receiving EDA technical assistance funds. In addition, an in-house evaluation team was formed to evaluate the Agency's growth center strategy. Emphasis was placed on determining the impact of this strategy on migration trends and the usefulness of Positive Action Programs. During this period, both the Office of Public Works and the Office of Business Development took steps to remedy problems noted in the evaluation studies. In the Office of Public Works, this consisted of considering modifications in project application forms. Administrators of the Business Development Program concen- trated on decreasing the time required to process a loan. By the end of January 1971, efforts toward this end had resulted in a decision to process loans in Washington, thereby freeing regional office business development personnel to work with EDR's in pro- moting EDA's loan program and assisting potential loan recipients to prepare applications. This procedure, which was implemented in April 1971, had cut the time between loan application and appro- val from 190 days to approximately 100 days by September. — J.W. Van Gorkom, Letter to the Honorable Maurice H. Stans, Secretary of Commerce, January 6, 1971. 64 "Better Access to Training Funds" Another improvement in Agency operations that was partially attributable to the results of the evaluation program involved manpower training. During the 1969 and 1970 fiscal years, EDA administrators had experienced difficulties in obtaining train- ing funds from the Department of Labor for use in connection with EDA projects. In November 1970, with the results of the evaluation indicating the importance of training and the con- tinuing reluctance of the Labor Department to make training funds available, the Assistant Secretary met with an Assistant Secretary of Labor to discuss the situation. As a result of that meeting, an agreement was reached whereby the Department of Labor would set aside $12 million in funds to support training programs related to EDA-funded projects. Although this amount was considerably less than the $22 million specified in the Manpower Development and Training Act for use in training residents of EDA-designated areas, it represented a step forward. For the first time, EDA was able to insure that a specific portion of the $22 million would be used to support training programs connected with Agency projects A similar agreement was reached for fiscal year 1972. "EDA's Urban Activities" Funds for the Urban Program represented a slightly larger percentage of the Agency's budget in FY 1971, and budget pro- posals for ensuing years contained additional increases. Faced with the prospect of an expanded urban program in the near future, Agency policy makers concentrated on developing a more effective strategy for urban development. Two OEO special impact areas - Midwest Impact Area in Chicago and the Lower East Side Impact area in New York - were designated during the fall of 1970, and Agency officials decided to implement coordinated development programs in both places. Their intention was that EDA activities in these areas would serve as models for future aid to urban centers. By January 1972, Richmond, California, the South Central Los Angeles Special Impact Area, the South Bronx Special Impact Area, and the inner-city area of Kansas City, Missouri, had also been designated under the Special Impact Areas Program. These areas were to be included in the Agency's demonstration program, which was directed toward creating jobs, increasing incomes, and stimulating minority entrepreneurship and employ- ment in a limited number of urban areas. 65 In May 1971, the Assistant Secretary established a policy of major significance for Agency activities in such urban areas. This policy, which was based on a recommendation from EDA ' s Depu- ty Assistant Secretary for Policy Coordination, set the grant rate for all non-revenue generating projects in urban special impact areas at 8 percent. Prior to this time, special impact areas were subject to grant rate procedures established primarily for rural counties. These procedures involve determining the per- centage of project cost funded by EDA according to such factors as an area's unemployment rate or out-migration rate. For most urban special impact areas, no accurate data exist for these cate- gories. Moreover, the kinds of problems faced by residents of the nation's central city areas are often not reflected in such statistics . The new policy solved these problems by stipulating that public works grant rates in urban special impact areas would no longer be based on such statistics. Rather, with the exception of revenue generating projects, public works grants in such areas would be for 8 percent of total project cost. For revenue gen- erating projects, the grant rate would be that percentage of total project cost that would not be covered by the income generated. "A Broader Concept of Economic Development" During his second year as director of EDA's program, the Assist- ant Secretary not only gave impetus to the allocation of funds on an entity program basis,— but also began to direct Agency person- nel to view project development as a direct response to local prob- lems. He had reached the conclusion that traditional projects which aim at directly creating jobs through the location of indus- try cannot fully meet the development needs of some communities. Several factors contributed to this change of philosophy. One was EDA's experience in attempting to stimulate economic development in such inner-city areas as Watts in Los Angeles and parts of Washington, D.C., where traditional public works and busi- ness loan projects were insufficient to meet development needs. As a result, the Agency experimented with alternative approaches v : Prior to fiscal year 197 0, EDA appropriations were allocated solely on the basis of program tools. At that time, the Agency responded to a Presidential directive and submitted a budget based on entity programs to the Secretary of Commerce and OMB. Thus, subsequent budget proposals identify a specific amount for projects in urban areas (or districts, Indian reservations, etc.), as well as a breakdown of urban area funding by program tool. 66 to development, such as approving public works funds: (1) to build a multi-purpose service center and a day care center along with shell commercial buildings on an indus- trial park in Watts; and (2) to construct a community health center and a minority- owned and -operated hotel in Washington, D.C. i j O n -site observations of earlier experimental projects also led the Assistant Secretary to broaden his concept of economic development. The results of such projects as the construction of an indoor theatre for the Oregon Shakespearean Festival convinced him that unconventional projects could have a significant effect on an area's development. He also recognized that projects like the Shakespearean theatre, a cultural center, or a downtown parking garage could effect results much more quickly than a traditional project. The former can be completed and enhance a community s attractiveness to private industry, attract tourists, or revitalize local businesses within a year, while an industrial park project usually entails time not only for developing the park itself but also for industrial prospecting and plant construction. Thus, jobs do not result until at least a year following the park's completion. These insights, gained from the Assistant Secretary's involve- ment m EDA's efforts in all parts of the country, led him to en- courage projects designed to enhance the quality of life and pro- vide communities with important development facilities other than those which directly create jobs and immediately raise income. He became particularly interested in the idea of locating such development facility projects in EDA-designated growth centers, where they could accelerate the growth of an already expanding economy. r ^ "EDA Legislative Proposal" Throughout the period between June and December 1970 the Assistant Secretary and his staff continued their efforts 'to develop a legislative program that would increase the Agency's effectiveness. Congress and the Administration were engaged in similar endeavors. The House Subcommittee on Economic Development initiated an evaluation and investigation of EDA to improve its Iril^Z \ Prepare new legislation for the Agency. The Adminis- tration, whose concern was focused not on EDA individually, but on the broad range of federal programs related to the country's economy, concentrated on developing substantive measures to exe- cute a national growth policy. 67 Through its sponsorship of a national growth conference in the spring of 1970 and Agency personnel's staff work for the Domestic Affairs Council in the area of rural development, EDA contributed to the Administration's efforts. The national growth conference was an outgrowth of studies initiated by EDA ' s Office of Economic Research during the first two years of the Agency's operations. When the President cited the need to "redirect" the nation's growth in the 197 State of the Union Message,-' officials in EDA ' s research office recognized the relevance of such a policy to work on regional growth centers that had been supported by Agency research funds. Subsequently, a decision was made to have the researchers who had been working in this area describe their findings to an assemblage of EDA officials, White House staff representatives, members of the Council of Economic Advisers, and staff personnel from the various regional commissions. The political problems associated with using regional growth centers to implement a national growth strategy was one of the topics discussed at this conference . During the spring and summer of 197 0, Agency personnel also assisted the House Subcommittee staff in collecting data on the results of EDA projects. Major emphasis, however, was placed on internal efforts to prepare a legislative proposal. In mid-December, the in-house proposal was completed and delivered to the Secretary of Commerce for submission to the Office of Management and Budget. It represented a departure from the existing legislation in a number of areas. Among the most significant changes were the inclusion of appropriations for training and assistance to disaster areas, increased credit assistance, a higher population limit for growth centers (500,000) and a provision reducing the number of redevelopment areas required to form an economic development district from two to one. In addition, the proposed designation criteria provided for a slightly difference group of redevelopment areas. The changes in these criteria included designation of places with median family incomes less that 50 percent of the national median (40 percent under the existing Act) , designation of areas with a sig- nificant decline in per capita employment over a 10-year period. Another meaningful departure from the existing legislation was a provision allowing the Agency to fund public works projects of direct benefit to growth centers or redevelopment areas. Pre- viously, all projects were required to have some impact on re- —' Richard M. Nixon, "197 State of the Union Message," (Washington, D.C. , 1970) . 68 development areas or to benefit a multi-county district. "Increased Role of Regional Directors" During the third Assistant Secretary's administration, direc- tors of EDA ' s regional offices began to play an increasing role in influencing Agency policy. They obtained authority to make final decisions on technical assistance grants, and consideration was given to broadening their authority even further. Moreover, in the fall of 1971, a policy was introduced calling for all regional office directors to meet with Agency officials in Washington once every two months to discuss policies and other relevant matters. This represented a considerable departure from the past, when regional office directors only journeyed to Washington on special occasions and rarely met with Agency offi- cials as a group. In introducing this practice, EDA policy makers not only satisfied their own inclinations, but also responded to the Administration's call for decentralization of government agencies "Industrial Prospecting Abroad" In December 1971, an old policy concerning industrial pros- pecting was revitalized. Under the second Assistant Secretary, EDA had joined with the Department of Commerce's Bureau of Inter- national Commerce (BIC) to support an industrial development attache working in Paris to try and interest firms abroad in locating in the United States, particularly in EDA-designated areas. EDA later dropped its support, but remained interested in the concept. In December 1971, the Agency's Deputy Assistant Secretary for Economic Development left his position in Washington and went to Brussels, Belgium, to undertake a similar effort. Again, financial support was provided by EDA and BIC. "Prevailing Tendency" The development of legislative proposals, improvement of existing programs, and increased emphasis on interagency coordina- tion were all means by which Agency administrators prepared for the future. However, these activities involved no major shifts in policy. The prevailing tendency among EDA's high-level offi- cials during the 1972 fiscal year - as during the preceding months - was to continue in established patterns until actions by Congress or the Administration dictated or facilitated policy changes. 69 CHAPTER SIX THE CONTINUING FEDERAL ROLE IN DEVELOPMENT ACTIVITIES "EDA's Future" During the spring and summer of 1971, Congress considered EDA's future. The deliberations were complicated by the Administration's January 1971 proposal to implement a program of revenue sharing. The purpose of this program was to distribute funds for certain types of programs directly to State governments. EDA's program was among those recommended for administration at the state level rather than the Federal level. At hearings held in March by the Special Subcommittee on Economic Development Programs of the House Committee on Public Works, EDA officials supported this position. Testifying for the Department of Commerce, they advocated only a one-year extension of the EDA legislation. The purpose of this extension was to facilitate a smgoth transition from EDA's program to revenue sharing. In response to questions from Subcommittee members, Agency officials discussed the problems associated with EDA's designation criteria and possible solutions . EDA's representatives at these hearings also testified against the $2 billion accelerated public works program under consideration. This program, which was a revitalization of the APW Act passed in 1962, provided for public works funds to be invested in (1) EDA- designated areas and (2) other places that were economically depressed but did not meet EDA designation criteria. 1/ Such areas would not be required to show evidence of local planning. ±7 Non-designated places eligible for these funds were: those areas which the Secretary of Labor designated each month as having been areas of substantial unemployment for at least six of the pre- ceding twelve months; and those areas which the Secretary of Labor designated each month as areas having an average rate of unemployment of Vietnam veterans at least 2 5 percent above the national average rate of all unemployment for three consecutive months or more during the preceding twelve-month period. 70 "Presidential Veto" Despite the opposition of the Administration and EDA officials, Congress passed a bill (S.575) containing both the $2 billion accelerated public works program and the two-year extension of EDA's legislation. £/ This bill, which received the overwhelming approval of both branches, was sent to the President on June 15. Fourteen days later it was vetoed. T n a message to the Senate explaining his action, the President stated that because construction projects had long lead times, "spending under this bill would not become fully effective for at least 18 months, at which time further stimulation would be unnecessary and inflationary." 3/ Other reasons for the President's veto included the Admini- stration's belief that the program would have little effect in reducing joblessness among those groups with high unemployment: Vietnam veterans, unskilled young people, and other persons unemployed because of lack of training or opportunity. "Extension of EDA's Program" Determined to pass authorizing legislation for EDA and the regional commissions before the scheduled August adjournment date, members of both the Senate and House Committees on Public Works turned their attention to structuring a new bill. To eliminate the necessity of a House-Senate conference, a decision was made to prepare identical bills in both chambers. Approximately three weeks after the President's veto, the Senate passed S.2317, which was amended and passed by the House on July 28. Two days later, the Senate agreed to the House amendment and the bill was sent to the President, who signed it into law on August 5. TT The bill also included provisions for the Appalachian Regional Commission and the five regional commissions established under authority contained in the Public Works and Economic Development Act of 1965. 3/ Richard M. Nixon, Message to the Senate of the United States, June 29, 1971 71 "Modified Version of APW Program" In addition to extending EDA's authorization through June 30, 1973, the portion of the legislation concerning EDA - the Public Works and Economic Development Act Amendments of 1971 - introduced a modified version of the Accelerated Public Works Program. The Amendments required that between 25 and 35 percent of all appro- priations for EDA public works grants be invested in newly desig- nated special areas. These areas were communities or neighbor- hoods with (1) large concentrations of low-income persons, (2) substantial out-migration (rural areas) , (3) substantial unemploy- ment, or (4) an actual or threatened abrupt rise of unemployment. As was the case with places designated under the APW Act of 1962, these special areas were not required to show evidence of local planning through the preparation of Overall Economic Develop- ment Programs. Such areas also differed from redevelopment areas with respect to the types of projects funded. Projects in these areas (public works impact projects - PWIP) were to provide immediate useful work to unemployed and underemployed area residents, and could receive 100 percent grants if the local or State govern- ment had exhausted its taxing and borrowing capacity for such purposes. Although Congress provided general criteria for identifying places eligible for these types of projects, the responsibility for developing specific guidelines for area designation and program implementation lay with Agency officials. The Assistant Secretary delegated these tasks to the Office of Public Works and the Office of Planning and Program Support. By the end of September, personnel in these offices had completed their assignments. Between August 5 when the Amendments to EDA's Act were signed into law and the end of September, the Assistant Secretary made a decision to use the PWIP authority to demonstrate what could be accomplished through a program of this type. Although the Agency had supported the Administration in testifying against such a program, the Assistant Secretary and his staff felt its implementation should be regarded as a learning experience. Their position was that funding the best possible PWIP projects and collecting hard data on their results would permit for the first time an objective measure of the impact generated by a program of this type. Such knowledge would clearly be useful to Congress and the Administration in their continuing efforts to develop effective tools for stimulating economic development. 72 Applications for PWIP projects began reaching EDA regional offices during the month of October, and by December 1, all appli- cations had been received by EDA Washington. On December 15, supplemental funding was approved, raising the total amount available for PWIP projects to approximately $48 million. By the end of January 197 2 $31 million of that amount had been approved to support 137 projects. "Benefits Resulting from Legislative Amendments" In addition to introducing the PWIP program, the August Amend- ments to EDA's legislation altered several other provisions of the Act. In every case these modifications were beneficial to residents of depressed areas, and in most cases, they were based on EDA's legislative proposal. Places designated as redevelopment areas were now assured of at least three years' eligibility. Previously, areas that had been designated for only one year were subject to de- designation if they failed to meet the standards of the annual review, The Amendments also extended eligibility to areas with a median family income between 4 and 50 percent of the national median. Such areas could not be designated under the 4 percent ceiling set by the original legislation. In addition, eligibility was extended to areas where the percentage of persons employed had declined significantly during the preceding 10-year period. "Proposal to Facilitate Transition to Revenue Sharing" When it became apparent that the President's revenue sharing proposal would not receive congressional approval in 1971, the Secretary of Commerce began considering other ways of achieving the goals of revenue sharing. He came to the conclusion that an earlier reorganization proposal for EDA, the Title V regional commissions, and the Appalachian Regional Commission could be revised to serve either as a vehicle for the transition to revenue sharing or as a compromise substitute. The task of formulating the new approach was assigned to the Assistant Secretary for Economic Development with the instruction that maximum use be made of executive discretionary powers. On November 11, 1971, the proposal that resulted from this effort was presented to members of the President's staff. Referred to informally as the "Stans Plan," the approach called for merging 73 the programs of EDA, the Title V regional commissions, and possibly the Appalachian Regional Commission and administering them at the regional level. An agency with the objective of stimulating economic development would be created for each of the 10 admini- strative regions identified by the President. A small national staff would be maintained in the Department of Commerce for allocating funds among the regions, overall program direction, congressional liaison, and implementing demonstration and technical assistance programs of a national nature. Each regional agency would be headed by a Federal Regional Director, who would be advised by a Council of Governors composed of the governors of all the states in the region. Through this Council, State governors would have an input to the economic develop- ment program and eventually obtain authority to approve their own projects. Thus, the plan prepared by EDA officials combined the principles of revenue sharing with the regional organization already established by the President. "Efforts to Increase Program Impact" During the fall of 1971, each of the program tool offices was considering or planning actions directed toward improving its effectiveness in promoting economic development. For example, the Office of Technical Assistance was examining the possibility of pro- viding funds to launch a national institute for training individuals with responsibility for economic development activities. In EDA's Office of Public Works the staff was particularly concerned with developing an increased capability to stimulate and enhance the economic development process. Personnel in the Agency's District and Area Planning Grant Program were encouraging the support of other Federal and State agencies in funding district programs. Such support was expected to lower EDA's share of the costs and enable the Agency to extend its assistance to other districts. A final example of efforts to increase EDA's effectiveness was the Office of Business Development staff's continued emphasis on reducing project processing time. "Use of Planning" Under the second Assistant Secretary, a new approach to implementing a meaningful planning program had been initiated. However, a number of factors had precluded the success of this effort 74 Among these was the heavy workload that fell on the small regional office and Washington planning staffs involved in implementing the new planning procedures throughout the Agency. Another contributing factor was the implied change in the role of planning with respect to EDA's operating offices, which had created bureaucratic obstacles Finally, the new planning initiative had suffered from the change in Agency leadership midway through the effort. At the encouragement of the third Assistant Secretary, another effort to give planning an increased role in Agency operations was undertaken. The focus of this effort, which was initiated during the latter part of the 1971 calendar year, was on upgrading locally developed OEDP ' s concurrent with the development of an Agency planning posture. EDA officials with responsibility for planning exhibited considerable optimism over the new initiative's potential to result in an innovative use of planning. "New Policies Under Consideration" When the 1972 calendar year began, the Assistant Secretary and his staff were considering introducing several new policies to increase the Agency's effectiveness. Prime among the possibilities were policies designed to improve EDA services to Indians. These included increased emphasis on personal contact between EDA and the tribes assisted by the Agency, particularly at the regional office level. In addition, the Agency had requested from Congress an extra $2 million in planning funds for fiscal year 1973 to support more planning grants for Indian reservations. In conjunction with plans to increase the scope of the reservation planning grant program, a policy was being considered to improve coordination between EDA's Office of Planning and Program Support and the Agency's Indian Desk. This policy would call for direct participation by the Indian Desk in monitoring planning grants to Indian reservations. Agency officials were also exploring ways of using other EDA tools more effectively with respect to stimulating economic develop- ment on Indian reservations, particularly technical assistance and business loans. This represented a continuing effort, which had reaped results in the final months of 1971 with the initiation of industrial prospecting activities. These activities were designed to identify firms interested in locating on Indian reservation industrial parks, and included attempts to establish contact between interested firms and tribal organizations. Both Agency personnel and EDA-funded consultants participated in the industrial prospecting efforts. 75 During this period, Agency policy makers were also concerned with increasing the effectiveness of economic development districts and obtaining membership on the Regional Councils for the 10 Standard Federal Regions established by the President. As in the case of Indian reservations, EDA officials believed the key to increasing districts' effectiveness lay in more contact between the Agency (particularly regional office personnel) and district staffs. Their intention was that EDA personnel would encourage relevant project applications and assist district staffs in carry- ing out their other functions. The purpose of such activities was not to impinge on districts' functions, but rather to make EDA more aware of their needs. Another policy change under consideration was linked to the increasing Federal Government controls on pollution. Agency officials were contemplating the possibility of providing long-term, low interest loans to firms being forced out of business for environmental reasons. By providing such companies with the resources to amend present facilities to comply with Federal requirements, EDA would save jobs and incomes that would otherwise be transferred to other areas or lost altogether. However, imple- menting such a program would necessitate additional funding and other modifications (e.g., lower interest rates) not under EDA's control. 76 CHAPTER SEVEN PROGRAM IMPLEMENTATION - JANUARY 1972 TO FEBRUARY 197 3 MANAGEMENT DECISIONS WITH AGENCY-WIDE EFFECTS During 1972, much of the attention of EDA managers and policy makers was focused on the managing process itself. There were four aspects of management that received Agency-wide attention: decen- tralization — the appropriate division of managerial duties between Washington and regional headquarters; the preparation of regional investment plans; a full-scale review of Agency directives; and the revision of EDA regulations in the Federal Register. A fifth management effort, concentrated in the Office of Planning and Program Support, entailed an updated identification plan for allocating EDA funds to regional offices. The new allocation model is discussed in Chapter 8 in conjunction with other activities of the Agency's planning staff. "Decentralization, 1972" In 1969, in response to the President's request that Federal assistance programs be streamlined, simplified, and moved closer to the people, an Agency timetable was established in which, within three years, all EDA program offices were to be studied and those operations that the study determined could be carried out effectively in the field were to be transferred to regional offices. The year 1972 was the final year of the timetable. By January 1972, EDA plans to open regional offices in Atlanta and Denver had been implemented, and the boundaries of the Agency's six administrative regions conformed with the 10 Standard Federal Regions established by the President. In Washington, decentralization within the individual program offices resulted in organizational modifications as well as shifts in responsibility to the field. Within the Office of Public Works, all project review functions were consolidated into one division, the Final Project Review Division, whose work was limited mainly to final veri- fication of projects, as contrasted with project evaluation or re- evaluation. The restructuring was aimed at eliminating duplication in Washington of work performed in the regional offices and underscored the intention that responsibility for all project processing now rested in the field. Establishment of another new division, the Program Development and Training Division, reflected Office plans to give increased attention to overall policy direction. 77 In a study of the operations of the Office of Technical Assistance, a management analysis team had noted that the technical assistance program was really two programs — one local in orientation and impact, and the other concerned with interregional and national problems. More than half of the technical assistance projects were of the local type. Responding to the team's reasoning — that EDA could give better assistance for local projects by placing more technical assist- ance experts in the field offices where they could meet personally with businessmen and community leaders — administrators of the Office of Technical Assistance transferred 13 positions to the regional offices, increasing the total of technical assistance staff positions in the field to 34 and leaving 37 in Washington. Responsibility for all projects of local scope was assigned to the Regional Directors. Although final authority to approve funding for most technical assistance projects was retained in Washington, authority to approve "task orders" remained with each Regional Director and was increased from $2,500 to $5,000 per project. The total regional limit for these task orders was increased from $25,000 to $5 0,000 per year.V Further EDA decentralization occurred within EDA's planning grant programs. 2/ First, Regional Directors were given responsibility for day-to-day guidance of the 120 economic development districts. Second, they were given responsibility for review and acceptance of districts' Overall Economic Development Programs (OEDP's). And, third, they were given authority to approve the continuation of planning grants of recipient organizations within their purview. The latter authority was made contingent upon performance by the regional office of an on-site management appraisal of the organization receiving the grant. 17 The $50,000 represented about 5 per cent of a Regional Director's technical assistance budget for the year. 2/ Recipients of planning grants included the 120 economic develop- ment district organizations, tribal or inter-tribal organizations on Indian reservations, and local development corporations in redevelopment areas not located in districts. 78 The Indian program was also affected by decentralization. In June, the Assistant Secretary signed two directives underscoring the Agency policy that Regional Directors were responsible for the EDA Indian program within their respective regions. One authorized Directors to approve the continuation of planning grants on Indian reservations. This authority also was made contingent upon com- pletion of a management appraisal and, in addition, upon coordi- nation with the Washington Indian Desk. The second directive established, for those regional offices having substantial Indian populations, the full-time position of Special Assistant to the Regional Director for Indian Activities. These program officers were to manage regional EDA Indian programs. The second directive also required Regional Directors to prepare annual Indian programs; each regional plan was to outline in de- tail annual objectives and propose methods for their accomplishment. Responsibility for overall Indian development program policy re- mained in Washington with the Special Assistant for Indian Affairs. "Results of Decentralization" By the fall of 1972, the decentralization program had signi- ficantly broadened the project and planning responsibilities of regional offices. Three years earlier, the technical assistance program had been completely operated from Washington. Field per sonnel mainly provided contact between local officials and Washington. The district program, also centralized, had as its main emphasis the formation of economic development districts. The steps required to organize, fund, and assist districts were performed almost entirely by Washington staff members. Indian leaders, more often than not, came to Washington to formulate plans and identify projects. All aspects of the business loan program were directed from Washington, with the Small Business Administration performing loan servicing functions in the field. Although in 1968 the Office of Public Works had assigned responsibility to its field staff for financial, engineering, and economic impact analysis for individual projects, in 1969 two projects were being rejected in Washington for every one approved. By the fall of 1972, Regional Directors had become respon- sible—at the pre-approval stage— for all public works projects, all technical assistance projects of local scope, and all planning grants. In addition, they had authority to approve the continuation of planning grants and to approve technical assistance purchase orders up to a specified amount. 79 Only in the Business Development program did they lack responsi- bility at the pre-approval stage. Functions that continued to be performed in Washington included credit evaluation and formulation of loan terms and conditions. Perhaps as significant as a Director's increased responsibility for developing and forwarding projects was his authority to screen applications and reject the economically unsound at an early stage. The savings to communities was estimated to be $1.8 million annually. Speed of assistance had also improved during the period, a result attributed in part to improved coordination with local officials and with other decentralized Federal agencies. "Regional Strategies" In the summer of 1972, responsibilities of Regional Directors were broadened further. At that time Directors were asked to analyze the resources and needs of their respective regions and to develop regional plans for EDA investments. When completed and approved by the Assistant Secretary, the plans would represent the Agency's first attempt at a national program for regional economic development. Four preliminary plans were completed and presented in the fall of 1972. To request an investment strategy from the regional offices was perhaps for the first time realistic because of the following develop- ments. Decentralization had provided Regional Directors with responsibility for a full mix of EDA programs. The role of planning in Agency operations had increased during recent months, and the planning staff was directed to continue this trend by giving Regional Directors analytical assistance in developing the plans. Finally, all six Regional Directors had served for at least two years, thereby gaining experience needed to view economic development on a regional, rather than a project-by-project basis. "Realigning Agency Directives" In August 1971, the Management Analysis Division and the Office of the Deputy Assistant Secretary for Policy Coordination began a comprehensive review of the Agency's directives system. EDA directives, like those of similar organizations, communicated policy, organization, procedures, and action requirements; they assigned responsibilities and authority, as well as provided information for effective administration and operation of the organization. 80 The need for review of the directives manual had grown obvious with implementation of the decentralization policy. Offices had been restructured and procedures put into effect; many earlier- stated policies now needed to be reconsidered. Further, the directives manual had not been subjected to thorough review since the Agency was established, and some streamlining was due. The year-long project, completed in August 1972, resulted in a combining and revising of some directives, the formal discarding of policies no longer in use, and incorporation of policies applied in practice but not previously articulated. By the end of 1972, sets of the five-volume directives manual had been dispatched throughout the Agency. The revised manual was expected to be a valuable aid for helping new personnel grasp the workings of the Agency. "A New Look at EDA Objectives Perhaps the most important revision made in the course of the directives review occurred after Agency policy makers concluded that a new directive should be added which would describe the Agency's objectives. Although five EDA goals appeared in other Agency literature, no one directive incorporated these goals into the directives manual. The five EDA objectives which Agency policy makers reviewed had been first articulated in 1968; thus, (counting the ARA years) they were re-examined in light of over a decade of Federal experience in organized economic development. After much debate on the part of the Assistant Secretary's immediate staff, Regional Directors, and office directors, three objectives were accepted as previously expressed and fourth was added. One of the two dropped was "(provision of) a basis for. . . effective expansion of expenditures. . .to promote economic develop- ment. . .if such expansion is desirable and necessary." This was viewed as the accumulation of a backlog of projects that would serve as vehicles for quickly infusing EDA assistance into local economies. This objective was eliminated because the kind of capability it called for had never been maintained by the Agency and the Assistant Secretary opposed such an approach. The other objective not retained was "to develop alternatives to the present patterns of migration of the unemployed and underemployed . * .by expanding economic opportunities." EDA policy makers evaluating this objective recognized that as a result of the Agency's limited resources, EDA's programs had not been and were unlikely to be successful in affecting population movement on a national scale. However, they also recognized that much had been learned and experience had been gained with respect to growth policies. Thus, they recast this objective in terms of a broader goal: "to contribute leadership and practical experience to the formulation of a national development policy." 81 The following four objectives were placed in the manual of directives : • to reduce the incidence of substantial and persistent unemployment and underemployment characteristic of needy regions, counties, and communities to a level commensurate with the levels prevailing in the national economy; • to improve economic development planning, coordinating and implementing capabilities at all levels — Federal, State, regional, and local; • to provide a basis for improved coordination of and continuity for Federal, State and local activities relating to regional economic development, and for more efficient utilization of all resources (Federal, State, local and private) available for regional and local economic development; and • to contribute leadership and practical experience to the task of formulating a national development policy and programs which identify the causes of existing economic imbalance regardless of where they occur and which attempt to provide economic opportunities in those places capable of growth, thereby increasing the utili- zation of the nation's total economic and social resources "Revisions for the Federal Register" Taking advantage of the currency of Agency directives, in September 1972 the Chief Counsel and a task force from the program offices began revising Agency regulations published in Chapter III, Title 13 of the Code of Federal Regulations. The regulations were revised to present a complete and current statement of policy pro- cedures, and rules affecting the public. A basic test applied by the task force was whether the material would be useful as guidance to the public, especially to prospective applicants. Upon publication in the Federal Register on January 23, 1973, the revised regulations became binding on EDA. 82 CHAPTER EIGHT PROGRAM IMPLEMENTATION - JANUARY 197 2 to FEBRUARY 197 3 NEW DIRECTIONS "Increased Role for Planning Staff" The previously reported, expanded role of the planning staff was played out during 1972 both at the Agency level, where planners made major contributions to long-range economic development strategy, and in the field, where efforts focused on developing and strengthen- ing field planning capabilities. Contributions at the Agency level were two-fold. First, using the new employment and income information from the Census and un- employment data from the Bureau of Employment Security, the Office of Planning and Program Support attempted to count anew the number of residents in those areas of the country that qualified for EDA funds and to measure their degree of distress — in sum, to identify for EDA its target population. Second, the planning staff made comparisons of the areas in terms of population size and degree of distress, and, using these comparisons, developed a weighting system that could provide the Assistant Secretary a basis for allocating the EDA appropriation to the six regional offices* The newly developed allocation system hinged on weighting populations in distressed areas according to unemployment rates and per capita income, depending on the nature of the local problem. Planning staff members were optimistic about the new model because it related in a systematic way degree of need to program efforts and because it could reflect geographic shifts in the target population. With development of the system, Regional Directors were told at the beginning of the fiscal year the full amount of funds available to their region. Thus, the new system was expected to help the Directors form their regional investment plans. "New View of OEDP" During the review of Agency directives and the attendant re- writing of planning guidelines, the Office of Planning and Program Support developed a changed role for the Overall Economic Develop- ment Program (OEDP). Agency planners characterized OEDP ' s of the past as largely descriptive and analytical documents laying open 83 the multi-county areas under scrutiny to show strengths, weaknesses, and potentials. They now felt that OEDP ' s and OEDP annual updates should put more emphasis on a strategy for district development. The Office determined to encourage local planners writing OEDP * s to develop a work program evolving from the district strategy. Programs such as health care, vocational training, industrial development would be given priorities in the work program, and local persons responsible for specific activities would be named. In this way, it was hoped, the OEDP would take its place at the center of local economic development activity, and projects funded by EDA would be a meaningful part of a plan developed by local representatives. In February 1972, planning teams were sent to three districts in a pilot project of assisting with the updating of OEDP ' s . The teams were expected to cover 25 districts by June 1973. "Contributing to a Regional Perspective" Planning efforts in the field also included assistance with regional investment strategies. The Washington planning staff presented to regional office planners reports on national trends that would have regional effects and explored the implications of those trends on regional development. Assistance in the use and interpretation of various data sources was also given. "Improving Effectiveness of District Program" While the Office of Planning and Program Support gave increased attention to district planning capabilities during this period, the Office of Development Organizations initiated two programs aimed at strengthening other aspects of the district program. One of the two entailed a formal system of performance appraisals of district organi' zations. This effort was begun with the hiring of a former Regional Director as a Special Assistant for District Appraisals Program. In February 1972, the Special Assistant, with team members from the Washington office and from regional offices, began visiting selected districts with a formal checklist of items to discuss during two- to five-day visits. Meetings with district boards of directors as well as with district staff members were included on the team itineraries. Some objectives of the program were to gather infor- mation generally about the effectiveness of the district program, to assist those districts in difficulty, to demonstrate to regional 84 offices and district staffs what was entailed in a formal appraisal, and to reaffirm EDA's interest in its field operations. Also during this period, the Office of Development Organizations initiated an exchange program for district organizations. The program was addressed to staff training and program innovation. Members of the staffs and boards of directors of 12 district organi- zations were scheduled to spend two to three days observing activities of their counterparts in 12 other districts during the year. Assignments were based on a recognition of common interests of two district organizations and on consideration of their complementary weaknesses and strengths. It was hoped that the exchange would strengthen individual district organizations and result in transference of successful programs from one district to another. The Office of Development Organizations also continued to experi- ment with economic development districts as delivery vehicles for other programs. One program that 38 of the district organizations were administering was judged highly successful when it came to a close in April 1972. This two-year program, entitled the Public Service Careers, represented the districts 1 first major venture into manpower development. It was underwritten by the Department of Labor to pre- pare 2,000 unemployed or underemployed persons for entry into or promotion in public service jobs. The jobs had been located by district staffs and were in schools, hospitals, and county and municipal governments. All trainees had been hired for specific jobs before their train- ing began. In exchange for a trained person to fill the job, the local governments agreed to pay the enrollee's salary after training for one year and to include the position in the agency's budget for the second year. At the end of two years, although the $4.7 million grant from the Department of Labor was to cover training of 2,000 persons, 3,398 had been trained and hired, or trained and promoted, through use of the district organizations. "Implementing Directive 7.06" A marked change in the composition of the boards of directors and executive committees of district organizations occurred during 1972 as a consequence of a new policy instituted by the Assistant Secretary. The economic development order articulating the policy Directive 7.06 — set requirements for minority representation on the board of directors and executive committees, spelled out procedures for selecting minority board members, and established a timetable for compliance. The directive also called for submission of affirmative action programs to insure the recruitment and hiring of minority personnel for staff positions, both professional and support. Addressed to districts and other EDA-sponsored planning organi- zations, the directive stated that minority membership on the boards and executive committees must at least equal the percentage of the minority population served, up to 2 5 percent, and that minority board members must be selected by organizations or persons who sub- stantially represented the minority community. Staffing ratios were to parallel, in general, the population mix of the area, and staff goals were to be attained through normal attrition or, in the event of the need to add personnel for carrying out the regular program, through expansion. In January 1972, the EDA Office of Civil Rights reported that - 7 of the 123 designated economic development districts were in complete compliance with the directive. By January 1973, 87 of 134 districts had complied. ±f The U.S. Commission on Civil Rights recognized EDA's progress in civil rights enforcement in January 1973 when it noted, "EDA's most successful effort to date has been its Directive 7.06. . ."2/ "Research — Response to Operating Concerns" In addition to continuing to support research in regional economics, the Office of Economic Research during 1972 strengthened its response to operational and policy concerns of the Agency and formalized its system for disseminating research findings. Among the FY 1973 projects closely related to Agency operations was one intended to explore alternative capital subsidy programs that could complement or replace existing Agency programs. Wage subsidies in the form of reimbursements to employers, regional development banks, and investment tax credits with a regional component were to be investigated. T7 By June 1973 the number had reached 115. 2/ U.S. Commission on Civil Rights, The Federal Civil Rights Enforcement Effort — A Reassessment, (January 1973) , p. 283 86 Also funded was a project to develop a series of case studies on communities that had experienced turn-arounds in their economic fortunes. The purpose of the case studies was to demonstrate the advantages of applying regional economic analytical techniques to real-world situations. Research staff members hoped to use the series as a training device to show persons with varying economic development backgrounds how and when to use the analytical procedures. Other efforts focused on additional ways of disseminating infor- mation about studies sponsored by the Office of Research. Staff members were given liaison assignments to program and regional offices to report on research in progress and to point out to these offices practical uses that could be made of research findings. In addition, the first annual research conference was held in the spring. Those attending included White House staff members, directors of EDA offices, and representatives of other Federal agencies concerned with formulating policies on regional development. "New Developments in Indian Program" Among the notable developments in EDA's Indian program during 1972 were an increase in Indian planning funds, a decision to continue industrial prospecting on Indian reservations, and the opening of an Indian management institute. The Congressional appropriation for fiscal year 1973 included an allocation of approximately $3 million for planning grants to Indian reservations, an increase of $2 million over similar funds for fiscal year 1972. The Assistant Secretary had requested the funds to enable every Indian reservation or trust to be covered by an EDA planning grant, either singly or together with other tribes. The new funds were expected to increase from 40 to 100 the number of professional planners already at work on Indian reservations Expressed another way, the funds would permit adding 4 planning grants to the 19 existing at the time of the appropriation. Outside consultants evaluating EDA's Selected Indian Reservation Program, the Indian Desk, and Indian tribal leaders had all pointed to the effectiveness of planning grants in improving the development potential of the reservations. A substantial portion ($350,000) of the additional Indian planning grant funds was allocated to Alaska. There the funds were to be used to assist the natives in planning for the best use of land and money grants made available to them under the Alaska Native Claims Settlement Act, enacted December 18, 1971. 87 Industrial prospecting for the 32 industrial parks financed by EDA on Indian reservations continued into fiscal year 1973. By the end of June 1972 , two companies had located and three others had signed agreements with Indian organizations indicating their intent to locate. The original consulting firm hired to bring interested industries and tribal leaders together expressed frustration over the fact that once representatives of the groups were brought together, no organi- zation or agency assumed leadership to ensure that the partnership would be consummated. Still, the partial success of the consultants encouraged the Agency to continue the prospecting, and a second firm was hired. In addition to maintaining contact with firms that earlier had expressed interest in locating, the new contractor proposed three principla prospecting activities: to develop a method for selecting those industries most suitable for Indian reservation location; to conduct an intensive campaign of marketing the reservations to those industries; and to develop an industrial park organization of Indians on each reservation, which would receive representatives of interested firms. The latter activity was viewed as a possible way to meet some of the difficulties encountered by the first consultant. Another innovative project directed toward stimulating develop- ment on Indian reservations became operational in December 1972. At that time, classes began at the American Indian Management Institute, a training center supported largely by EDA technical assistance funds. The Institute was established to assist reservation Indians in improving or developing management and administrative skills needed for operating tribal businesses. Its program included classroom instruction and on-site application of that instruction. 88 "New Directions in Office of Technical Assistance" Several events took place in 1972 which influenced the direction of the "national" technical assistance program. In January 1972, Congress voted independent funds for the Office of Minority Business Enterprise (OMBE) . This made possible alternate uses for approximately $3 million of EDA technical assist- ance funds that otherwise would have been budgeted for OMBE during fiscal year 1973. The Assistant Secretary decided the funds should be kept in Washington to finance projects of national scope and applicability. Thus, the staff of the Washington office turned its attention to considering where the national technical assistance program could be the most useful. In February 1972, Congress received a Presidential Message on Science and Technology, which called for a strong new effort to marshall science and technology to strengthen the country's economy and improve the quality of life. The President emphasized that Federal programs should be applied to putting to use scientific breakthroughs and that the programs should encourage technological innovation to improve the country's economic productivity, thereby expanding our markets, strengthening old industries, creating new ones, and generally providing more jobs. In his outline of ways in which the Federal government could work as an effective partner in such tasks, the President announced that the Department of Commerce would serve as the focal point with- in the executive branch for policies concerning industrial research and development, and the Department would appraise on a continuing basis the technological strengths and weaknesses of American industry Thus, in the spring of 1972, officials of EDA's Office of Technical Assistance concluded that their national program funds might be best used to support the new initiatives requested of the Department by the President. Top staff determined to develop new technical assistance projects consistent with this responsibility. In addition to the science and technology initiatives, the Office of Technical Assistance staff also decided to emphasize assistance to communities and industries suffering from economic adjustment problems, particularly problems resulting from recent environmental regulations. 89 "Projects Exemplifying the New Directions" One of a number of projects addressing the Presidential goal of encouraging innovation involved helping Philadelphia identify- new products and procedures that would improve the city govern- ment' s services. There were already some needs known for which there were no existing products, for example, manhole cover locks and fireboxes that met standard specifications and linked in a predictable way with the rest of the fire-reporting apparatus. It was hoped that identification of needs such as these could result in new products and in market aggregation, with cities around the country benefiting from the resulting economies of scale. EDA technical assistance was also used to fund projects designed to further the transference of known technology. Among these was a grant to support the review of nearly 1,000 government-owned patents. The objectives were to disseminate information about the results of government-sponsored research and development activities, to remove barriers that might hinder their use by private industry, and to look for incentives that would encourage such use. Another project with technology transfer objectives combined those objectives with the goal of improving productivity by linking unemployed scientists and engineers with small companies that could benefit from these individuals' technological expertise. This project was undertaken on a pilot test basis in Illinois with the expectation that similar efforts could be developed in other States. Some of the early findings included the discovery that the scientists and engineers needed no retraining to work effectively with the small companies and that firms were, in fact, eager to receive their assistance. Within six months, testimonials to the project's success were being received by the Governor's office. The new directions taken by the Office of Technical Assistance in the spring of 1972 included sponsoring projects associated with economic adjustment. Among these were studies of three industries identified by an earlier analysis as likely to be hardest hit by environmental controls. The initial analysis predicted that fruit and vegetable processing plants, pulp and paper mills, and iron foundries would suffer most from plant closings. Accordingly, the EDA-funded studies focused on identifying where closings might occur, estimating the severity of their impact and reviewing the economic options of the communities affected. 90 "Assumption of SBA Loan Functions" In October 1972, the Office of Business Development began performing loan closing and disbursing functions. Previously, ARA and subsequently EDA had transferred administrative funds to the Small Business Administration (SBA) to carry out these and other loan functions. Over the years, however, the Office of Business Development had gradually assumed responsibility for all loan services except closing, disbursing, and certain liquidation activities. In requesting that EDA be granted responsibility for closing and disbursing its loans, the Director of the Office of Business Development stated that having these functions reside in one Agency would save money and would provide better service to EDA borrowers. He proposed that EDA phase out its use of SBA's loan closing and disbursing services but continue to use that office's liquidating services. The Office of Business Development's budget request for fiscal year 197 3 reflected the transfer of functions and showed a saving of approximately $4 00,000 in closing and disbursing costs over the previous year. "Modified Policy on Training Centers" EDA's policy regarding assistance to vocational-technical training centers was modified in 1972 as a result of an evaluation of EDA training-related projects. Training centers were receiving assistance from EDA through public works projects, for construction, and through technical assistance grants, for operation and admini- stration. In June 1972, an evaluation team reported that the primary factor determining the success of a training center in placing the unemployed and underemployed in jobs was the presence in the center of permanent staff members engaged in the following functions: recruitment of trainees from the target population, job development within local industries, and job placement of the disadvantaged. In responding to these findings, EDA administrators rewrote Agency policy regarding assistance to training facilities, to make more specific the requirements that centers must meet in order to receive assistance. Determined to insure that EDA-sponsored centers would provide training programs that reached the disadvantaged adults and out'-of -school youths of the redevelopment areas, Agency policy 91 makers made a decision to look more carefully at the overall edu- cational program being planned for a center and also at the plans for administering the program. Provision for a formal permanent staff to perform recruitment, job development, job placement and counseling functions was made a mandatory part of any request for assistance. The Office of Technical Assistance was assigned responsibility for reviewing program plans and, following project approval, for monitor- ing operations of the centers, in cooperation with the Office of Public Works and the appropriate Regional Director. This was the first time that one program office had been assigned responsibility for monitoring projects originating in another program office.!./ "Growth Center Policy — A New Effort" In June 1971, an in-house evaluation team reported that EDA's experience in funding projects in growth centers had N not yet proven that the growth center strategy was workable. In November 1972, following a long period of re-examination, the Agency undertook a new and concentrated effort to improve the overall growth center program. Focus of the new effort was not so much to change as to strengthen efforts to implement the strategy. Regional Directors convened in Washington on November 21 and 22 to discuss their roles. There, Agency officials emphasized the importance of selecting centers with growth potential as well as projects that would stimulate further growth. They also stressed the need for field personnel to discuss objectives of the strategy with project applicants and community leaders, in particular, the hiring and providing of services to the unemployed and underemployed of the district's redevelopment areas. The Positive Action Program (PAP) was dropped as a requirement, and the Overall Economic Development Program (OEDP) was made the sole planning vehicle for showing the relationship between a growth center ' s development and other areas of the district. Increased emphasis was placed on the annual updating of the OEDP, in which the impact of the center on the surrounding areas during the preceding years was to be described. The Agency announced, further, it would undertake a demonstration program in a limited number of growth centers, investing a total of $10 to $12 million in selected centers for at teast two years. Regional Directors were asked to recommend such centers, within the framework of their regional plans. 1/ Sixty-six EDA-assisted training centers had been constructed and 26 were in operation in June 1972. It was estimated that 10 would open during fiscal year 1974 and 30 more in fiscal year 1975. 92 In exchange for the concentration of money, the demonstration center and the district in which it was located were to develop a strategy for using the funds that included a significant outreach program. The program was to involve both public and private sectors on behalf of the redevelopment area residents and all unemployed and underemployed persons within the district and the growth center. Additional funds from planning and technical assistance programs, as well as personnel from the Office of Development Organizations and the Office of Planning and Program Support, were to be made available to support the demonstration effort. Public Works Impact Program" July 1972 marked the end of the first year of the Public Works Impact Program (PWIP) . During that year, 203 projects were approved, for a total investment by EDA of $47.7 million. The purpose of these projects was to provide immediate, useful construction work for unemployed and underemployed persons residing in the project areas. Projects for consideration of public buildings were the most common. This category, along with installation of water and sewer facilities, and street and road improvements, accounted for 7 per- cent of the total projects. According to the estimates of project applicants, over 30,000 man-months of construction employment would result from the first year's 203 projects. A close follow-up and evaluation of PWIP was begun by EDA to determine the actual amount of employment created. Preliminary results were expected to be reported in late 1973. Guidelines issued in July to the regional offices for develop- ing second-year PWIP projects encouraged funding projects in the most distressed eligible areas. Regional Directors were reminded that while they might be inclined to stretch PWIP allocations by lowering the EDA grant rate below 80 percent in communities that appeared to be able to pay a larger share of project cost, they should avoid doing so, in order not to impose further financial burden on already distressed communities . Projects that promised the most jobs were to be selected; among those, projects offering environmental improvements, rehabilitation of existing structures, and construction of new buildings were to be favored. As in the previous year, an EDA-participation limit of $600,000 per project was again set as a general guide. Force account projects — those for which the governing body receiving the funds does its own hiring, rather than contracting out — were to be encouraged, as local governing bodies were considered the most likely to employ local residents. 93 "Drug Rehabilitation" EDA's first involvement in programs concerned with rehabili- tation of drug addicts began in June 197 2. At that time, the Agency approved two planning grants for demonstration programs in Philadelphia and Chicago aimed at development of jobs for former drug addicts. In the fall of 1972, EDA approved grants for two public works projects, one for drug treatment facilities in Newark and the other for training facilities for ex-addicts, in Brooklyn. The demonstration programs were administered by EDA at the request of the Special Action Office for Drug Abuse Prevention, Executive Office of the President. Funds were made available by the National Institute of Mental Health. Perhaps the most ambitious of the drug projects was a $1.4 million EDA grant to turn a former dairy distribution center in the Bedford- Stuyvesant area of Brooklyn into a skills training center. When renovated, the center was to be used by the non-profit Addiction Research and Treatment Corporation (ARTC) , which was treating approxi- mately 1,200 drug addicts in the area by means of a methadone main- tenance program. ARTC planned to select for job training those addicts who had been drug free for six months. Included in the plans for the skills center were a sheltered workshop and a day-care center. EDA involvement in drug programs was met both with support and concern by Agency administrators. Those who supported the involvement contended that any positive approach to economic development in the cities had to address the problem of whether cured addicts were employ- able. Other administrators felt the Agency should move cautiously before investing its money, looking carefully to see whether drug treat- ment programs worked. "Tropical Storm Agnes" On June 17, 1972, Agnes struck the panhandle of Florida. There- after, moving slowly up the eastern seaboard, Agnes took 118 lives and left an estimated $2.5 billion in storm damage to private property. In economic terms — homes destroyed, businesses crippled, and jobs lost — Agnes was the worst natural disaster in American history. Hardest hit were Pennsylvania, New York, and Virginia. On June 23, President Nixon declared the State of Pennsylvania, together with portions of New York, Virginia, Maryland, Florida, Ohio, and West Virginia, major disaster areas. Expressing concern for the economies of the devastated areas, the White House asked the Secretary of Commerce to lead a fact- finding task force to determine the longer-range consequences of the economic damage, to decide upon ways in which the Federal Government might immediately begin to establish restoration procedures, and to evaluate the costs of such restoration. 94 On July 3, the Assistant Secretary of Economic Development along with other Federal Agency representatives visited Harrisburg and Wilkes-Barre, Pennsylvania, and Elmira-Corning, New York. Two task force findings were of particular concern to the Assistant Secretary: First, available Labor Department programs alone could not create enough jobs to counter unemployment resulting from Agnes; and second, serious disruption of many businesses foreshadowed permanent shutdowns and relocations from affected communities. Following the task force tour, EDA assumed primary responsibility for the Department of Commerce's disaster relief effort. The Assistant Secretary allocated to the disaster area $16.51/ million in EDA funds, and the Agency received ad additional $4 02/ million from a supple- mental disaster appropriation enacted by Congress. On July 12, special EDA field offices were opened in Wilkes-Barre, Harrisburg, Elmira-Corning, and Richmond. In his briefing for personnel to be assigned to these offices, the Assistant Secretary stressed the importance he attached to "cutting red tape" and "thinking creatively" in project development. He gave three general guidelines for project selection: First, projects in the hardest-hit areas should receive top priority; second, growth areas near hardest-hit areas should receive attention when near enough to the disaster centers to benefit the un- employed; and third, EDA activities were to closely parallel those of the Office of Emergency Preparedness. The Assistant Secretary also noted EDA's legislative authorization to supplement other Federal programs. Although the Office of Emergency Preparedness was limited to "grants in lieu" — for example, replacing a washed out, two-lane bridge — EDA could expand such a project with supplemental funds to finance a four-lane bridge. All EDA project activities were coordinated by the Atlantic Regional Office of Philadelphia. By August 16, 16 Pennsylvania counties and one New York county had been designated for assistance. The first EDA project was approved on August 24. In September it was decided to place primary staffing emphasis on Wilkes-Barre and to close the Richmond field office, since no Virginia counties had been made eligible for EDA designation by the flood. By February 1973, 53 public works and 84 technical assistance projects had been approved, for a total commitment of $28,653,000.3/ I/ The $16.5 million included $5 million from PWIP funds. 2/ Congress apportioned $30 million of the appropriation for development facilities, $7.6 million for technical assistance, $1.5 million for planning grants, and $.9 million for administration and operations. 3/ By June 197 3 the commitment had been increased to $54.7 million for 97 public works projects, 125 technical assistance projects, and 10 planning grants. 95 CHAPTER NINE EXTERNAL EVENTS, AGENCY RESPONSES, AND THE CHANGING FEDERAL ROLE IN DEVELOPMENT ACTIVITIES MAY 1972 - JUNE 1973 "Response to Questions on National Growth Policy" On May 31, the Secretary of Commerce received from the White House a list of 135 questions pertaining to the development of a national growth policy. The questions had been forwarded to a number of domestic agencies from the Domestic Council, which was charged with formulating and coordinating domestic policy recommendations to the President. The Secretary asked the Assistant Secretary for Economic Development to serve as senior operating officer and assist the Under Secretary of Commerce in the Departmental response. Respondents were asked to define national growth policy and the Federal role in national growth policy. They were also asked to examine existing Federal policies affecting national growth, existing programs with national growth impact, and related topics of importance to the process and pattern of growth. The questions gave members of EDA's staff an opportunity to clarify their own thoughts on the subject and to contribute knowledge gained through their experience with Agency programs. Examples of pertinent Agency programs included EDA's investment in growth centers to stem outmigration and in industrial parks to attract investment. On July 31, the Assistant Secretary, serving as Acting Secretary of Commerce^/, forwarded to the White House an informal and preliminary response outlining a Department position on the development of a national growth policy. EDA attached to its answers a list of research studies pertaining directly to national growth policy, which had been sponsored by the Office of Economic Research. "The Rural Development Act" On September 22, senior staff of EDA met to consider the impli- cations on Agency programs of the recently enacted Rural Development Act of 1972. 2/ Based on earlier legislation pertaining to the Soil Conservation Service and the Farmers Home Administration, the Rural Development Act made more comprehensive those programs in existence 1/ Both the Secretary and the Under Secretary were engaged in trade negotiations out of the country . 2/ Rural Development Act of 1972. Public Law 92-419. Signed by the President, August 30, 1972. 96 and extended the two programs into areas of general rural development. In doing so, the Act authorized the Department of Agriculture to establish a number of grant and loan programs similar to those administered by EDA. The Act also directed the Secretary of Agri- culture to assume leadership in "coordinating a nationwide rural development program." Some staff members attending the meeting were concerned that the new legislation was intended to supersede EDA's mission and program in rural America. The discussion centered on that issue as well as the questions of how EDA might assist and cooperate in the new programs and how EDA might make use of them to accomplish its own mission in rural areas. To those participating in the discussions it was apparent that there were indeed programs in the Rural Development Act with the same objectives, clientele, and funding methods as programs under EDA's administration. It was also clear that many of these similar programs took different directions. The Agriculture loan programs for public works projects, for example, were available to small communities. But these loans were not expected to be of great use to the distressed communities EDA served, since the tax base of these towns was usually too small to support extensive borrowing. Again, the Agriculture grant programs for public works projects historically had taken another avenue of development. For example, they had paid for the installation of water pipes for residential use rather than pipes that would serve the industrial users which EDA programs were intended to attract. Yet for those cases where the two programs were seen to have parallel objectives, many examples surfaced for effective coordination. The Assistant Secretary decided to respond to the new legislation by communicating to Agriculture's administrators EDA's willingness to share knowledge gained from experience in rural economic development. He directed staff members to prepare a proposal that would identify program and geographic areas in which EDA could be helpful, together with proposals of ways in which the programs of the two agencies could support one another. In subsequent months, EDA program directors met with Agriculture officials to describe Agency programs, and in the spring of 1973 an EDA task force of seven persons was assigned temporarily to the Department of Agriculture. Composed of experts in business loans, public works, development organizations, and legal aspects of develop- ment programs, the task force assisted Agriculture staff members in drafting program procedures for implementing the Rural Development Act. One outcome of this cooperation was a plan for close coordination of rural development activities with EDA's economic development districts throughout the country. Districts of the Farmers Home Administration were realigned to be coterminous with EDA's development districts. 97 "EDA Appropriation for Fiscal Year 1973" The Agency operated on continuing Congressional resolutions between June 30 and October 26, 1972, when the President signed into law Congress's appropriation for fiscal year 1973. The total appro- priation of $325.7 million was an increase of approximately $41 million over the previous year, a difference due primarily to the supplemental appropriation for disaster relief and the increase for Indian planning grants. The increased funding for Indian planning grants was provided in order to assist more tribes and in anticipation that EDA's legislation would be amended to increase the rate for such grants from 75 to 100 percent of expenses incurred. The higher rate, which had been recom- mended in a Department of Commerce legislative proposal, was proposed in the expectation that it would overcome the historic lack of planning in Indian areas and would lighten the economic burden on Indian tribes who needed planning assistance. "Actions Taken on EDA Legislation" On October 14, Congress passed amendments to the Public Works and Economic Development Act of 1965, as amended, extending EDA's legislation for one year, through June 30, 1974. Subsequently, on October 27, the President vetoed the Act. Besides increasing the funding rate for planning grants to Indian reservations, the Act contained among its provisions a separate authorization of $250 million for the Public Works Impact Program (PWIP) for each of two years. i/ It also authorized the Secretary of Commerce to pay unemployment compensation to individuals unemployed as a result of Federal laws related to improvement of the environment, and to make long-term, low-interest loans to businesses attempting to comply with Federal environmental requirements. In his veto message the President stated that the bill "would unnecessarily add new authorizations for Federal programs"2/ and "by the time this spending became fully effective the need for stimulation would be past and the stimulation would be inflationary." 1/ Separation of PWIP from the regular public works grant program did not increase the funds authorized for all public works grants. Authorization for regular projects was set at $550 million, so that the total public works grant authorization of $800 million estab- lished the previous year remained the same. 2/ Richard M. Nixon, "President Nixon's Veto Message," Washington, D.C., October 27, 1972 . 98 Other reasons for the President's veto included the Administration's belief that the provisions to assist workers and firms affected by- Federal environmental actions would be "highly inequitable and impossible to administer." "Preparing the FY '74 Budget" On November 24, 1972, the Office of Management and Budget (OMB) placed approximately 34 percent of EDA operating funds for fiscal year 1973 in reserve. According to the directions accompanying the notifi- cation of apportionment, this action was taken for two major reasons: (1) It would help the White House hold down Federal expenditures for fiscal year 1973 and subsequent years and (2) It would provide the President with options for developing the Federal budget for fiscal year 1974. For example, it was explained that if the fiscal 1974 budget should request no program funds for EDA, then the Administration would be in a position to begin gradually reducing the Agency program in fiscal year 1973. OMB spokesmen stated that the Agency would be informed about the new budget within three weeks. On December 14, the Assistant Secretary was notified that the Administration would not be requesting appropriations for EDA programs for fiscal year 1974 and that EDA was to be abolished as an organi- zational entity as soon as was "feasible, and no later than June 30, 1973. However, the budget allowance included funds beyond that date for administering projects previously approved and for costs associated with phasing out. The Assistant Secretary was also informed that OMB officials were continuing to study EDA's project situation to decide whether or not to lift the apportionment of EDA's FY '73 funds. "Change of Leadership" In December, the third Assistant Secretary submitted his resigna- tion to the President after nearly four years as Agency administrator. On January 20, 1973, his Deputy became Acting Assistant Secretary. "The President's Alternatives" The President described the budget he submitted to Congress on January 29, 1973, as a blueprint for holding down Federal spending in order to fight inflation and guard against higher taxes. He also characterized it as evidence of a change in direction: "The power to make many major decisions and to help meet local needs will be returned to where it belongs -- to State and local officials. . .accountable to an alert citizenry and responsive to local conditions and opinions."!./ 1/ Richard M. Nixon, "Budget Message of the President," January 29, 1973. 99 The budget, he reported, consolidated and reoriented the country's rural development programs, using the Rural Development Act of 1972 as the basis for beginning efforts consistent with the revenue-sharing concept. Public Works and related economic development programs of the Department of Commerce were to be phased out in favor of programs established mainly under the Rural Development Act and the Small Business Administration (SBA) authorities. The budget included a request for $20 million for phasing out EDA and the Title V regional commissions. Administration spokesmen, including the Secretary of Commerce, explained the termination of EDA in this way: "The Economic Development Administration is an example of a program in which there are unnecessary Federal controls. . . .There is no need for the strong Federal decision- making role in localized kinds of projects with which EDA has been of functionally overlapping programs which result in wasteful dupli- cative efforts on the local level. "1/ Cited as a further negative aspect of EDA was the significant portion of EDA's public works funds that legislation required be used for the Public Works Impact Program (PWIP) , aimed at short-term jobs in the construction industry. "This program," the spokesmen claimed, "could operate as a stimulus to portions of the economy at a time when the country must guard against inflation." The objection was similar to that raised by the President when he vetoed EDA legislation in October 1972. Vehicles for the Administration's new response to economic development needs included legislation already enacted, proposals for special revenue sharing, and increased funds to existing programs. One of the major alternatives to EDA programs was a public works and industrial development loans program administered by the Department of Agriculture and to be enlarged under the Rural Development Act. An increase of $248 million^/ over the fiscal year 1973 obligation was being requested. These funds were to go to communities and businesses for community facilities and for commercial and industrial development. In response to waste disposal needs, Administration spokesmen pointed to an additional $5 billion that had already been made avail- able for grants for waste disposal facilities for communities of all sizes, through the Federal Water Pollution Control Act Amendments of 1972. 1/ Federick B. Dent, Secretary of Commerce, Statement before the Senate Committee on Public Works, February 21, 1973. 2/ The President's budget was later amended to add $100 million for this program. 100 Federal efforts to aid small businesses would be channeled through expanded programs of the Small Business Administration (SBA) , which would allow for loans similar in many respects to EDA's business loan authority. The Administration was requesting a budget increase of $642 million for SBA, of which $632 million was for loan guarantees. Planning and management assistance programs would be concentrated in the Department of Housing and Urban Development. A $10 million increase in HUD "701" funds was being requested for planning and management grants to be made directly to the States. The new approach!/ would allow governors to make sub-allocations to local governments and other eligible recipients in accordance with State priorities. The States could, if they wished, use these funds to continue regional and district planning efforts previously funded by EDA. Federal funds for Indian tribes would be administered by the Bureau of Indian Affairs (BIA) . The budget was requesting $25 million to enable the BIA to provide block grants to tribes for development projects, a program that would represent approximately the same level of funding as the EDA public works program for Indians. Urban development programs, vocational-educational facilities, and vocational counseling and skill training would be financed through three special revenue-sharing programs that would make funds available to States and localities for responding to these needs. Enactment of urban community development revenue-sharing legislation, that the President would resubmit to Congress2_/ would make eligible for funding the kinds of projects that EDA had assisted in urban areas. Legislation for education revenue sharing3/ would include funds for construction of the kind of vocational-educational facilities financed by EDA. Vocational counseling and skill training of the type supported by EDA funds would be available under manpower revenue- sharing4/to be phased-in beginning July 1 and for which the President was requesting $1.34 billion for fiscal year 1974. Even with the consolidations arrived at by the Administration, Administration officials expressed the opinion that there were "still too many agencies needlessly involved in community and area develop- ment" and said the White House would submit legislation during 1973 17 Entitled The Responsive Governments Act. 2/ The Better Communities Act, submitted April 19, 197 3. 3/ The Better Schools Act, submitted March 22, 1973. 4/ Under existing authorities, the Economic Opportunity Act of 1964, Title lb and Ie, and the Manpower Development Training Act, Section 241. 101 to concentrate these programs in a new Department of Community Develop- ment . \f "Continuation of Long-Range Strategy" The decision to abolish EDA programs and to meet economic develop- ment needs through revenue sharing to States and local communities was part of a program for improving government services at all levels which the President had outlined in January 1971 in his State of the Union Message. Described by one publication as "an ambitious plan to change the balance of power in the structure of American federalism, by shifting money and authority from Washington to State and local governments, "2/ this program had been referred to by the President as the "New Federalism." At the Federal level, he had proposed to streamline the executive branch by consolidating functions scattered among several agencies into four domestic departments organized around four major purposes of government: community development, human resources, natural resources, and economic affairs. To strengthen State and local governments and to permit more local decision-making about local needs, the President had proposed broad financial assistance through General Revenue Sharing. The General Revenue Sharing program had been signed into law in October 1972 A third part of the President's plan had been to replace 7 categorical grant programs for domestic assistance with Special Revenue Sharing in four areas: education, law enforcement and criminal justice, manpower training, and urban community development. Companion legis- lation was to provide funds to help State and local governments strengthen their management capabilities to carry out their expanded roles. (This proposal was later submitted as the Responsive Governments Act. ) Thus, the budgetary decision to abolish EDA's grant programs in favor of revenue sharing represented one action in the Administration's continued efforts to bring the "New Federalism" into being. "Congressional Response" The 93rd Congress convened January 3, 1973. To ensure early enactment of legislation that would continue EDA's mandate, members of the Senate and House Public Works Committees agreed to prepare identical bills authorizing a simple extension of the EDA program. The bills were not to include the controversial Public Works Impact Program or the environmental adjustment program. In addition, at least 21 other bills intended to extend the life and programs of the Agency were introduced. YJ Frederick B. Dent, Statement before the Economic Development Sub- Committee of the House of Representatives, February 27, 1973 2/ National Journal, (Washington, D.C., December 16, 1972). Vol. 4, "Number 51, p. 1908. 102 The bill introduced by the House Public Works Committee — H.R. 224 6 -- had over 150 co-sponsors. Hearings were held in February before the two Economic Development Subcommittees, with governors, mayors of large cities, executive directors of Councils of Government, and board members of economic development district organizations testifying about the Agency's programs. "Policy Decisions Regarding Selective Spending" EDA funds continued to be held in reserve until January 18, 1973, when the Office of Management and Budget completed its analysis. At that time, OMB withdrew the apportionment. In studying the EDA system of project development, OMB staff members had learned that local communities often had already committed themselves financially to projects for which they were requesting as- sistance from EDA and that the disappearance of EDA funds might result in heavy losses to such communities. Another factor that influenced OMB s s decision to allow EDA to resume its project processing and fund- ing activities involved the financial commitments of other Federal and State agencies to pending EDA projects. Thus, all but $11.4 million of the $110 million placed in reserve was released. Because the requests exceeded the funds available, EDA and OMB agreed upon guidelines for selecting the year's projects. Public works projects given priority were those in which: • the applicant had purchased land, raised local funds, or gained commitment of funds from the State legislature • other Federal or State agencies were committed to pro- viding funds • the project's economic development impact could be docu- mented to be exceptionally high. Policy for selecting technical assistance projects was also established. Those institutions that were financed with technical as- sistance funds and had been recommended for continued support were to be funded for six additional months. The decision to shorten the usual grant period from 12 to 6 months allowed the Office of Technical Assistance to spread its funds 1/ and provided recipient organizations a transition period in which to look for other sponsors. It was also decided that feasibility studies relating to broad ^ economic development issues could be funded, but not localized studies linked to future requests for EDA-supported construction. T7 A setting aside of regular program funds for Tropical Storm Agnes projects and a transferring of funds to support district organi- zations had reduced the Office of Technical Assistance's regular allotment to two-thirds its fiscal year 1972 level. 103 Thus, the third quarter of the fiscal year was devoted to spend- ing EDA's available appropriation. No backlog of projects was to be developed since no program funds were to be available for fiscal year 1974. The regional offices and the Washington program officers had agreed upon February 15 as the deadline for all recommended projects to be in Washington and April 1 as the deadline for all projects to be ready for approval by the Acting Assistant Secretary. This timetable was intended to allow the final quarter of the fiscal year to be spent in transition activities. Eighty-five percent of the projects under consideration met the deadlines^/and had begun circulating through the various operational offices in Washington for approval by February 15. An unusual lag between EDA's appropriation and its legislative authority made available extra planning funds for Indians and made possible a policy decision to support all Indian planning grant organi- zations through December 197 3. The Congressional appropriation passed in October 1972 had included funds for financing Indian planning grants at 100 percent of administrative costs. However, authorizing legis- lation was within the amendments the President vetoed. Thus, although the 7 5 per cent grant rate remained operative, the approximately $900,000 appropriated to cover the anticipated 25 per cent increase was still available. As a result, the Agency was able to extend the 46 new planning grants and the 21 old grants for six months into fiscal year 1974. "Release of Additional Funds" On May 8, the final $11.4 million still in reserve was released by OMB. This action allowed the Office of Development Organizations to use $2.3 million to continue the planning grants of all 132 district organizations through June 1974. Thus the Office awarded grants in fiscal year 1973 amounting to $8 million, compared to $5.6 million in previous years. Staff members processed 120 grants in the last quarter of the fiscal year, an end-of-year workload about twice that of a normal year. Another $750,000 of the $11.4 million was expended during the last weeks of the fiscal year for economic adjustment assistance. Technical assistance studies were awarded to 25 communities identified by the Department of Defense as those most seriously affected by base closings and cutbacks announced by the Secretary of Defense in April. Between May 15 and June 15, the Office of Technical Assistance sent personnel to areas affected by these cutbacks to develop grant applications. While development time for technical assistance projects normally averaged 90 days, these projects had to be developed and 1/ Most received and approved later were regular program projects from the Atlantic Regional Office, delayed by the processing of Tropical Storn Agnes projects. 104 approved before the end of the fiscal year, or within 4 5 days. The Office's technique was to assemble a sampling of relevant economic adjustment projects EDA had funded in previous years, meet with community officials, relate resources of the area to the resources to be made available by DOD, consider local plans, develop project appli- cations, and return to Washington and process the projects. "Phasing Out" Since it was intended in the President's budget proposals that EDA would be phased out, it was necessary to reduce the work force from a level of nearly 900 in January 1973 to a monitoring staff of 600 by June 29. Thus, reduction-in-force (RIF) procedures had to be under- taken. Several policy decisions were associated with this personnel action. Two such decision included timing of the release notices and identification of offices in which personnel cuts would be made. There were competing considerations with respect to the date of issue of the RIF notices. On the one hand, to allow maximum time for placement of personnel, it was desirable to distribute notices as early as possible. On the other, the Agency's need to accomplish the work remaining would be better served by a later date of distribution. Ultimately, field staff in three regional offices were handed notices on March 20, while staff members in Washington and the other regional offices were notified on March 22. Issues also arose on the question of where cuts should be made. For example, should reductions in Washington be greater than those in the field, or vice versa? Should some offices be phased out entirely? Since Economic Development Representatives were mainly engaged in project development (activities no longer needed) , should all EDR's be released? Or, since the EDR was most familiar with a project's local situation and presumably best qualified to carry out future monitoring functions, should all EDR's be retained? It was decided to reduce all offices, including the regional offices, by approximately 25 per cent and, after July 1, to reassign personnel from offices with less work to those with a heavier burden. Exceptions to the 25 per cent figure included Accounting and Congressional Relations, which were to remain intact; offices report- ing to the Deputy Assistant Secretary for Planning, which were to be reduced by 3 per cent; and the Office of Policy Coordination, to be reduced by 50 per cent. Also during this period, EDA administrative staff began to plan for a new organization to come into existence July 1. To be entitled the Office of Development Project Management (ODPM) , the new organi- zation would have as its main purpose performing the administrative functions necessary to bring previously approved EDA projects to completion. It would report directly to the Assistant Secretary of Commerce for Administration. Besides absorbing the 600 remaining EDA personnel, ODPM was also to have as staff 60 employees from the Offices of the Federal Cochairmen of the Title V regional commissions and the Special Assistant to the Secretary for Regional Economic Coordination. ODPM was also to be charged with responsibilities associated with phasing out the regional commission program. 105 "Selected Transition Activities" Following the February 15 deadline for submission of the final block of projects from the regional offices, Agency staff members turned their attention to ways of insuring the success of past EDA investments. "Past investments" was not a small figure. On February 16, 1973, Accounting Division figures showed that over $1.8 billion had been obligated by the Agency since 1965. The Offices of Public Works and Business Development undertook an inventory of past projects, to identify those encountering delays and those with impacts substantially below that expected. Information from the survey was to be used to determine how in the ensuing months EDA could contribute to the success of its projects; it was also to provide a record of Agency performance. In a survey of the 132 development districts, the Office of Development Organizations (0D0) found that approximately 35 would not be able to survive without administrative support similar to that given by EDA. For approximately 35 other districts, loss of EDA funds was expected to result in loss of one-third of the staff. Transition activities in 0D0, therefore, focused on locating other sources of funding. The district cross-training program initiated in the summer of 1972 and aimed at strengthening skills of staff and board members was completed in February. Performance appraisals conducted by the regional office planning staffs also continued, with increased emphasis on the responsibilities of members of the board of directors. This emphasis resulted from the conviction of the Special Assistant for District Appraisals that the strongest local legacy EDA could leave was a district board of directors deeply involved in the direction of the organization. Regional office planning staff members responsible for conducting annual reviews of district OEDP ' s were directed in a new policy by the Acting Assistant Secretary. Focusing on the quality of district economic development programs, the Acting Assistant Secretary directed the reviewers to accept annual reports more concise than those permitted in the past but to insist on a summary strategy that included work program components. He also directed planning staffs to encourage districts to avail themselves of new data on their areas, in particular, 1970 census data, as well as information from sources not previously tapped, such as the Bureau of Economic Analysis. No matter who was to be responsible for directing future regional development policy, it was recognized that areas and districts would be in a better position if they had a well-thought-out, locally prepared, and current develop- ment program. In parallel decisions, the Office of Development Organizations and the Office of Policy Coordination decided to approve designation of new areas even though funding from EDA would not be available. Five district 106 organizations and three special impact areas were added. These decisions were made in the belief that the economic development planning necessary to meet designation requirements would be useful to the new applicants and in the knowledge that EDA designation might allow increased support to the areas from other Federal programs. Other transition activities occurred. For example, EDR's were assigned to inform selected State development organizations that EDA planners had a well-developed data base on their particular State and it was available for their use. The Indian Desk held three training sessions in the spring for the new Indian planners hired when EDA awarded 4 6 new planning grants; sixty per cent of the new planners were Indians . Also, the Office of Policy Coordination produced a Handbook describing selected Federal assistance programs for economic develop- ment, to serve the staff as a simple reference document of capsule information on programs that might provide assistance to EDA clients. Selected regional personnel and EDR's were instructed to intensify their efforts as brokers between communities with worthy projects and other Federal or State agencies that might be sources of funding. "Congressional Action" As EDA staff members searched for sources of assistance for communities with potential development projects, the House and Senate Public Works Committees concluded their study of Administration pro- posals and reported to their respective Houses that wholesale abandon- ment of EDA legislation would be unwise at the end of fiscal year 1973. i/ Committee members had found the Administration's alternatives either not sufficiently operational to fill the void left by termination of EDA programs or not sufficiently focused on distressed areas to be responsive to their special needs. No special revenue sharing legis- lation had been passed by the spring of 1973, and guidelines for imple- menting the Rural Development Act of 197 2 had not yet been approved. On March 15, the House passed the Amendments to the Public Works and Economic Development Act of 1965 as agreed upon by the two committees, by a vote of 286 to 116. Program authorizations amounted to $1.97 billion. The Senate vote on May 8 was 81 to 16 and authorized $287.5 million. Responding to the President's call for fiscal restraint, a joint conference committee in early June agreed to lower the House's authorization by two-thirds to $430 million, and the two Houses passed the Amendments on June 6 and June 8. The President signed the Act on June 18, 1973, two weeks before the Agency's authorization would have expired. The Act -- Public Law 93-46 — was for the most part a simple one- year extension of existing EDA programs. Besides two amendments inserted on the Senate floor, it increased the grant rate for planning assistance to eligible Indian tribes from 75 per cent to 100 per cent 1/ Congressional Record , (June 6, 1973), S10502. Also see Congressional Record , (June 8, 1973), H4511, H4513. 107 of administrative expenses, and reinstated the moratorium on de-designat- ing development areas, so that any redevelopment area eligible for funding before May 31, 1972, and de-designated since that time, was again eligible for EDA assistance. The two Senate amendments were both study provisions. One was in response to the Department of Defense announcement in April that 274 defense installations in 32 States would be closed down, consolidated or realigned. These actions were expected to eliminate 42,000 military and civilian jobs and result in the transfer of thousands out of the communities in which they were located. The Senate amendment called for a report to Congress within 30 days from the Interagency Economic Adjustment Committee containing details about the excess defense property that could be turned over to the affected communities and describing Federal efforts to assist the communities with plans for economic adjustment to these moves. The other Senate amendment required the President to instruct the Secretary of Commerce and the Office of Management and Budget to examine past and current Federal efforts to obtain balanced national economic development and to submit proposals to Congress within six months for restructuring Federal economic development programs. "Reexamining the Federal Role" When the President signed PL 93-46, he said, "I am convinced that this program has done little to help the poor, and it clearly overlaps other Federal programs." 1/ He agreed, however, to continue the Economic Development Administration and the Title V regional commissions while the problems of the distressed areas and the ability of current and proposed Federal programs to deal with those problems were re- examined. He stated that he would request a reduced appropriation for the program, one that would provide for an effective transition while keeping within the budget constraints. Subsequently, the President directed the Secretary of Commerce and the Office of Management and Budget to proceed with the study of Federal programs related to economic development as requested by the Congress and to submit proposals for restructuring the Federal Govern- ment's approach to economic development. The report, which would present the Administration's position with respect to EDA's future, was scheduled for submission on December 18, 1973. 17 Richard M. Nixon, "Statement by the President," (June 19, 1973) 108 BIBLIOGRAPHY Legislation Alaska Native Claims Settlement Act. Public Law 92-203 December 18, 1971. Appalachian Regional Development Act (as amended). Public Law 89-4, 91-103, 91-123, 92-65, March 9, 1965. Area Redevelopment Act. Public Law 87-27, May 1, 1961. Indian Tribal Government Grant Act. S.2038. Introduced to the U.S. Senate on June 20, 1973. Manpower Development and Training Act of 1962 (as amended) . Public Law 87-415, 87-729, 88-214, 89-15, 89-792, 80-794, 90-636, March 15, 1962. Public Works Acceleration Act. Public Law 87-658, September 14, 1962. Public Works and Economic Development Act. Public Law 89-136, 89-794, 91-103, 91-123, 91,304, 92-65, 93-46, August 26, 1965. Rural Development Act of 1962. Public Law 92-419, August 30, 1972. 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Economic Development Administration, 1968. Interviews Boudinot T. Abberbury. Deputy Director, Economic Development Administration Office of Development Lending. December 1970, October 1971. Israel M. Baill. Deputy Director, Economic Development Administration Office of Technical Assistance. January 1970, May 1971, August 1971, October 1971, September 1972, August 1973. Herbert S. Becker. Economic Development Administration, Office of Administration and Program Analysis. February 1970, December 1970, September 1971, August, October 1972. Andrew J. Bennett. Former Chief, Economic Development Administration Office of Technical Assistance, Urban Projects Division. March 1970 J. Gordon Berry. Director, EDA Atlantic Regional Office. Former Director, EDA Southeastern Area Office. March 1970. Daryl M. Bladen. Program Assistant, EDA Office of Public Works. February 1971, September 1971, January, September 1972, June 1973. William W. Blunt, Jr. Deputy Assistant Secretary for Economic Development, Former EDA Chief Counsel. December 1970, September 1971, January 1972. 117 J. Ernest Bowker. Economic Development Analyst, EDA Office of Development Organizations, Program Support Division. January 1970, W. Arch Bratton. Chief, Public Works Division, EDA Southeastern Regional Office. March 1970. Hugh L. Brennan. Chief, Management Analysis Division, EDA Office of Administration and Program Analysis. January 1971, September 1971, January, October 1972. Charlotte Breckenridge. Economist, EDA Office of Economic Research. September 1971 John S. Brookbank, Jr. Chief, Administration and Legislation Division, EDA Office of the Chief Counsel. September 1971. Daniel J. Cahill. Director, EDA Office of Business Development. September 1972, August 1973. Edward G. Conroy. Former EDA Chief Counsel. September 1972. M. Fred Coon. Loan Specialist, Business Development Division, EDA Mid-Eastern Area Office. March 1970. Robert A. Cox. Special Program Officer, EDA Office of the Deputy Assistant Secretary for Policy Coordination. Former Director, EDA Mid-Atlantic Area Office. January 1971, August 1971, January, September 1972. Neil Daniel. Program Officer, EDA Office of the Special Assistant for Indian Affairs. August 1973. Ross D. Davis. Former Assistant Secretary of Commerce for Economic Development. January, February, August 1970. William E. Davis. EDA Special Assistant for Field Operations. Former Director, EDA Mid-Eastern Area Office. March 1970, December 1972, August 1973. Anthony DeAngelo. Former Special Assistant to the Director, EDA Office of Public Works. January 1970. Kenneth L. Deavers. Director, EDA Office of Planning and Program Support. January, August 1972. Thomas P. Dunne. Special Assistant to the Assistant Secretary of Commerce for Economic Development. January, September 1972. Charles A. Fagan, III. Former EDA Deputy Assistant Secretary for Economic Development. December 1970. John A. Flory. Economist, EDA Office of Administration and Program Analysis, Program Analysis Division. Former Chief, Program Evaluation Division, EDA Office of Program Analysis and Economic Research. April 1970, 118 Eugene P. Foley. Former Assistant Secretary of Commerce for Economic Development. February 197 0. Thomas S. Francis. Director, EDA Office of Development Organizations. January 1970, September 1972, August 1973. Steven Frank. Operations Research Analyst, EDA Office of Admini- stration and Program Analysis, Program Analysis Division. August 1972. Robert L. Friedlander. Vice President, Thomas H. Miner & Associates, Inc., International Business Consultants, Chicago, Illinois. September 1972. Richard R. Gardner. Deputy Director for Intergovernmental Relations, EDA Office of Policy Coordination. August 1971, January, September 1972. Harvey A. (Mike) Garn. Former Director, EDA Office of Program Analysis and Economic Research. February 197 0. Mildred K. Glazer. Manpower Development Specialist, EDA Office of Technical Assistance, Training Division. April 1970. Lorin L. Goodrich. Chief, EDA Office of Administration and Program Analysis, Budget Division. January, August 1972, August 1973. Anne L. Gould. Special Assistant, EDA Office of Public Works. February 1970, January 1971. Richard T. Greer. Former Deputy Director, EDA Office of Development Organizations. January 1970, September 1972. Joseph G. Hamrick. EDA Deputy Assistant Secretary for Economic Development Planning. February 1971, August 1972. Daniel F. Harrington. Acting Chief, Industrial and Resources Projects Division, EDA Office of Technical Assistance. August 1973. Thomas W. Harvey. Associate Chief Counsel for EDA. Former EDA Deputy Assistant Secretary for Economic Development and EDA Chief Counsel. January 1970. James E. Hawkins. Former Special Assistant to the Secretary for Regional Economic Coordination. April 1970. Edward Huizingh. Program Specialist, EDA Special Assistant for Indian Affairs. October 1971. Robert M. Jackson. Former Chief, Training Division, EDA Office of Technical Assistance. November 1972. 119 Vincent S. Jones. Technical Assistance Officer, EDA Southeastern Regional Office. March 1970. George T. Karras. Director, EDA Office of Public Works. January 1970, November 1970, December 1970, January 1972, September 1972, August 1973. Henry C. Kramer. Chief, EDA Office of Administration and Program Analysis, Management Analysis Division. August 1973. Paul R. Kugler. Program Officer, EDA Office of Development Organi- zations, Program Support Division. January 1970. Joseph H. LaMarche. Management Analyst, EDA Office of Administration and Program Analysis, Management Analysis Division. August 1972. Arnold H. Leibowitz, Director, EDA Office of Technical Assistance May 1971. Jonathan Lindley. Former EDA Deputy Assistant Secretary for Policy Coordination. January 1970. David S. Maney. Assistant for District Performance Appraisal, Office of Deputy Assistant Secretary for Economic Development Planning. August 1972, August 1973. Nathan L. Maryn. Intergovernmental Program Specialist, EDA Office of Policy Coordination. February 1970, October 1971, September 1972. Paul W. McCloskey. Program Specialist, EDA Office of Development Organizations, Program Development Division. January 1970. John J. McCracken, Jr. Special Assistant to the Deputy Assistant Secretary for Economic Development Operations. August 1973. Raymond H. Milkman. Former Chief, EDA Office of Administration and Program Analysis, Program Analysis Division. January, April, September 1970. George R. Milner. Program Officer, Office of Regional Economic Coordination. January 1971. John G. Motheral. Deputy Director, EDA Office of Administration and Program Analysis. October 1973. John H. Nixon. Former Director, EDA Office of Technical Assistance. February 197 0. Lambert S. O'Malley. Former Deputy Assistant Secretary for Economic Development Operations. April 1970. Joan G. Passek. Management Analyst, EDA Office of Administration and Program Analysis, Management Analysis Division. August 1972. 120 Allen H. Pett. Chief, EDA Mid-Eastern Regional Office, Planning Division. March 1970. Robert A. Podesta. Assistant Secretary of Commerce for Economic Development. March 1970, December 1970, January 1972. Roger A. Prior. Acting Deputy Director, EDA Office of Economic Research. March 1970, September 1971. David A. Rally. Director, EDA Office of Congressional Relations. August 1972, August 1973. Lawrence Revzan. Chief, Program Planning Division, EDA Office of Planning and Program Support. September 1972. Boyd B. Rose. Chief, EDA Southeastern Regional Office, Planning Division. March 1970. Samuel M. Rosenblatt. Director, EDA Office of Economic Research. January 1970, August 1971, September 1972. James T. Sharkey. Former Director, EDA Office of Business Develop- ment. February 1970. Richard L. Sinnott. EDA Deputy Assistant Secretary for Policy Coordination. September 1972. Raymond E. Tanner. EDA Special Assistant for Indian Affairs. February 1970, September 1972. Mary A. Toborg. Program Analyst, EDA Office of Administration and Program Analysis, Program Analysis Division. February, April 1970, January 1971. Barbara A. Walker. Former Director, EDA Office of Civil Rights. January 1973. J. Davidge Warfield. Former Director, EDA Office of Development Lending. Former Director, EDA Office of Business Development. February 1970. Harold W. Williams. Former Deputy Administrator, Area Redevelopment Administration. January 197 0, December 197 0. Elizabeth A. Zicherman. Management Analyst, EDA Office of Administration and Program Analysis, Management Analysis Division. August 1972. 121 PENN STATE UNIVERSITY LIBRARIES AODDDViaft^lOt. ^e-itf* ^** Wlt c, t **«,«« «""