UNIVERSITY PARK, "Y l/i SHARE IN AREA U.S. DEPARTMENT OF COMMERCE AREA REDEVELOPMENT ADMINISTRATION Digitized by the Internet Archive in 2012 with funding from LYRASIS Members and Sloan Foundation http://archive.org/details/shareinareagrowtOOunit oev^ U.S. DEPARTMENT OF COMMERCE Luther H. Hodges, Secretary AREA REDEVELOPMENT ADMINISTRATION William L Batt, Jr., Administrator April 1962 For sale by the Superintendent of Documents, U.S. Government Printing Office Washington 25, D.C. - Price 15 cents ** oEV **o if ft 4 ^ O COURAGE EXPANSION Every year, American businessmen invest billions of dollars in research, in new product development, in new equipment and in new plants. This helps to assure constant expansion and modern- ization of our ability as a Nation to produce goods. The growth of our production facilities is one of the hallmarks of our free enterprise system. Modern, efficient, well-managed business firms are essential to America's economic progress. A thriving business community means that we are making the maxi- mum use of our knowledge and of our human resources. It means, as President Kennedy put it, that we are showing the world "what a free economy can do." In recent years, this economic growth has sometimes taken place unevenly across the Nation, and changing times and changing technologies have left some communities and entire geographic regions far behind the rest of America. In these areas are an abundance of natural resources, ideal plant locations, unused pub- lic facilities, and — most important of all — a large reserve of workers, either possessed of skills or capable of being retrained, to provide a new or an expanding company with a ready-made work force. In 1961, the Congress enacted and President Kennedy signed into law the Area Redevelopment Act, designed to create a work- ing partnership between private enterprise, the community, the State and the Federal Government. The purpose: to bring about the establishment of new or expanding business enterprises in these geographic areas — to serve as a bridge between the company looking for a place to locate, and the communities where estab- lishment of such commercial facilities would benefit the business concern, the people of the local area, and the Nation as a whole. The responsibility for stimulating the flow of private invest- ment into designated areas of chronic unemployment has been placed in the Area Redevelopment Administration, a new unit of the U.S. Department of Commerce. ARA was given two prin- cipal roles relating to the business community: (1) To make available special financial assistance, made pos- sible under the Area Redevelopment Act, to aid business firms which will locate or expand and create new jobs in redevelopment areas; and (2) To focus the on-going programs and services of a variety of Federal Departments and agencies to help business firms in these redevelopment areas expand and create additional employment. This booklet was designed to give company executives general knowledge of the various forms of assistance available to them through the Area Redevelopment Administration. Specific com- pany situations will, of course, require discussion either with the ARA Field Coordinators located in the several States, or with the business specialists in the Industry Operations Division of the Area Redevelopment Administration in Washington. yWM^A^ /. ^^k William L. Batt, Jr. Administrator Area Redevelopment Administration. A KIT OF TOOLS FOR BUSINESS The Area Redevelopment Act made available a specific kit of tools to help business establish or expand in areas of chronic unemployment or underemployment: • Low-interest, long-term loans for new or expanding business firms • Loans and grants to communities to help provide public facilities needed if new firms are to be established or existing firms expanded • Technical assistance to help break barriers to economic growth • Programs to help train jobless workers in new skills required by an ever-changing industrial economy To these basic tools, the Area Redevelopment Administration has added a variety of other services to business and industry, including: • Information on redevelopment areas, labor force and plant sites • Studies of transportation, markets and sales • One-stop service for businessmen seeking information on the programs of other Federal departments and agencies that will help in their expansion plans in redevelopment areas 3fcr'- -S~"Z •.- .«yw -4- LOW-COST rt LOANS: ARA'S NO. 1 SERVICE For business firms establishing or expanding in redevelopment areas, the Area Redevelopment Act makes possible low-interest, long-term loans. This is ARA's No. 1 tool with which to help the business community — but it is only one of many tools created specifically under this legislation to encourage expansion of our Nation's productive capabilities in areas of chronic unemployment and underemployment. What Are the Terms of ARA Loans? Loans to business firms under the Area Redevelopment Act bear an annual interest rate of 4 percent, and can run for as long as 25 years. What is the Extent of ARA's Participation? The Area Redevelopment Act permits ARA loans up to 65 percent of the cost of land, buildings, machinery and equipment of industrial and commercial projects. This 65-percent ceiling is designed to stimulate participation of private investment — banks, local communities, and private investors — in redevelopment areas. m u N ii > h a isr? i r ~ Because ife? Area Redevelopment program is roofcea'i in *com- '-■*• munfty, | rathfer than Federal action, the Act requires that 10 per-^^^ cent of; the ; financing conie from either a public or semipublic source, the latter commonly being a redevelopment company, and that at J least 5 percent come from private sources. The ARA Fi&ld Coordinators and representatives of the Industry Operations Division are available to assist in working out this investment with local and State organizations. How Do These Provisions Work? These provisions can be worked out in a variety of ways. Here are some examples, based on a company desiring to build a $100,000 plant in a redevelopment area: Example A. — Arrangements are made for a local bank to par- ticipate to a substantial extent with the Area Redevelopment Administration in providing the necessary funds. The financing would work out this way: First Mortgage (Participation Loan) Local bank's portion $42,500 ARA's portion 42,500 Second Mortgage State or local economic development agency 10,000 Equity Applicant 5,000 Example B. — The local lending institution is not willing to join with ARA in financing the project, but would finance part of the cost if it had an ex- clusive first mortgage: First Mortgage Local lending institution $50,000 Second Mortgage Area Redevelopment Administration 35,000 Third Mortgage State or local economic development agency 10,000 Equity Applicant 5,000 Example C. — The local lending institution wishes to take an exclusive first mortgage, but is able to lend only a small portion of the funds needed: First Mortgage Local lending institution $20,000 Second Mortgage Area Redevelopment Administration 65,000 Third Mortgage State or local economic development agency 10,000 Equity Applicant 5,000 Example D. — It is impossible to get any local bank or other lending institution to assure any of the financing of the project: First Mortgage Area Redevelopment Administration $65,000 Second Mortgage State or local economic development agency 10,000 Third Mortgage or Equity Applicant 25,000 As these examples indicate, a wide variety of formulas can be developed to meet conditions as they exist both with the company and with the redevelopment areas, as long as the loan from the Area Redevelopment Administration does not exceed 65 percent of the aggregate cost of the project. The ARA Field Coordinator in the redevelopment area, or representatives of the ARA Industry Operations Division will be available to help work out the best possible formula. In all cases, the terms and conditions of ARA loans will be adjusted to the best interests of the business applicant, the local community and the Federal Government. The types of collateral, maturities, terms under which funds are to be disbursed, terms of repayment, and amortization will be handled on a negotiated, case- by-case basis. Are There Any Other Requirements? The Area Redevelopment Act requires the applicants must show that they have been unable to locate other sources of financing on reasonable terms. Evidence of this lack of available financing is customarily established by letters from private banking sources which normally are engaged in lending for similar projects and which might be expected to make such a loan. What Companies are Eligible for Assistance? All types of business enterprises — whether in manufacturing, distribution or the service fields — can receive assistance under the Area Redevelopment Act. There are no limitations as to size, and therefore there are neither minimum nor maximum limitations on the amount of ARA loans. Investment by the Federal Government will be weighed on the basis of whether or not a project is economically and technically sound, and the amount of ARA's assistance will be determined to a large extent by the amount of permanent employment the business enterprise will generate in the redevelop- ment area. Whether the firm is a newly formed company, an established small business, or a large, multiplant concern, the Area Redevelop- ment Administration's lending authority can be utilized provided the firm is going to operate in a redevelopment area. How About Industries Which Are Relocating? The law establishing the Area Redevelopment Administration specifically prohibits assistance to establishments relocating from one area to another. This prohibition extends not only to ARA industrial and commercial loans, but to all other assistance under the Area Redevelopment Act, for the law was designed to help create new employment, not to redistribute employment and unemployment. Are There Any Other Exclusions? Loans for working capital cannot be made under the Area Redevelopment Act. However, the Small Business Administra- tion can make working capital loans. ARA and SBA work closely together in financing proposed commercial or industrial activities, with ARA funds being made available for plant and equipment, and SBA funds being made available for working capital. Small Business Administration loans in redevelopment areas carry the same annual interest rate of 4 percent as the ARA loans and run for a maximum of 10 years. K ■& HUi ■£&"* *3? '*^fe "-*-.,, ""VARIETY of other SERVICES Although ARA's direct loans to commercial or industrial enter- prises are of paramount importance to the business community, a wide variety of other tools are available to help the business con- cern seeking to establish or expand in a redevelopment area. ^^im^wm^*^ ' .. v ...,:.-" Aid for Community Facilities In the past, some companies have been unable to use labor surplus areas for their plant location because of an inadequacy of community facilities. Sewer or water systems may have been either nonexistent or incapable of meeting industrial demand; railroad spurs may not have been available to a plant site; access roads may have been unsatisfactory; or the plant site, itself, may have needed development beyond the community's power to finance. These conditions need no longer inhibit the company which finds other conditions in the redevelopment area — manpower, raw materials, plant location, accessibility to markets — satisfactory to its needs. Under the Area Redevelopment Act, long-term loans up to 40 years, bearing an annual interest rate of only 3% percent, can be made to the community, itself, for public facilities that are directly associated with the creation of permanent employment opportunities. What's more, if the community is in a position to borrow only part of the money needed for these public facilities, ARA may be able to provide the remainder that is needed through direct grants. To be eligible for financial assistance with such community facility projects, the community must have assurance from an interested company that it will establish or expand its operation if the needed facilities are provided. C-~-t Manpower Training One of the principal assets of the redevelopment area is its large and available pool of workers. Often these workers already possess the basic skills which the establishing or expanding com- pany requires for its operations. But in many other instances, a specialized skill is needed if the available workers are to be utilized in a company's operations. The Area Redevelopment Administration, as an additional serv- ice to companies which choose redevelopment areas for their operations, is in a position to arrange specialized training programs to meet the operating needs of individual companies. "Starting-up" costs for the company can be lowered through these carefully planned employee training programs, and the time it takes for a company to get into full production can be appre- ciably shortened. To carry out the job training phase of the program, the Area Redevelopment Administration draws heavily on the resources of the U.S. Department of Labor and the local Employment Security office for recruitment and testing of trainees; and on the U.S. Department of Health, Education and Welfare, which makes ar- rangements with local or State vocational training officials to pro- vide the specific job training courses required by the company's needs. - 1 W- Technical Assistance Often a company's choice of an area for its operations depends on specific studies of the potential involved in new natural re- sources, the development of new uses of old resources, or a variety of other technical problems. To carry out this phase of the program, ARA turns first to the available resources within the Federal Government — the Bureau of Mines, the Forest Service, the Fish and Wildlife Service, to name just a few. If necessary, ARA goes beyond the Federal establishment to the Nation's colleges and universities, and to private research groups in search of the answers which the business community needs in its never-ending search for knowledge leading to economic growth. For the firm which chooses the redevelopment area, financial assistance is often available for these technical studies, and new or expanding firms should investigate whether this added assistance from the Area Redevelopment Administration is applicable to their particular problems. SERVICES TO A COMPANY'S NEEDS In addition to the basic financial aids made possible under the Act, the Area Redevelopment Administration — particularly through its Industry Operations Division — offers a broad range of services specially tailored to the individual company's needs. Community Information There is a wide variety of redevelopment areas for business to choose from in deciding on location — variety in location and natural resources, variety in size, variety in topography. There are more than 900 eligible areas, in almost every State and ter- ritory, so that choice of location in relation to markets, raw materials and other special requirements, can be worked out to good advantage. Labor Force Information Data on the availability of labor, local skill-mix, levels of earn- ings and other detailed information on communities within re- development areas can be made available. Special local labor market surveys can be carried out to provide management with current, precise information relating to labor force needs. Plant Sites Information on available buildings, industrial parks, utility serv- ices and costs, and other required data can be obtained through ARA. In this connection, it is important to note that the Area Redevelopment Act significantly amended the Urban Re- newal section of the Housing Act, to give special consideration to redevelopment areas in connection with commercial and in- dustrial development as an integral part of urban renewal. This is another plus to help make a redevelopment area a good place for establishing or expanding business. Use of this expanded urban renewal authority may permit a company located in a con- gested area to expand where it is on adjacent cleared land rather than move to a new location at great inconvenience and cost. Transportation Analyses Plant location decisions involve careful consideration of all forms of transportation — for management and sales personnel as well as for incoming and outgoing shipments. Complete up-to- date information on transportation facilities in any redevelopment area can be secured from ARA, and analyses can be made of transportation to specified places. Market Studies Accurate market planning can be aided through analysis of data from several Federal Government sources, and detailed in- formation is available through ARA on population characteristics, expenditure patterns and regional economic outlooks. Sales and Marketing Guidance on Federal procurement methods, with particular em- phasis on the kinds of preference available to companies in re- development areas and on bidding procedures, can be obtained from ARA. Data on the size and characteristics of markets, both domestic and overseas, is also available through agencies of the Federal Government. ONE-STOP SERVICE One of the principal features of the Area Redevelopment Act is the manner in which all the available skills and programs of the Federal Government have been mobilized into a single task force to aid business firms seeking to establish or expand in re- development areas. Rather than create an agency which would duplicate existing Federal programs, the Area Redevelopment Act calls for a pooling of these Federal services. Seven Federal Departments and agen- cies share responsibility for specific facets of economic redevelop- ment — the Department of Commerce, of which the Area Re- development Administration is a part; the Department of the Interior; the Department of Agriculture; the Department of Labor; the Department of Health, Education and Welfare; the Housing and Home Finance Agency; and the Small Business Administration. In addition, the Area Redevelopment Administration draws liberally on the programs of many other Federal Departments and agencies — the procurement agencies of the Department of Defense, the Bureau of Public Roads, the Federal Aviation Agency to name just a few. To assist the businessman seeking to learn which Federal pro- grams can be applied to his operations in a redevelopment area, the Area Redevelopment Administration has instituted a "one- stop-service" concept — serving as a central clearing house for in- formation and for contacts. The businessman whose operations are oriented to a redevelop- ment area can take all of his problems directly to the Area Re- development Administration. ARA will locate the proper Federal agency to help solve the particular problem presented. This con- tact with the entire spectrum of Federal programs can be made either through the ARA Field Coordinator or through the ARA Industry Operations Division which is a business service group, selected to understand management's problems. Throughout the Area Redevelopment program, there is one basic concept: The businessman decides what he wants to do — ARA helps get it done. REDEVELOPMENT AREAS A GOOD PLACE FOR BUSINESS The basic advantages of redevelopment areas are obvious — an available supply of manpower; available factory buildings or industrial park sites; the special low-interest, long-term loans available through ARA; job retraining programs; special aid for public facilities which business requires; and technical assistance. But there are other advantages — chief among which is the de- termined spirit of the people in the redevelopment area to work with the business community in developing new economies and providing permanent new jobs. The people in redevelopment areas are willing to invest their dollars — both private and public — to help a new industry get established or an existing industry expand, for they understand that a strong, profitable business community is indispensable to economic development. The people in redevelopment areas have already rolled up their sleeves and gone to work on economic development — under the Area Redevelopment Act the basic initiative must come from the community, and hundreds of areas have responded with plans and programs to prove that the American spirit of working with private enterprise is just as alive now as it ever was. In short, while the local economies of these areas may be de- pressed, the people are not. That's why redevelopment areas are such ideal places for the American free enterprise system to flourish. ft U.S. GOVERNMENT PRINTING OFFICE : 1962 O— 634774 PENN STATE UNIVERSITY LIBRARIES inniiiiiii AD0DD71Efl c iD3fl