\. v. K FEDERAL ADVISORY COUNCIL FEDERAL ADVISORY COUNCIL ON REGIONAL ECONOMIC DEVELOPMENT FIFTH MEETING-NOVEMBER 24, 1970 Maurice H. Stans Secretary of Commerce and Chairman Federal Advisory Council George J. Pantos Special Assistant to the Secretary and Executive Secretary Federal Advisory Council U.S. Department of Commerce % 1 WASHINGTON, D.C. TABLE OF CONTENTS Page Introduction v Federal Advisory Council on Regional Economic Development Members of the Council vii Participants at Meeting viii Agenda ix Opening Remarks 1 Under Secretary Siciliano Upper Great Lakes Plan 4 Federal Cochairman Alfred France Discussion of Plan 7 George Pantos, Special Assistant to the Secretary Statements by Executive Agency Participants 9 Department of Health, Education, and Welfare 9 Department of the Army 9 Department of the Interior 10 Department of Labor 11 Department of Transportation 12 Department of Housing and Urban Development 18 Department of Agriculture 20 Small Business Administration 21 Office of Economic Opportunity 23 Department of Commerce 24 Appendices Appendix A — Written Statements of Executive Agencies 29-78 Department of Agriculture Department of the Army Department of Commerce Department of Health, Education, and Welfare Department of Housing and Urban Development Department of Interior Department of Labor Office of Economic Opportunity Small Business Administration Appendix B — Executive Order No. 11386, dated December 28, 1967, establishing Federal Advisory Council 79 Appendix C - Outline of Plan Review Process 86 INTRODUCTION The fifth meeting of the Federal Advisory Council on Regional Economic Coordina- tion, held on November 24, 1970, has particular significance in the field of Federal-State cooperation. For the first time a Federal Cabinet-level committee has reviewed and made its recommendations on a multi-state economic development plan prepared jointly by State and Federal officials. The Council, which was formed under the provisions of Presidential Executive Order 1 1386, links the Federal agencies responsible for major domestic economic programs with the six multi-state regional economic development commissions formed in recent years under the provisions of the Public Works and Economic Development Act of 1965 and the Appalachian Regional Development Act of 1965. These include the Appalachian, Coastal Plains, Four Corners, New England, Ozarks, and Upper Great Lakes Commis- sions. Also coming within the purview of the Council is the Federal Field Committee for Development Planning in Alaska. The Council is designed, among other purposes, to obtain a coordinated review within the Federal Government of the developmental plans and recommendations submitted by these several regional organizations. The first fully-developed regional economic development plan was drawn up by the Upper Great Lakes Commission and forwarded in final draft for Federal review in September 1 970. As submitted, the plan represents the best joint thinking of the three member States (Michigan, Minnesota and Wisconsin) and the field establishments of the member agencies of the Federal Advisory Council. By the terms of the Public Works and Economic Development Act of 1965, the Secretary of Commerce is charged with the responsibility of giving final approval to the regional plans, after which they are forwarded to the President. Since the Federal Advisory Council review is the last interagency review step in the process, the Upper Great Lakes Commission will now revise the plan to reflect the comments and recommendations of the Council. The plan will then be submitted to the Secretary of Commerce for final approval. MEMBERS OF THE FEDERAL ADVISORY COUNCIL ON REGIONAL ECONOMIC DEVELOPMENT Maurice H. Stans, Chairman Secretary of Commerce Clifford M.Hardin Secretary of Agriculture Stanley R. Resor Secretary of the Army Elliot L. Richardson Secretary of Health, Education, and Welfare George Romney Secretary of Housing and Urban Development George J. Pantos, Executive Secretary Special Assistant to the Secretary for Regional Economic Coordination George Sharrock Chairman, Federal Field Committee for Development Planning in Alaska JohnB. Waters, Jr. Federal Cochairman Appalachian Regional Commission G. Fred Steele, Jr. Federal Cochairman Coastal Plains Regional Commission Walter J. Hickel Secretary of Interior James D. Hodgson Secretary of Labor John A. Volpe Secretary of Transportation Donald Rumsfeld Director, Office of Economic Opportunity Hilary Sandoval, Jr. Administrator, Small Business Administration Stanley Womer Federal Cochairman Four Corners Regional Commission Chester M. Wiggin, Jr. Federal Cochairman New England Regional Commission E. L. Stewart, Jr. Federal Cochairman Ozarks Regional Commission Alfred France Federal Cochairman Upper Great Lakes Regional Commission PARTICIPANTS AT FEDERAL ADVISORY COUNCIL MEETING NOVEMBER 24, 1970 The meeting was called to order by the Honorable Rocco C. Siciliano, Under Secretary of Commerce and Acting Chairman of the Federal Advisory Council. Mr. George Pantos, Special Assistant to the Secretary and Executive Secretary of the Council, presided: G. Fred Steele, Jr. Federal Cochairman Coastal Plains Regional Commission Chester Wiggin, Jr. Federal Cochairman New England Regional Commission E. L. Stewart, Jr. Federal Cochairman Ozarks Regional Commission Alfred France Federal Cochairman Upper Great Lakes Regional Commission Henry AJilgren Deputy Assistant Secretary for Rural Development and Conservation Department of Agriculture Richard Hertzler Chief, Office of Civil Functions Department of the Army Larry A. Jobe Assistant Secretary for Administration Department of Commerce David Kinley Deputy Assistant Secretary for Community and Field Services Department of Health, Education, and Welfare Andrew Bullis Assistant Director, Inter-Governmental Relations Department of Housing and Urban Development Robert Binder Deputy Assistant Secretary for Policy and International Affairs Department of Transportation Harold Bailin Deputy Director for Field Coordination Division Office of Economic Opportunity Glenn Swanson Acting Director, Office of Community Development Small Business Administration Ray Waldmann Domestic Council Major Wheelock Office of Management and Budget Robert A. Podesta Assistant Secretary for Economic Development Department of Commerce Norris Ellertson Regional Planning Officer Four Corners Regional Commission Temple Reynolds Roy Fingerson Staff Assistant, Office of Policy Planning and Research Special Assistant Department of Interior Upper Great Lakes Regional Commission Millard Cass Deputy Under Secretary Department of Labor Alexander Christakis Consultant Department of Commeici AGENDA FOR THE FIFTH MEETING OF THE FEDERAL ADVISORY COUNCIL ON REGIONAL ECONOMIC DEVELOPMENT Chairman : Honorable Rocco C. Siciliano, Under Secretary of Commerce Time and Place: 9:30 a.m., November 24, 1970 - Secretary's Conference Room (Room 5855) I. Introductory Remarks: Under Secretary Siciliano II. Development of the Upper Great Lakes Commission plan: Honorable Alfred E. France, Federal Cochairman, Upper Great Lakes Regional Commission. III. Individual agency comments on the Upper Great Lakes Commission plan: Discussion Leader, Mr. George Pantos, Special Assistant to the Secretary for Regional Economic Coordination. A. Department of Health, Education, and Welfare B. Department of the Army C. Department of the Interior D. Department of Labor E. Department of Transportation F. Department of Housing and Urban Development G. Department of Agriculture H. Small Business Administration 1. Office of Economic Opportunity J. Department of Commerce Under Secretary Rocco C. Siciliano opens the meeting of the Federal Advisory Council on Regional Economic Development. OPENING REMARKS Proceedings MR. SICILIANO: I would like to welcome all of you this morning to the fifth meeting of the Federal Advisory Council. I'm sort of playing double duty this morning. The Secretary is out of the country. Actually, he is in Canada. So, I have three meetings that all began at 9:30, each of which I was to open. I've just opened one, and then I have another meeting at 10:30. However, this particular one, I believe, is most significant to all of you here, as well as to the Department, because, I think, it marks the first time that we've had a completed plan by one of the Regional Commissions brought to the Council for review and discussion. Before we go any further, though, I would like to suggest that we go around the table and everyone introduce themselves and state the agency that they are representing. We will start with Robert Podesta, Assistant Secretary for Economic Development, the Department of Commerce. Thank you, Bob. MR. PODESTA: Good morning. MR. CASS: Millard Cass, Labor. MR. HERTZLER: Richard Hertzler, Department of the Army. MR. BULLIS: Andrew Bullis, Housing and Urban Development, filling in for Mr. Ball who had to fill in for Assistant Secretary Jackson at a meeting at Agriculture. MR. WIGGIN: I'm Chuck Wiggin with the New England Regional Commission. MR. STEWART: Bud Stewart, Ozarks Regional Commission. MR. WHEELOCK: Mr. Wheelock of the Office of Management and Budget MR. WALDMAN: Dave Waldman, Domestic Council. MR. ELLERTSON: Norris Ellertson, Four Corners Commission. MR. STEELE: Fred Steele, Coastal Plains Commission. MR. BAILIN: Harold Bailin, OEO. MR. SWANSON: Glenn Swanson, Small Business Administration. MR. AHLGREN: Henry Ahlgren, Department of Agriculture. MR. REYNOLDS: Temple Reynolds, sitting in for John Quarles, Department of Interior. MR. KINLEY: Dave Kinley from HEW. MR. SICILIANO: We have a number of other visitors and participants. I won't go around the room because 1 think we have twenty or more people. I would like to introduce, however, George Pantos, Special Assistant to the Secretary for Regional Economic Coordination. I believe all of you know the purpose of the meeting, and the man who is here for that purpose, Al France. As most of you know, the Executive Order 11386 was created to assist the Secretary in reviewing the regional plans and also recommending development objectives and programs for each of the five designated regions. So, the purpose, as I say, here today is to review the plan of the Upper Great Lakes Commission. Before doing so, however, I think it would probably be worthwhile to talk in general terms of the status of the Title V program. All of you are familiar, I am sure, with the fact that the authorization of the program expires on June 30, of this coming year, 1971. And I think most of you are familiar with the fact that for the past several months the program has been undergoing study and evaluation, not only by the Department of Commerce itself, but also by the Office of Management and Budget, as well as the Congress. At the moment, it is enough to say that the Domestic Affairs Council, which as you know is part of the White House now, is deliberating the future course of the program. It has received the considered judgments of the Ash Council, which has pretty much gone out of business, the recommendations of the Rumsfeld Committee, a Subcommittee of the Domestic Affairs Council, as well as the Secretary of Commerce. 1 The deliberations which preceded their recommendations were interesting; they were varied; and they were different in their approaches. Most of the agencies represented here, I think, participated in those deliberations. I don't know what the final outcome will be concerning the future of the program. All I know is that the approaches are still diverse. As far as a final recommendation, I have no idea what the President will do— which of the approaches he will select. We do know, though, that there is going to be a program of some sort that will be developed within the next two months. So, in the meantime, we plan to continue to work toward the improvement of the program under the present legislation, striving for better regional commission planning. From the early days of this Administration the question of what happens to economic development in the regions has been a matter of deep concern to us. Some of you will recall that there was a two-day meeting in June of last year at Easton where we set as the first priority for the Commissions the development of high-quality plans. In January of this year, the Secretary gave tentative approval to the draft planning documents of the New England, the Coastal Plains, and the Upper Great Lakes Commissions. At the same time we suggested that improvements and modifications be made in each of the plans. So, these plans then are in the second stage of Federal agency review. We've sent them out to you, to the Federal Advisory Council members, and we are awaiting critiques of the New England and Four Corners Commission plans, and, for that reason, today we are discussing the one plan that is the furthest along, and that is the Upper Great Lakes Commission plan. It has been reviewed by all members of the Council and, with one or two exceptions, I think, most of the agencies have submitted their comments. We would like these comments in writing. One agency, I know, was somewhat critical but at the same time did not submit its comments in writing. We hope to have them all soon. In September 1970, the Secretary approved and circulated an outline of the Plan Review Process which had been agreed to by all the reviewing agencies. Now, the principal purposes to be achieved by this review process, are: first, to provide the Secretary and the Federal Cochairmen with an expert appraisal of your own views; second, to inform the concerned departments and agencies of the various regional problems and the proposed solutions; third, to give all of the reviewing agencies an opportunity to identify those areas where they feel they can cooperate with the Regional Commissions; and finally, to provide the Secretary and the Federal Cochairmen with a basis for formulating budget requests, since, of course, the essence of what you do depends upon the amount of funds you have available. At the Washington level, we held a workshop session on October 26, 1970, for the Commerce units and the Upper Great Lakes Cochairman and staff to go over the plan in considerable detail. So, today's meeting really would represent, I would say, a summit meeting approach to the plan by all of the concerned agencies. The big question which we will be discussing today will be the implementation of the plan once it has been approved. We've not yet approved any Commission plan. This implementation process is going to be the key; and, obviously, it will be tied in very closely to the budget aspect, but most important, to the overall review that is now being pursued by the Domestic Council of which we are an important part. I think I would have to leave you with that sort of question, which is— how is the plan to be implemented when approved? That question will have to be answered, and I assume that the answering of that question is going to take some further deliberation and discussion. Al, I would like to introduce you because I think you are going to take over and conduct this for the rest of the morning. Alfred E. France, Federal Cochairman, presents the Upper Great Lakes Plan to the Federal Advisory Council. UPPER GREAT LAKES PLAN MR. FRANCE: Fine. Thank you very much, Mr. Under Secretary, and thank you all for being here today to consider this draft proposal for a comprehensive plan for the Upper Great Lakes region. You all know, I am sure, that the planning process as such, at various levels of Government, has been undergoing some rather thorough and oftentimes critical scrutiny of late. And that's appropriate, I think, with so many Federal grant programs requiring comprehensive plans, or basic plans, before a grant can be qualified. I rather imagine there are hundreds of planning officers, some professional, some not professional, some qualified, some unqualified, who are right now laboring to bring forth a plan, or a plan component, which will qualify a community or a development district, or planning district, for some type of Federal grant. So, with all of this ferment of planning activity, it's quite understandable and appropriate that there are at present a number of task forces and committees, some in the White House, some elsewhere, who are scrutinizing the planning function— functional planning, comprehensive planning, the whole spectrum of planning and how it applies to Federal Government programs. And knowing that such scrutiny is under way, you can understand, I hope, that we come here today with a certain degree of trepidation as we put before you a comprehensive plan. To begin with, I suppose that economic development has a number of different meanings for different people, and, therefore, there are bound to be different approaches to the problem of economic development. The resources of one region which may underpin or undergird economic development, may be totally different from the resources in another region. And the conditions that retard economic development in one region may be totally different from those conditions in another region. And with such variances, it is not possible to approach economic development with a uniform system or method. And so, consequently, economic development planning, we feel, has to be substantially tailor-made. In tailoring this plan to the needs of the Upper Great Lakes region, as we perceive them, we've taken a conventional approach. While some aspects of the program might be considered innovative, essentially it's an approach which utilizes traditional means of economic development. Fulfillment of the program will require work, a lot of work, and, hopefully, it will provide work. And after all, it is work that is the stuff of economic development. Quickly and briefly— I'll try to be quick about it— Fd like to review how we've gone about this planning task. To begin with, we asked for and received state-developed objectives. State agencies developed what they considered to be the goals, as they perceive them, for economic development in the counties that comprise the Upper Great Lakes region. The aggregate goal would require that the Upper Great Lakes Regional Commission program generate 100,000 new job opportunities in the region by 1980. This objective achieved should help to reduce what has been a chronic level-a high level of unemployment in the region. It should also tend to reduce and retard out-migration from the region and bring about a better balance between those who are leaving the region and those who are entering it. The program should also reduce the income disparity that characterizes the region as more jobs become available. With the objective or goal in view then, an effort was undertaken to pull together all the information and data which would have a bearing on economic development in the region. And, as you can well imagine, this became a monumental task because this region's economy has been under study, and analysis, and evaluation since as far back as 1937. At the same time, we sought to involve the various state agencies whose activities would have a bearing upon economic development. And we also worked with the offices and bureaus of the Federal agencies both here in Washington and at the regional level; in our case, primarily in Chicago. In a number of instances, agencies of the three states were brought together to develop planning components which have found their way into this plan. This was a bit unusual, in terms of experience, for some state agencies; but we found it to be quite productive. So, early this year, component parts of this plan were fairly well in hand and we proceeded to a draft. I'd say that the materials and back-up documents which we used would have made a stack as tall as I, so that a considerable amount of culling and sifting and winnowing had to be done. In situations where information was lacking, we set about to develop that information through our technical assistance authority. An instance of this involved development of the Commission's position with respect to expanding Great Lakes shipping. Another instance involved the tourism development program that we have incorporated into this plan, contemplating a network of star attractions in the region. In addition, various citizen advisory groups were formed and organized and relied upon for what information and advice they could give us in development of component parts of the plan. So, preliminary drafts of the proposal were sent to your regional offices last May. We met with your regional representatives in June. Following that, we modified the plan, incorporated changes where we thought they were appropriate, and the draft which you have been working with was then prepared. So, the ingredients that make up the program are largely the offerings of state agencies and your own staffs at the regional level. Essentially we've just given the ingredients a mix so that there is some orderly approach and understanding brought to the comprehensive spectrum of planning components. I might say we tried to present a readable and uncomplicated document. And this is why it is not cluttered with charts and statistical tables. We've also sought to hold down the expense a little bit which is why we've not gone to more graphic presentations. Now, it is also evident, if you go through the plan, that we have not attempted to provide programs in a number of key areas. Apart from health manpower training, the plan does not include programs for health care in the region. We feel that, for our purposes, economic development planning must have some boundaries lest our efforts become so diffused as to become ineffective. The same may be said about housing. We know that housing in the region is, in many instances, substandard. We know this is a problem. But with our program authority and, in addition, with our desire to focus and concentrate our efforts, we have constrained ourselves from developing substantial housing programs for the region. Now, I'm sure that some might question these apparent omissions. And I guess I would have to say they are calculated omissions. They're intended and, in our judgment, appropriate. Also, questions can be raised about the validity of data we use, and the conclusions we draw from those data. Our unemployment projections, for instance, might be constructed in a number of different ways, and, in fact, we made different projections, but generally reached the same conclusion. Needless to say, our data is going to be subject to continuing evaluation and continuing study. As a matter of fact, we had a meeting just this Saturday reevaluating the county unemployment data for Minnesota, Michigan and Wisconsin. In any event, we feel that the data that we have used is as valid as are to be found and certainly they are adequate for our purposes, and that's why we've used them as we have. One of the functions of the Title V Commissions under the legislation is to perform a coordinative role between the Federal agencies, and throughout this planning effort we have sought to fill that role as best we can, and we think the plan reflects that effort. The major guideline that we followed in constructing the plan has been to conform the program elements to the existing Federal agency programs administered by you. To our knowledge, new legislation would be required only in one instance and that would involve our hopes and recommendations for an investment incentive policy. By following this guideline, we've produced a plan which doesn't propose to alter or change any existing Federal agency efforts. Rather, we see this plan as augmenting and complementing existing programs, hopefully increasing their effectiveness in the Upper Great Lakes region. Implicit in the plan are elements which will affect growth and development in the Upper Great Lakes region. Implicit also in this plan are our hopes that a more balanced growth will result. And as we contemplate the development of new national growth policies for the Nation, the planning process will have to be an integral feature of any such policy. We hope that this comprehensive plan demonstrates that planning can indeed be viable and useful. And in that sense we would hope that this plan would be of value as we all try to reason our way and prepare ourselves to meet the problems that continuing national growth will present. I think at this time, George, I'd like to introduce members of my staff who have participated in developing this program and who will be responding to some of your inquiries and questions. First is Roy Fingerson, who has been coordinating the agency responses to the plan; Mr. Fred Madison, who has been active in the areas of environmental consideration, tourism development; Mr. Dennis Stavros, who has been involved in unemployment projections and statistical projections for the region; Mr. Howard Potter, who has been involved in developing a program for agricultural and forestry resources, as well as other elements of the plan; and Mr. Wilbur Fritz, who has given us invaluable advice in the program development for mineral and energy resources in the region. Mr. Fingerson is also involved with manpower development and transportation. I think that would conclude my remarks at this point. George /. Pantos, Executive Secretary of the Federal Ad- visory Council leads discussion of Upper Great Lakes Plan. DISCUSSION OF PLAN MR. PANTOS: Thank you very much, Al. 1 just want to make a couple of preliminary remarks and then we will go right into the meeting, which, in effect, is your meeting. This is an opportunity for the Federal Advisory Council to offer remarks to the Federal Cochairman of the Upper Great Lakes Commission and the staff who are here today. Just quickly, for your information, we have a table at the back of the room on which there are a number of documents that might be of some interest to you either now or later, including copies of the Upper Great Lakes plan, the Executive Order, the outline of the Plan Review Process, as well as the written copies of the reviews that have been submitted by members of the Council. We haven't distributed them here, but you are welcome to take a copy as you go out, or during the coffee break later. One other preliminary item, and that is, where do we go from here? 1 think it is important to keep in mind the procedure we have for continuation of the review process. Following this review meeting, the Federal Cochairman for the Upper Great Lakes and the staff will take the comments, the suggestions, and the recommendations that have been made here and proceed to review them and revise the plan, as appropriate. The plan will then be resubmitted to the Secretary, together with a report on the disposition of the review comments. The Office of the Special Assistant for Regional Economic Development Coordination will prepare recommendations to the Secretary within fifteen days of receipt of the plan, and the Secretary will then, in his judgment, review the plan, submit it with his recommendations to the White House, notifying the Federal Cochairman as he does so. I might make one other overall observation, and that is that we have already had an intradcpartmental review of the plan which has included comments from constituent agencies of the Department, including EDA, Travel Service, Office of the Assistant Secretary for Economic Affairs, and the Office of Science and Technology. We have also had an opportunity in a seminar session to bring in outside consultants, who have been retained by my office, to consult with the Upper Great Lakes staff on the plan, and in those meetings, and as 1 hope in this meeting, the spirit has been one of providing guidance and assistance. The opportunity for response and rebuttal has not been there simply because I believe that we're not really engaging in a confrontation process. The critique process, rather, offers an opportunity for constructive comments for the guidance of the staff as they proceed to review the plan in the continuing process that this entails. So now, I think we should start the meeting by turning to the participation of the Council members, unless there are any preliminary questions that anyone may have on the purpose of the meeting, why we are here, and what we are to do. If there are no questions about the preliminary points, I'd like to start the meeting by asking the representative from the Department of HEW, who is here today, to give us a brief summary of the comments HEW has developed on this plan. Richard Hertzler (I), Department of the Army, and Robert Binder, Department of Transportation. George /. Pantos, Robert A. Podesta, and Alfred E. France discuss Upper Great Lakes Plan. STATEMENTS BY EXECUTIVE AGENCY PARTICIPANTS MR. K1NLEY: We've had extensive comments from our regional office. At the outset we will take the standard that we were given and say simply that the plan is in general agreement with the Department's goals, the goals of our own Operational Planning System as developed entirely within the Department, by both our regional offices and our operating agencies. The plan, as indicated, is not in conflict with any of our Department's jurisdiction. As Mr. France indicated, the plan is deliberately sketchy in the area of health care. In the area of health manpower, I think we will need continued development of specifics to be able to come up with grants and grants proposals that we can fund in conformity with our legislative authority, as soon as you all see fit. In the general area of manpower, I have already had some personal experience in operating with our Chicago regional office, and in conjunction with the Department of Labor, and the Regional Manpower Administrator in Chicago. Our vocational education people are quite used to working with Labor and coming up with plans and proposals that will complement each other, and implement the goals that you all have set out. One of the comments that I did receive from our regional office indicated that, with the exception of the initial run-through in submitting the draft to the Regional Director, there had not been a lot of operational contact at the staff level, and particularly in the area of vocational education and vocational technical education. This might be useful. The second was setting up some kind of contact with the regional council as a body. You have already done this, in effect, by running the plan by each of the regional directors in Chicago. I don't know the extent to which they have consulted with each other in coming up with their responses and thought about it as a regional council. We are putting a lot of heat on our regional people to operate through the regional council, and our people in Washington as well. I think you all ought to take the benefit of that kind of pressure that we are putting on our regional officials. MR. PANTOS: Thank you very much. That's David Kinley, Deputy Assistant Secretary for Community and Field Services for HEW. Next, I'd like to call on the representative from the U.S. Department of the Army, Richard Hertzler, Chief of the Office of Civil Functions, Office of the Secretary. MR. HERTZLER: Thank you. First of all I think that the Commission has done a remarkable job in coordinating all of the various interests of the many agencies of Government and states, and has come up with a generally sound program for economic development. We note, of course, that the emphasis is on transportation, on training, and then in the general field of recreation and fish and wild life. Also, from the industrial aspects of the proposed program, the emphasis is on minerals and on forest products. All of these programs do create, I'm sure we all know, some environmental problems. For example, on the forest products, as well as minerals, there will undoubtedly be some request to dump debris of one kind or another into the water. This then requires a permit from the Department of the Army, and we are having all kinds of problems with implementing their program at the present time. But I can't forecast that the degree to which we will implement that is going to be increased. Significantly, we're going to be a whole lot tougher than we ever have been in the past. This also applies to filling and dumping, which will be required in the Great Lakes area, for the development of industry, as just one example. In the transportation field, of course, the Department of the Army is very much interested in the harbors and the waterways. Again, 1 point out that this creates environmental problems because these harbors become filled up with all kinds of material and among the materials with which they are filled up are the sewerage outflows from all of the cities, which creates a problem of disposing of this material. We have proposals in mind, in the legislative process, that would prevent dumping this material in the Great Lakes. But this, in turn, requires participation on the part of the states. 1 would also point out that there are other planning activities going on in the Great Lakes region, particularly the water resources of the Great Lakes Basin Commission, which is under the aegis of the Water Resources Planning Act . This takes in a different area, a larger area than the Upper Great Lakes, but I see no conflict in the development of a water resources and related land plan which would come out of that larger area, and it certainly would fit into the Upper Great Lakes plan. This is one of a number of areas. In our work on water resources in the Department of Army, we have developed in our planning, budgeting and programming system, a system of utilizing regions. Now, these regions are different from the economic development regions. But again, we have no problem, through the computer, in pulling out from the regions that we use, any other region. And we have already done this for Appalachia. Even in the area of water resources, we are going a little beyond the objective of economic development. Underway now are principles and standards for broadening the objectives beyond just economic development. So far as Army is concerned, we really have no problems with this. It is consistent, but it does not deal with some problems that Army has, either in its military field, which, of course, it couldn't very well, or in the water resources field. Furthermore, the Army has no grant program. So, to that extent we are not involved in the implementation of this program in the same way that some of the other agencies are. Nevertheless, we do expect to participate as we have in the past and as we will in the future, on such problems, for example, as extending the period of navigation in the Great Lakes. We are deeply involved in that, as well as establishing ports and keeping those ports operative as long as possible. That completes my remarks. MR. PANTOS: Thank yuu. Because the use of the resources of water in commercial ports is an important element in the Upper Great Lakes plan, I think it might be appropriate, Al, if you were to say a few words, if you would care to do so, in connection with the comments that the representative from the Department of the Army has made. MR. FRANCE: Well, maybe it would be a good idea if I responded very quickly now to your comments as we go around. And I'd like to do that. With respect to your remarks, Mr. Kinley, 1 think they are well taken. Health education-we do have a fairly good perspective of where we want to go-primarily to encouraging the development of curricula, which is going to produce primary contact physicians. And we have some programs ongoing there which we are working out with NIH people. The vocational education question you raised about contact at the regional level— I think that's probably because we go through the states to your offices right here in Washington on grant programs. And as to the regional council question, this is a good one and I don't have a good answer for it. I know that OMB is looking at this, as well as the White House. As to whether or not the regional councils could be the vehicle for a coordinative role, on behalf of the agencies, we find that the regional councils don't have the scope necessarily that we are looking for, because not all of the agencies that are involved with economic development are members of the regional councils. And that's presently our difficulty there. With respect to your comments, Mr. Hertzler, the environmental problem is certainly one that is foremost and uppermost in our minds. This region has a definite degree of sensitivity on the part of the people both living in it and out of it, as to maintaining the quality of the environments there. I guess it would be fair to say that when people started thinking about the comprehensive plan for economic development in this region there wasn't much concern about environment then. And the great emphasis and drive behind all planning and programming was jobs and economic development. And we've tried to weave into most of these program elements considerations for the environment, and certainly they're going to be changing, as you well know. I know your problems with a certain taconite company at Lake Superior. With respect to the Great Lakes Basin Commission, we have submitted this program to them sometime ago and I've been in contact with the Commission. As a matter of fact, we are jointly funding a limnological study on Lake Michigan with them. And we've been working with you, as you know, on extension of the shipping season, as well as with the Coast Guard, NOAA formerly ESSA-and other interested agencies. That looks like a goer, I think. MR. PANTOS: I would like to ask the Departmenl of the Interior to be next. We have with us today Mr. Temple Reynolds, substituting for John Quarles who is Assistant to the Secretary of the Interior. I think with the great emphasis that is in the plan on such aspects as recreation, the environment, water resources, ct cetera, Interior should have some relevant comments to make here today. MR. REYNOLDS: Thank you. I think, to a degree, our comments parallel those of the Army's in terms of enviornmental concern. I think, I should say, that we arc not concerned so much with what the plan says as possibly what the plan doesn't say. We. the agencies within Interior, who took the plan under advisement lor review purposes, ranged in our comments all the way from saying that there should be no economic development to. that the area had 10 such pleasing environmental aspects that it should be, in essence, set aside for fish, wild life, and other recreational purposes. All the way down the line, as you can imagine, are a diversified group of bureaus that we have in our Department. And in general, I think, we had some concern that there was noi spelled out in the plan, more or less explicitly, a coordination process that might have gone on, for example, between the Commission and the parks or recreation departments of the various states. You have a high degree of emphasis on the network of star attractions at the recreation areas. Yet there seems to be no indication of how the regional plan was coordinated with the statewide comprehensive plans. With a three hundred million dollar funding arrangement, with the Land and Water Conservation Fund Act, at the present time, there will be a fairly substantial amount of money in Federal grants going into the states. What happens with this money and how we might be able to work with you is predicated to a very high degree on how the states reflect the need for expenditures in their own states. And this gives rise, of course, to such questions as: What are the needs of the people in the area? How would the states themselves see recreation developments? We pointed out in our written comments to you that in terms of your network and star attractions, the Apostle Islands, and the Sleeping Bear Dunes, of course, had already been authorized. We had some hopes that Voyageurs would also reach the point of authorization during the present session of Congress. Beyond this, our greatest feeling was toward the environmental aspects. The highway program, the airport development program-ot course, all of these things— eat up a fantastic amount of land. They would have their impact on the environment. Again, it is not so much what you've said, as we will be looking forward to seeing environmental impact statements and working more closely with you as these things begin to get to a point of fruition. I think this somewhat summarizes our feelings. MR. FRANCE: The points are well taken. Again, on this question of environment, I think in your written response you mentioned the highway development program that we have in mind. And I can say that we have had comments from people in the region. Going to your point about no economic development— setting the region aside for recreation. Some have suggested that we not build one inch of highway anywhere and rather that any funds that might go to highway development be used instead to arrest soil erosion on the south shore of Lake Superior. And I guess this is a matter of value, certainly. We recognize that economic development and environmental quality can come into conflict directly. And our position, having recognized it, is that we have to work as hard as we can, and this would apply to all Governmental agencies, to accommodate economic development to the environment and make the two considerations compatible. And that's the underlying approach and philosophy really that we rest upon. The network of star attractions and the whole vacation industry development program has been closely coordinated with the three state Departments of Conservation or Natural Resources, depending on which state you're talking about. We met with them in 1968, and again we met with them last April, to work the state element, state parks, state recreation development program, into close coordination with this network of star attractions that we proposed. The two are designed to complement one another so that people entering the region to go to the Apostle Islands will know they can also very readily go to Sylvania or to state parks in that immediate area. The Law-Con funds are very much a part of that as you have pointed out. So, I think that there has been a close working relationship with those three state agencies. And I can't perceive any real problem coming there. MR. REYNOLDS: I'm sure you covered the bases, as they say. MR. FRANCE: Again, how far do you go in laying out all the detail that you have gone through? We don't have a good answer there. We didn't think you wanted a document like that. But it has been done. The question is, how well? And we can only hope that it has been done well enough. Any other point there? MR. PANTOS: Of course, this seems to point to the impact of the various direct and indirect factors on the development process. The environmental factor, of course, is critical and certainly the factor we're going to talk about next, the human factor, is also critical to the developmental process. I was quite amused in getting the comments of Assistant Secretary Lovell to see his reference to the fact that the plan does recognize the need for manpower training, but hopes that they do go well beyond just simply limiting their training to snowmobile repairmen. I hope this is not a characteristic of your area, Al, but-anyway, the next comments will be from the Department of Labor, the Deputy Under Secretary, Millard Cass. MR. CASS: Well, I find that it's illustrative, not exhaustive, so I'm not really concerned about this. In the first place, we were very pleased with this plan. You know, we have seen some earlier drafts of various plans that we thought were beyond the scope of reality and provided too grandiose a plan to be successful. And we thought this had considerably eliminated that kind of problem and is a practical, realistic, attainable goal. 11 Now, even after we say that, however, we know that it does require resources. And it is possible that not all the resources required will be available. Under those circumstances we thought that perhaps a little more in the way of scheduling of priorities than the plan now does, would be helpful. It has some planning strategy there, but we thought perhaps if they classified the programs according to different levels of priority that this might help, in fact, give them a fall-back position, so to speak. We had one other— two other— basic areas where we made comments which we hope are constructive. One is that we were concerned about perhaps an undue reliance upon the incentive of tax credits for attracting industry. The experience that we have had over the years is that it is an uncertain and sometimes not even an effective mechanism. One of the things I have to say parenthetically with respect to that is, if everybody is doing it, it doesn't really help any of them. And when we get down the road and we have enough of these plans, if they are all relying upon a tax -incentive situation, they will have an offsetting effect upon each other. So, I would be inclined to say, "All right, you try some of that, but you don't place too much faith in it." And the last thing, of course, is the need for manpower training, particularly for upgrading workers in the region. I assume that, as I said, you weren't telling us that these are all your needs. I also assumed that since this is an overall plan to touch the entire global structure of what you need, any shortcomings in the delineation of the manpower aspects at this point would be worked out in the course of the implementation process. So, therefore, I think all we really need to do is flag for you the fact that it is terribly important, that there is a great deal to be done that we consider in a reasonable approach. We would be very happy to cooperate and we anticipate that in the implementation process you will call upon HEW and us and other interested agencies which can be of assistance. MR. FRANCE: Thank you. With respect to your last point, you're quite right. We cannot really spell out in detail what lies ahead. For instance, now we have a new bill recently passed which reinstates, or at least emphasizes heavily the Mainstream and Green Thumb programs, I believe. And we have taken those into account but we didn't incorporate them in the plan because we didn't know the extent to which that program was going to be supported. I think it is being supported more than we anticipated perhaps, so we'll have a new look at that. I guess you have to continually do that as you begin to put a program into effect. The question of investment incentives is a very, very basic question because we do, in our thinking, rely on that to a very great extent. It's been our view that public works programming, public investments as such, cannot help but improve the economic attractiveness of the region for certain types of private investment. The region does lag behind in terms of public facilities. And that's a deterrent to private investment. So, the public works program is very basic and fundamental. On the other hand, there have been other reasons in the past, which have discouraged industry and business from coming into tins particular region. And we feel that these barriers have to be overcome. And what can we do to do that? We look at the experiences of other similar areas, not only in this country but actually beyond its borders, Western Europe, Canada, and we find that they do utilize selective investment incentive approaches, and quite effectively. And so consequently, we, if you will allow it, went off the reservation, so to speak, beyond the perimeters of public investment planning and raised the public policy question. And we would like to get an answer to that question. We feel it's most important, and if the philosophy which underlay the establishment of Appalachia, and the Title V Commissions, and EDDs, which was literally to discriminate in their favor, if that philosophy is valid then we also feel that a selective incentive-investment incentive program-by a tax credit or perhaps outright grant or subsidy as Canada offers, is certainly as valid. And that's why it is an important element in this plan. We would like to try it. MR. PANTOS: So far we have had a rather nice honeymoon here between the Federal Cochairman from the Upper Great Lakes and the agencies that have spoken. And I begin to wonder whether it is symbolic that we have not received written comments from the Department of Transportation, which is next on the agenda. Of course, the transportation factor is a very big part of the Upper Great Lakes plan, and it does point to the need in the region for a transportation backbone, an alternate route, a transportation route which will go east-west and would be an alternative to the present freeway system. I would like now to ask the Department of Transportation representative, Mr. Robert Binder, Deputy Assistant Secretary for Policy and International Affairs, if he would give us the benefit of Transportation's comments on this? MR. BINDER: Thank you. I'll be happy to do that. Let me first focus upon some aspects of the plan that we think are quite good and represent a beneficial side of this effort, and then I will turn to what I would hope will be taken as constructive comments about other aspects of it. We think it's fine that the Commission works closely with local transportation planning bodies in putting this plan together. This includes the State Highway Departments and State Aviation Agencies. We think this very desirable and we encourage it. And in that sense, we think that was a fine way to approach this problem. We also 12 believe that the plan recognizes well the interdependence of the region's economy with policies affecting the Great Lakes-St. Lawrence shipping system, and we think that is true and desirable to recognize. Generally, we found that the plan was readable, which we think is a big plus. (laughter.) MR. BINDER: And we found it easy to get an understanding of the region's resources and the developmental history. And we found that these aspects are a plus because we have not found this to be true of other efforts in the same thing. And we think that is very desirable. Now, let me apologize, in a sense. We have not yet furnished our written comments to this plan and I apologize for that. Our effort to get written replies back from our administrations, Federal Aviation, Federal Highway, and Federal Rail, and the St. Lawrence Seaway people, and so forth, have not yet succeeded. And I don't want to short-change any of them in giving you the benefit of all of their reactions to this plan. We hope to come along with our comments in writing shortly. In that context, I would say, I noticed, as I came in the room, that you do have on your table of handouts, a written comment from an official representing the Department of Transportation, specifically a gentleman signing for the Regional Administrator in Region IV of the Federal Highway Administration, a gentleman named Edward Muse. About that letter that is dated the 10th of November, I can only say this. My conversations, and conversations of my staff, with the officials of the Federal Highway Administration here in Washington, do not indicate to me that there is at the moment a congruity of thought as between Mr. Muse, on the one hand, and the officials here in the Federal Highway Administration, on the other. And undoubtedly our comments eventually will reflect the view of the Federal Highway Administration, on the one hand, and the Office of the Secretary, on the other. All I can say at the moment is that I do not believe that I can take Mr. Muse's letter as reflecting that. And I think we just have to look at that letter in that regard at the moment. Now, let me preface what I'm going to say by a very short preliminary statement. Our Department does a great deal of highway building and airport and airway building, as everyone knows, and the general approach that has been reflected in what highways get built, in what airports and airways get built, historically has been in an effort to meet a felt need, a need that can be accurately-at least it is felt it can be accurately-projected for highway movement, for air movement. Now, when you move from that type, that approach, to Federal assistance, into the area of this Commission's work, where you are focusing more on a developmental effort, where the need that you are trying to identify is not felt, but is something that you are trying to create so that you can feel it, I think you are getting into the area which Mr. France said is what is now being focused on throughout the Government. This is a part of the planning process. Certainly that is getting a great deal of attention. And it is this part of the plan that we are focusing on very heavily, because there is a direct connection between the need which is stated in this plan and the two-and-a-half billion dollars of highway construction money which is said to be required. Now, I am not standing here saying that I believe that it does not require it. What I'm saying rather at the moment is that I am not aware of a showing that is inadequate, that is required, that the need which has been identified and referred to in this plan is, in fact, a need. Now, this is a little bit of chicken and egg proposition, and we are in a difficult area where the question is, now, how do you establish the kind of need that is justified to justify the expenditure of this kind of money? And I don't think that this plan, in my preliminary review of it, states enough to persuade me that this is a need and this amount of money should be spent in order to satisfy it. I'm not quarreling with the general need of the area for development. Don't misunderstand me. The question is whether or not there is a need for this kind of highway construction in certain parts of the area, going from this part of the area to that part of the area. That is the specific need I am talking about. It is a difficult exercise in this developmental area. And while I commend this group for attempting to discuss it, at the moment it's a part of the plan that talks about transportation, but does not yet say enough, in my judgment, to persuade me that the need exists. Now, let me say this. There may be a quarrel of philosophy as between ourselves and the people who prepared this plan. It may be that the thought-philosophical thought-is that you build a highway and then development occurs. Mr. Muse's letter suggests the generalism that commercial establishments and highway-oriented businesses and industries thrive when located near a major highway. Well, I'm sure that has been very true in some cases, but I think it is also true that you can find areas of this country that are very nicely served by a major highway system which are not thriving and are not prospering and are not developing. And the question then becomes, you know, why? Interestingly enough, in another section of this report, and I don't mean to pull it out of context, but on page 6 of Chapter 3, at the top of the page, one sentence makes our point. It says, "Industry usually will not be attracted to an area because of good roads or some other single factor. Instead a combination of factors is normally required, such as 13 a variety of transportation media, reliable, adequate power, water and sewer facilities, educational research facilities, component supply sources, repair services, labor skills, living amenities." Now, that is a fair statement. So, I go back to where I started. In the transportation section of this plan, on pages 56 and 57 of Chapter 2, at the bottom of 56 is a reference to the great need of the region for a natural transportation backbone. The top of page 57, the statement is made, the regional need coincides with the national need for an alternative east-west route. And then, in the same paragraph, from a lateral backbone, there is a further need for a direct north-south route. It may be that the back-up material to this plan contains the analysis which supports that. Perhaps it is elsewhere in this book, and I haven't found it. But I am willing to be educated on this, because I want my remarks to be taken as constructive. At the moment, I don't find enough of a discussion of the need for highways to justify the two-and-a-half billion dollars that are supposed to be spent. I would add that money is in addition to the highway money that is proposed to be spent on other roads in the general geographic area of the country that we are talking about, which the states themselves have proposed through their Highway Departments and through the Federal Government. This is all supplementary and in addition to on-going programs. And my conversations with my Highway Department suggest that they are also wondering what the need is, or what the showing of the need is for this building which is over and above the already projected highway building program. Now, let me say, moving from the highway, for the moment, to the Great Lakes discussion here, there is no question about our Department's commitment to developmental efforts concerning the Great Lakes region. And I don't quarrel particularly with any of the points that are made in the Great Lakes section of this plan as desirable objectives. I don't find, however, in this plan as it now reads, a sufficient recognition of the fact that there are a number of activities going on now, some regional, some Washington-oriented, meeting some of these requirements. One gets the impression from reading this that all these objectives are wholly unmet. And I think, in terms of a plan which is going to be read, it should give a more balanced— if it is possible- view of that, recognizing where starts have been made and indicating that more perhaps needs to be done, or needs to be done with more vigor, and whatever. Now, the only other major transportation item that is discussed in this section is airports and airways. And I think I would say that my remarks generally apply there too. The section here does not, in my judgment, for my purposes, sufficiently identify the particular need that has been identified for the type of airport-airway construction which is proposed here. And again, if the back-up material is available I would like to see it. And if this is clear from other sections of the report, I would like to be referred to it. But we may be talking here about an editorial problem overall, or we may be talking about a conceptual one. If it is editorial, 1 would be delighted to see the material that has been pulled together. MR. PANTOS: Before Al replies I might also point out that our reviews, our internal reviews of the Great Lakes plan, and the reviews that have been made by outside experts for us, this point has been made in a similar way, and you have reinforced it. This is a critical part of the plan. It is one that 1 think will have to be examined very carefully. I believe that it is based on a lot of assumptions of the future. The point you made before, though, I think should be emphasized and made clear here, and that is that all of the recommendations in this plan are based on a supplementary funding of existing programs. To do what the Upper Great Lakes contemplates needs to be done in this period of time to bring this region up to parity with other parts of the country, these would be extraordinary investments above and beyond what Federal agencies are budgeting under the normal course of operations. So, we are talking about a level of funding which goes above and beyond anything else the other Federal agencies would do. Al, you may wish to say some things on this because this has come up again and again in our discussions. 1 think, perhaps, they have begun to revise some of their own work on this too. So, why don't you just answer those questions. MR. FRANCE: Well, I do take your comments as constructive, and they certainly are. And I would have to report that there has been a great deal of mental and verbal wrestling over the transportation element in this program. In fact, there arc some who think the emphasis is too heavy in this area. But I suspect the emphasis is heavy simply because when you talk about building a highway, you're talking about two million dollars for a mile, if it's four lanes; a million dollars a mile for improved highway with uncontrolled access. It's expensive and consequently the emphasis is heavy because you just don't build highways without a significant outlay. I think there is a basic conceptual question here, and it does relate to need versus the potentials of development. I think it has been customary for Highway Departments in these three states, and probably elsewhere, to project their highway planning based on need primarily. What are the traffic counts? How can we project how many people are going to need the highways in this area? Consequently, the highway construction that we've seen arising out of the 14 Interstate Act, for instance, has gone largely to metropolitan areas and access and exit capabilities of those areas. And that is one of our problems. In 1937 there was a very comprehensive study made of the Upper Great Lakes Region. They came up with a proposal not unlike what we are talking about today. A few events intervened to prevent that from ever being implemented, such as World War II, and other national priorities. But at that time they characterized the Upper Great Lakes region as the "cut-over area," recognizing a characteristic of the region which had resulted from the utilization of its timber stands. We tend to look upon the area as not only cut-over but cut-off, because essentially transportation and commerce in this country has moved from east to west, and, as a result, this area has missed that flow and it is, in fact, cut off. Our recent interstate highway developments have improved the situation in some respects. There are two north-south interstate systems. But there is need for more. It is important to the area that its manufacturers, its businesses, and its resources have better and more ready access to markets which are largely to the south of the region. We think this is very, very important if there is to be economic development in the region. The proposal for an east-west through-way system from Sault St. Marie to Fargo is not necessarily gratuitous. But in looking ahead, there are those who forecast that the present highways, which run essentially on a line through Chicago or around it, are going to be taxed beyond their capability within ten years. Consequently, there is going to have to be another east-west system. That's not the reason necessarily that that feature is in this plan, because if we look at the region, there is a need to tie the eastern part of the region with the western part of the region. There is a need to tie the agricultural section of the region with markets to the south and east, and, consequently, that highway proposal has validity in our view. Now, it is true we cannot give to anyone a precise, valid figure as to how many people are going to travel this highway, or any one of these highways. But it is true that as we look at the concentrations of population, that we can foresee a need for a greater mobility for those people to move into the region and we see a greater need for access to those metropolitan areas for the products and services that are produced in the region. And we don't see how to meet that problem without building a system which can provide the transportation facilities and transportation service to accomplish those ends. I should say, before I forget it, and I already have once, that in constructing this program element we determined last year that we must also meet the environmental question. And that's been raised in connection with this whole program. And we have now under way a technical assistance study which may be of value beyond this regional consideration, which will make recommendations, which will design, if you will, highway construction planning and engineering which takes into account environmental and aesthetic consideration. Our three state highway departments got together, decided how this should be done, and have retained competent professional people in the field, and we're financing it, all to show us how a highway that goes through an aesthetically attractive area can complement that area, or at least not detract from its attractions. So, we have tried to approach this in a logical fashion. We admit that we are not approaching it from the strictly engineering approach, but that rather we are looking upon transportation as a means of developing economic activity in the region. I guess that is a conceptual question. And I would hope that the Department of Transportation would look at it from that point of view, and I would offer, if it is appropriate, to ask the Highway Department people who have figured in this planning, as well as the regional office, your regional office people, to meet together with those who have concern for it and perhaps a lot of questions can be resolved in that fashion. It may save much time and much energy and much effort. We have found that to be a successful way to approach these problems in connection with another point you make, and that's the development of shipping and commerce on the Great Lakes. It's just a month and a half ago that we asked representatives from the Department of Transportation, the Coast Guard, the Great Lakes Seaway Development Corporation, ESSA, Corps of Engineers, all of the interested agencies to meet together, which they did in this building on October 1, and we went at it a full morning laying out how we could go about extending the shipping season, how we could go about ameliorating the ice conditions as a deterrent to shipping. And that's an on-going program. So, it is possible to coordinate these things. And I think we can perhaps achieve something if we could approach the highway transportation proposal in this program the same way. MR. STEWART: I just wondered, could we ask a question or two? MR. PANTOS: Sure. Yes. Please raise any questions. MR. STEWART: First of all, those of us who still have to prepare in final form one of these documents, are very appreciative to Mr. France and his group for going on with the point because I think we are going to learn much from this discussion. Since we all know that the Appalachian Regional Commission has spent a considerable amount of 15 money on transportation, particularly highways, I would like to ask Mr. Binder if he felt that the Appalachian highway program was solely one of meeting needs of traffic count, or if their studies— approval of that program— would indicate that there are developmental aspects in the Appalachian program? MR. BINDER: Well, I'm not sure we are at a point yet where we can measure the impact of that highway program. As I understand it, it has been a fairly spotty building program to date. I know the projections are for continuous belts of concrete. But at the moment, I think the approach has been to fix up the worst sections first. I am not aware, and I would be happy to be educated, I am not aware that the system has been completed in any meaningful sense so that you are able to say that we have a highway system now which is serving a felt need, and make any connection between one or the other. I think I'm being responsive to your problem. If not, please come at me again. MR. STEWART: Most of the reports about the Appalachian program place emphasis on highway construction. I was just wondering how the Department might relate to this. Also, the problem I think that we face in all of these Commissions, including the Appalachian, is dealing with essentially the rural areas. When you consider the national goals, which have not been particularly defined, but which the President has mentioned on two or three occasions as needing to be restructured to create migration from the urban to the rural areas, I was wondering how the Department of Transportation views that with emphasis on the anticipated Trust Fund expenditure in urban highway development versus rural. Has there been any attempt on the part of the Department to anticipate an increase in spending in rural areas as opposed to urban? The idea is that actually in most urban parts of this country you can demonstrate an absolute need better in the open area than you can in the rural. If there is to be some policy to emphasize the rural area more, I was wondering if that might not play a part in the rest of these plans as we develop them? MR. BINDER: Ultimately the chances are certainly that what you have discussed in terms of a redirection of emphasis and a national growth policy could have its effect on the allocation of Federal resources. So far as I have been able to follow, however, discussions that are now on-going in various circles, including the Subcommittee on National Growth Policy of the Domestic Council, I don't think we are at a point yet where those decisions have been made or where we can focus, in a concrete way, on the kinds of new directions that you are discussing. There is a great deal of thinking going on, and I am not aware that we have reached the decision stage although I think that what you say could reflect a future course, but I think it is now very speculative to suggest that it will. MR. PANTOS: I might suggest on a related point that very recently we have become aware of the fact that in transportation there is now emphasis on developmental planning as a part of transportation planning. We have scheduled a meeting for, I think, early in December with transportation representatives and Federal Cochairmen on this specific point, so that we can have an exchange on this question, exactly what the Department of Transportation's current thinking is on the developmental aspects of transportation because the other four Federal Cochairmen are also faced with this problem. It's a real live problem and since the road and the highway potential is really an integral part of planning, this is a question that will have to be tackled head on. Now, you had some points, I think, that you wanted to make. MR. FRANCE: Just this one point, then I think you have fully gotten to the nap of it. Mr. Binder uses the words "ultimately could" have an impact on future transportation development and I guess that is where the issue is. We want that impact to be quickly or shortly felt, and that is a question which goes beyond our purview or yours really. It goes to the Office of Management Budget. It goes to the whole spectrum of government, and we would just like to come to grips with that problem as soon as we can and hope that this will move us closer to that day and point. MR. PANTOS: Millard, you have a point. MR. CASS: This, 1 think is just a small matter, but it goes to the essence of everything that you are doing. I don't think if the Department of Transportation's policy or suggested solution to this is the one that is adopted, that the plans that are now on the drawing board, that I have seen, could stay as they are. I think that this would mean a very major focal change in the approach. As soon as it is possible in that connection, I wonder whether it might not be helpful, at least, to bring it to a head; not just what you are talking about, which I think is good, but I wonder if some paper could be prepared that presents the two approaches: development in response to need or development to generate need. As an overall approach, an awful lot would have to be changed if you go down this one way or if you go down it the other. And I think it's so fundamental I almost suggest that when you finish today you really stop the wheels and see if you can't get this one settled first, because I think a lot of changes are dependent on it. We have the whole thing of training, you see, at HEW. A lot of this depends upon accessibility and this kind of thing; mobility of labor. 16 Now, could I just go back to one other point while I am speaking, and then I can shut up and not have to bother you again. When I spoke before, I did not raise the point. Mr. Kinley has flagged for me the fact that we must insure the compatibility of this plan with any plan developed under the CAMPS programs, and he is, of course, correct. Now, I assumed that there would be this kind of rationalization to insure compatibility, but assuming it is not enough, I think it ought to be specifically noted that there will be and that, I think, would meet the point. MR. FRANCE: Roy Fingerson might- MR. FINGERSON: I might say briefly, Mr. Cass, that we, on two or three occasions in the last year, have attended the Regional CAMPS meeting, but again going to Al's earlier answer, we have decided to rely on the representatives of the states who are working on this development program, so we don't have a direct line. We rely on the states for coordinating that function with CAMPS. MR. PANTOS: One thing troubles me here. Maybe the confusion also exists in the minds of others. Al, perhaps you can help. What is the role of the Transportation people on the regional level in terms of their written response to you, in terms of their participation in your planning process, and how does that role relate to the Federal, Washington-oriented, level in planning? Maybe you can tell us what has happened at the regional level which has given you the assurance, at least, that this plan meets the acceptance at that point. MR. FRANCE: 1 can answer part of your question. The sessions were set up and held with the three state highway departments. They met jointly a number of times and were joined by regional representatives of the Department of Transportation. Those representatives participated in those planning sessions. Also, with respect to the Airport Development Program, the three State Commissioners of Aeronautics, if that be the proper nomenclature, have dealt with the regional FAA people, and I believe, in all instances, the airport projects that are enumerated in our plan are in the National Airport plan, so there shouldn't be any conflict there. Now, as to what happens after the regional representatives of DOT have surveyed these plans, and, in fact, participated in the planning, I can't answer that question. I don't know. MR. PANTOS: Yes, sir. MR. KINLEY: I would like to echo Millard's comments about elevating this kind of conceptual conflict. Perhaps we have viewed these plans and perhaps the Commissions have viewed them solely in terms of analyzing what they consider to be the needs of the region and then planning internally to meet those needs. Perhaps the documents should be restructured more as an advocate for this rural point of view that you have got— that you can't meet the needs of the urban areas without facing the real problem about migration from the rural areas into the urban areas, but that is the cause, the real cause of the problem that must be met, and really bring this thing to a head because, as Bud points out, every single one of the Federal Cochairmen faces this problem. MR. FRANCE: I would just say that the Federal Cochairmen, working jointly, have certainly construed their individual Commission programs as a factor, at least, in an approach to better balanced growth in this country, and we belabor each other often about this problem and how our program might be a vehicle to effectuate a better growth policy or rather implement a better growth policy. But the policy consideration is bigger than any of the Regional Commission considerations, and consequently, we are merely elements possibly in that overall approach. But certainly, if you are going to look at the regions that have been designated, you cannot avoid coming to terms with the question that rural development is at least part of the approach, part of the answer to the problems of urban development in the future and the two cannot be separated in our view. And I think I speak for all the Federal Cochairmen on that. MR. BINDER: Let me make a comment here. I am not reacting negatively to Mr. Cass' suggestion that we try to get a resolution of this. But I know how much attention has been given to the problem and, other aspects of the problem, at the Cabinet level, and I am not optimistic that if we raise it we are going to get an instant resolution of it. This is something that is open, but I can't be overly optimistic. So I would only say that, as the other side of that coin, it may be that what ought to be done is to complete these plans which are pretty much on course. At least you will have that done, and sometimes 1 think it is better to have that done than to have a totally incomplete product or a series of incomplete products. Now, let me say something else, too. I don't want to leave the impression that this somewhat fundamental objection has been raised in what may be called the tenth-and-a-half-hour here. As I am sure you know, our comments 17 in 1969 about the prospectus for this planning effort were pretty much along this line; and in a great sense, I'm interested to know the transportation section of the final plan is pretty much in line with the earlier version to which we raised the same objection. I also might say that it isn't that we've singled out this region of the country for particular criticism. I believe we took much the same approach in our comments on the New England regional planning effort, also, in 1969. So we may be wrong, but at the moment we are consistent. (Laughter.) We have been holding to this view for some time now. MR. PANTOS: This discussion, I think, has been very useful for all of the Federal Cochairmen and for all of us who are working on this. I think we will just hold under advisement the question of how we proceed and at a less large meeting deal with this question. Let's go on now because time is growing short. We do have a few more reviews. Mr. Romney's office called this morning to ask whether Mr. Howard Ball could be excused from the meeting and Mr. Bullis is here in his place. Mr. Bullis, would you please give us the HUD comments. MR. BULLIS: You already have the written response from our Department which found this plan to be a very sound and ambitious one as far as the economic development aspects that you dealt with. Mr. France has already defended himself very ably in his introductory remarks against most of the reservations I think HUD would like to express about the plan. I am sure that the reasons for limiting the scope of attention to strictly economic development questions, as narrowly defined, was a good and sufficient one; however, we, I think, would feel that it should have provided some flexibility by including some of the questions of housing and environmental control, which were glossed over. Let's look at the question, first of all, of housing with a tremendously high percentage of the homes in this area being substandard and/or in need of serious rehabilitation, and the economic development plan that is set forth placing a very high reliance upon the attraction of additional industry. The locational factors that a firm takes into consideration embrace things like housing and community infrastructure, and if that isn't in place, if there isn't good housing for the development of this kind of industry, it won't come into the area, chances are. And the pollution problems that are generated by increased population and increased industrial loading is also one that makes me think that the plan ought to look to water and sewer programs and water and sewer problems as being so intrinsically wedded to the industrial development goals, that one can't occur, that industrial development can't occur, unless these facilities can be put in place. You are also in an area of development where most of the local governments that are going to be providing the primary services to new business or new populations-primary units of local government— are extremely weak in the services they offer. Strategies and plans should be included to strengthen these institutions and not expect that it is just going to happen by accident if industry does locate in an area. You also have identified an aging population in this area and a shrinking farm economy. Many of the older people probably go out of farming as they reach retirement age, and there may be a very primary need for housing for the elderly located in communities where health facilities are available. Thirdly, I think that this is where I feel least comfortable in saying anything and that is with respect to the development of tourism and recreation. You have based many of your hopes and projections on the ability to upgrade a large sector of your commercial lodging facilities and increase the occupancy rate to 65 percent, meaning a heavy use of winter recreation in the area. I have feelings that are probably based upon having lived in the north country myself and now having moved a little south. The people in the immediate market to the south of you, where most of the population is that you are counting on to use those facilities, don't have to go that far to find winter. They have it, so if they are going to go, they are going to go where the attractions for winter sports are considerably more than you have up there; namely, the mountains of Colorado or something like that. Perhaps rather than the development of commercial lodging in the area, housing may offer you a greater multiplier, and it may be the great potential of the area in terms of second homes for people in the large population area to the south of you. And, again, that reinforces the housing components that I talked about earlier. The housing industry developed to provide second homes under, hopefully, planned projects that would enhance rather than further destroy the environment, coupled with housing production for the elderly, coupled with housing planned to upgrade the existing stock of housing and provide new housing for workers they can hope to attract into the area would make more sense than an attempt to buildup a year-round recreation business that might not be there. MR. FRANCE: You have raised a lot of points. I did attempt, as you pointed out, to explain why we did not address ourselves specifically to a program for the expansion of housing facilities in the region. I guess I would have to say that at some point we decided that our responsibility for economic development must have some perimeter, some boundary, and that other agencies have a primary responsibility and that we don't really find that as our priority consideration. That may be very lame and very weak; however, we also have the feeling, and it's not a very well-defined feeling, but it recognizes that economic development in this country in the past has generated the capability for many of the services and many of the accommodations that the population needs. It goes back to the chicken and egg concept that someone mentioned earlier. We don't feel that the government can provide all aspects of living amenities for the people of this region or any other region, but that if we generate economic activity that that activity will support the natural development in some of these areas involving living conditions as such. And I guess that would have to be a rather fundamental view that we have and, as I say, though it's not well-defined, I think it's probably arguable. Nevertheless, we have had to impose some constraints on our approach as a matter of practicability, really, because we have not wanted to go before the Administration or the Congress with a program that is at once out of hand, almost, in terms of its dimensions. With respect to the points you raised on the extension of the tourist season, vacation and travel seasons, it's true the mountains of Colorado are perhaps more attractive to the skier than are the rather modest slopes of Northern Michigan, Wisconsin, or Minnesota. Yet there has been a very significant expansion of this type of activity in the region, and it has been augmented considerably with the invention of the snowmobile, so we do find a number of resorts that are extending their season to take advantage of this potential market. Our problem, really, in the vacation travel industry is lack of venture capital, which will support upgrading these facilities and I am not trying to overlook your point that we might better look for investment in housing for the elderly as an alternative to this approach. I don't think that second homes are going to come to that point. I don't think that any of these things are exclusive of one another, but we find that the resort industry in this whole area is essentially obsolete and people might have a desire to upgrade those facilities to improve them, but they cannot get capital to finance it. We have now underway a project which is hopefully going to demonstrate to the lending institutions in the region that they can pool small resources and spread the risks so widely that none of them would be subject to criticism by the bank examiners and thereby be able to provide long-term financing. We are not going to overcome the interest rate question, but that isn't really the problem. It's the term of financing that is the problem and we are trying to get to that problem, get to a solution of it. As to the second home market, there has been such a great development of lakeshore homes over the last ten years in this region that we are beginning to run into some deterrents in that area that worry us; primarily, the tax base. It's very easy for local assessors to find that lakeshore homes have a greater value chan perhaps the indigenous homes in the area; and consequently, the tax burden has been increasing on lakeshore property at a prodigious rate, and it's a very substantial problem in all three states. Then, if you add to that the necessary costs of maintaining lake quality— if you put that burden on the second home, the lakeshore home-you are, I think, going to find that these homes are not going to be built. To that end, we have been sponsoring a project which we call "inland lake renewal" to try to determine just what is going to be requisite in terms of water quality programming for development around lakes, because there are people who want to develop secondary homes on lakes. We are working with the University of Wisconsin, primarily, on this and they are working with some private sector people to lay out a model and to try to determine what the potential costs will be and how they can be met. 19 We know they are going to be substantial, but again, I guess we would have to say that we hope the economy, as it grows, will be able to support this type of cost. We are dealing with improbables here, and admittedly so. I guess all we can say is we that are looking at these imponderables and hoping that some direction will come out of the projects we have underway and that the mix, as we have tried to develop it, will be adequate and appropriate for economic development in the region. MR. PANTOS: 1 guess throughout the meeting we have been skirting and touching on really what is the developmental process and part of our own thinking internally has been guided by the fact that the economic development process is a process which takes many factors into consideration. The Secretary, himself, has placed a lot of emphasis on those factors which could be made more productive to utilize unemployed, underemployed, or unemployable people. He has placed emphasis on the improvement of infrastructure; transportation, communication, public utilities, and through the necessary incentives for private investment. But all of the indirect factors, at least as he sees them and in his definition of economic development, such as health and manpower, are also a very important part of the process. I think what we are talking about here in many of our discussions is the balancing of these factors and the priority assigned to one factor or the other, and what may be necessary in order to take advantage of the potential of one area, or removing a bottleneck in a particular factor. I think this becomes a continuing process, Al, that doesn't cease with any particular plan. We have next the representative from the Department of Agriculture, Mr. Henry L. Ahlgren, Deputy Assistant Secretary for Rural Development and Conservation. MR. AHLGREN: Well, thank you very much. 1 would like to speak from two points of view. 1 may have had at least one experience that is somewhat different from all the other agency people who are represented here today in that until recently, about six weeks ago, I served as a Chancellor at the University of Wisconsin. I served as the Governor's Alternate in our state on the Upper Great Lakes Regional Commission, and I have served in that capacity ever since the Commission was formed. MR. FRANCE: We stop at nothing to accomplish our needs. (Laughter.) MR. AHLGREN: 1 probably shouldn't be here today. MR. K1NLEY: Disqualified for conflict of interest. (Laughter.) MR. AHLGREN: That has been called to my attention. (Laughter.) MR. AHLGREN: I mentioned that only because of some of the comments that have been made here today, also in view of the kinds of reports that you see covering the work of the Commission and the budget and so on, the one thing that does not appear in the reports or in the budget reviews and the one matter that has been an item of great satisfaction to me, particularly, has been the involvement of people, individuals, in the three states and involvement of state agency people in the development of this plan. And I think one of the great byproducts of the Commission operation, at least in the Upper Great Lakes, has been the relationship that has existed over time between the people that are involved themselves in what is going to happen, the state agency people, in the development of a plan that you now have before you for review. I think it was a monumental task to put this plan together, and I am pleased and proud that agency people, state agency people, and certain Federal agency people, have been involved in the development of this plan. 1 think this is a real plus for the Commission activities. Now, the other part of this review that 1 want to present here is that of the Department of Agriculture. The Department has reviewed the five-year plan, and without going into any great detail, I would simply point out that it is the view of the Department that this document is very well prepared and it should provide an excellent base for the work of the Commission. The communication that Mr. France received from Assistant Secretary Cowden in the Department of Agriculture points out that, as now written, there seem to be certain omissions in the plan. This lias been brought out here today: specifically, sewer and water facilities are mentioned in our review letter. Health facilities are mentioned and a few other things. 20 But, in general, the Department of Agriculture is pleased and satisfied with the plan as it has been developed up to this point. MR. PANTOS: Thank you very much, Mr. Ahlgren, for those comments. Mr. Glenn Swanson from the SBA, Acting Director of the Office of Community Development, is next on the agenda. MR. SWANSON: Thank you, sir We reviewed this plan like the other agencies at the regional level and also, in Washington, and find that it coincides rather dramatically with many other things that we are doing in SBA today. It appears to us that this might be somewhat of a new guideline in the Upper Great Lakes region. As most of you probably know, we do allocate our resources, which are meager in many respects, to three general categories of assistance. In the first place, we strive to extend the assistance to deprived areas. These areas are typical of Northern Minnesota, Northern Michigan, and Northern Wisconsin. I do come from this part of the country, having been associated with the SBA program in Minneapolis, and I know how difficult it is to enter into an economic development program in the range area of Minnesota as well as in other parts of Wisconsin. I do find, however, that there are many areas where we become rather excited. We become excited about the prospects for tourism. We become excited about the prospects for winter resort activities, and we have done rather well, as you know, in some of these areas with SBA-type assistance. Beyond the deprived areas which, as I say, coincide with the Commission's goal of upgrading employment, we extend assistance, of course, to minority groups. There are minority groups within these three states, particularly on the Indian reservations. We feel here that there is a tremendous job to be done. I think that we owe it to the Indian population. I think we must reach out and assist these people in bringing about sound economic development, utilizing the maximum Federal resources. Then we go into the other area of assistance which is growth areas. Typically here we are striving to help upgrade the region in these parts of the country where they have not obtained comparable growth to the national levels, and we find in SBA that it is possible to attain such growth patterns by assisting communities that are not appearing on the unemployment tables; communities that have relatively high unemployment and communities that have, for a large part, old people as their populace. These communities need some spark. They need some direct assistance, and SBA has sought to help these communities in bringing about a better economic climate within their particular areas. Within the last year and a half, we have gone forward with a community development program. Rather than respond to demand requests for loans, we are now reaching out to small communities that feel that they want to go some place. We attempt to work with community leaders. We set up a community organization and through this community organization build an economic structure that will serve their particular purpose. We realize, of course, that there are many communities that do not hope to gain any degree of economic growth, but where the motivation exists for the people and the leader quality is present, there is ample opportunity for the government to work with them. In terms of resources, this would mean not a large staff of people to go out and work with the communities on a selective basis, but I would say a group of well-trained, SBA-type specialists to go into a community, hold regular workshop sessions with community leaders such as we have done in Antelope Valley, California; Slidell, Louisiana; Tacoma, Washington; and some other places in the New England area. These sessions serve to instruct the community leaders in what they must do to attain some degree of economic help. It's surprising to us to find out how little they know of the Federal structure; how little they know of the Federal programs; and when we appear on the scene, in combination with Labor, with Agriculture, with other agencies, there is much that can be accomplished. In the development process there are several steps that we usually go through. First of all, of course, there must be a workable organization. We must have community leaders that want to work again. We can do this in the central city areas. We can do this in rural communities, typically of 10,000 and under. If wc work with these groups, if they form a community development organization, this can become the vehicle for various types of SBA assistance, EDA assistance and other. 21 The organization would typically seek to assist all identifiable small business concerns who meet our standards and limitations as far as loan amounts are concerned. And they would provide a facility, they would accommodate a small business and create jobs. We could use our own community development programs for this purpose. These loans are made with loan maturities for 25 years, such as Mr. France has suggested as being one of the keys to the development process, and we can also use our relatively new program, which is known as the Lease Guarantee Program. Here we can guarantee leases for small firms that are seeking to gain access to facilities that are comparable to the triple A's attendant million-dollar network. These are places where SBA can do things that I feel are important. This is going on today. Someone has mentioned here this morning— must this be a new development program? Actually we need new guidelines, but each of the agencies, 1 think, is extending itself in many of these areas and accomplishing some of the objectives of the Commission. We have found in our agency that manufacturing is the prime industry to generate employment. In our own development program, about 30 percent of our loans are made to manufacturing, for the benefit of manufacturing firms. This is going to be typical, undoubtedly, in the Upper Great Lakes region. Beyond that, of course, we have extended service-assistance to retail facilities, such as St. Claire, Michigan. They went through a development process in the last eight years, and some of you have seen the results. It is rather dramatic. SBA assisted the Plaza of St. Claire by extending loans for 16 retail establishments. It's great. We want to do this more and more. We want to do this across the country. There are many communities, as I see it, across the northern areas that can learn from this experience. We feel that there is much to be done in the service field. We have a franchise program which is important to minority groups and to other small business dealers as well. The tourist field, as I mentioned before, is, of course, particularly attractive. Coming from the Midwest area, I recognize what is to be had in the northern part of our states. I can envision no more beautiful area than northern Wisconsin, and 1 would feel that this area has great potential if some of the small business proprietors were given an opportunity to grow and expand their operations. The thing that we are concerned with in the Commission report is the fact that there hasn't been evidence so far of the high degree of coordination with SBA programs. We have had a good relationship with the Commission-through our regional office in Chicago. I'm sure that it was the intent of the Commission to utilize our program, along with many other Federal programs; but 1 do feel, maybe through lack of knowledge of what we can do, what the Department of Agriculture can do in rural areas, that maybe this should be one concern and one area on which further emphasis should be placed. Thank you. MR. FRANCE: You raised some points which should have been covered and haven't been yet, and we'll go at them as fast as we can. I want to express our appreciation to SBA for the assistance that you've extended the Commission in some of its projects. The coordination here has been very good with Mr. Dwyer's office in Chicago, with Mr. Murray, and Mr. Sieben. In fact, we use your people as advisory committee members in a number of instances. 1 don't want to overlook the point you raised about Indians. As I am sure you all know, the problems of the various Indian reservations, the Reservation Business Councils, are very, very severe, and sometimes, almost, it appears beyond solution. You find very little language in this plan proposing to set out a viable program to meet the problems that attend our Indian population in the Upper Great Lakes Region. That, again, is done with intent. We've worked with just about all of the various reservations business councils and with the tribal councils, and we've come to the conclusion that the less we say about what we are going to do the better are our chances to contribute something meaningful to economic development for Indian populations. This is an area of great sensitivity, and, consequently, we want to approach it in a way which has some understanding as a foundation and a base. Right now, 1 believe we have seven ongoing projects involving Indian reservations in the Upper Great Lakes Region. 22 As a matter of fact, on January 14 and 15, we will have a three-state, inter-tribal conference, which we hope the Indians will run themselves. This will be devoted to whether or not the Indians want to take advantage of the wild rice market through new technology that has been developed with Commission sponsorship. We know that we cannot tell the Indians that they should take advantage of this market. We know that we are best suited to encourage them to take advantage of this market, and I am sure you are aware of these problems. You also mentioned the phrase "growth center", and in some quarters we should have ringing applause when you mention that phrase. I know you don't find that phrase used in this plan. That is not because we have not had experience with this concept, but rather because we have had experience with this concept. (Laughter.) The phrase "growth center" is a rather appropriate one to use in a lagging region, and we have three or four different euphemisms in the plan which, if you look closely, you will find mean "growth center". Planning certainly can't go forward without recognizing the importance of this concept, so we are well aware of it. We've sponsored studies determining growth centers, service centers, and their potential in the region. We are also aware that there is a difficulty in defining what a growth center might be. Some definitions which I have heard would exclude the Upper Great Lakes region and several other regions in this country from having a growth center at all. We don't have any communities of 250,000 population. We are aware that the community which appears to be declining today, when exposed to some assistance by way of a vocational educational institution or an industrial park or some other facility, may be a growing community tomorrow. And this, to us, is very important, and why in fact we've not written off any community, so to speak, in our approach to economic development. But certainly we are aware of those communities which have greater potential than others, and we tend to look to those communities to provide for sub-regional development, and I think the plan is really based on that approach. So I am glad you mentioned those two points, because they represent important ongoing efforts of the Commission, particularly the Indian program that we have, and the plan does not reflect day-to-day activities of the Commission and, I guess, should not. But we are aware- well aware of what SBA is doing in the region and, frankly, take advantage of you at every instance we can. MR. PANTOS: We have another presentation, and I might say that we will be on time in our adjournment. We'll try to adjourn at twelve noon, if we can, to get all of you away. We would also like to mention before the next presentation that we would like to have a few minutes reserved at the end to discuss where we go from here, which I think might be germane to the future of the plan. I'd like to call next on Mr. Harold M. Bailin, Deputy Director for Field Coordination of OEO. MR. BAILIN: I caught your hint. (Laughter.) MR. BAILIN: I promise not to take over 13 minutes, so as to leave more time in your department. MR. PANTOS: Right. MR. BAILIN: But one advantage of being last is that it is quite possible to be brief— most everything has been covered. We, notoriously perhaps, look at most problems somewhat differently and with different emphasis than other agencies, and this one is no different. Part of what I would have jumped on was answered just now in the discussion on Indians, and that stopped me from mentioning my experiences in Itasca State Park and the pow-wows in the old days. Do they still continue? MR. FRANCE: Yes, but not with the frequency or verve that they used to. MR. BAILIN: And also the hope that they still have corduroy trails in the park, maybe not the same logs that 1 put in there 35 years ago. MR. FRANCE: Itasca State Park is on our list for improvement with our tourism problem. MR. BAILIN: I would like to go back with the same ability that I had 35 years ago. I think one of the things that we are most interested in discussing with you is more joint planning, perhaps more than we know about. We were interested to discover that we haven't been receiving reports from our regional offices, so apparently they have been working with you. That's good to know. 23 And we are now discussing their views, because our views are supposed to be based on theirs. But we are doing some things in the region, not in your area, and not through the regions, but directed by our Office of Program Development, for instance, and I hope that you know about it. And you discussed tax incentives. You know in some places we are discussing the stimulation, if you read my report, of tax incentive programs, and it might be possible for you to utilize our funds and programs to help you arrive at some decisions on that. You should be in contact with our Office of Program Development, and if you have a minute afterward, Justin Jenkins from that department, who is working on that program, is here with me. The Opportunity Funding Corporation, which is about to take off, would be of use to you, as would our Community Development Corporations. All in all, primarily what I will say is that we have some things going that can be useful to you and perhaps your assistance will make the programs more effective. MR. PANTOS: Thank you very much. Our last review this morning will be on behalf of the Department of Commerce, the Office of Special Assistant, Regional Economic Coordination. We have conducted a number of in-house reviews and, as I mentioned at the outset, copies of these reviews are on the table in the back- specifically, four reviews that have been done by our office as part of the development review process. In addition to that, there have been six other reviews by other agencies in Commerce, individual agencies of Commerce, and those are also on the table in the back of the room, as are the reviews by the agencies that have particupated in this meeting. On behalf of the Commerce Department now, I would like to call on Mr. Alexander Christakis to present anything that has not been covered. MR. CHRISTAKIS: Yes, and it is not easy. It is particularly hard because my comments will be an attempt to try to summarize the reviews that have been made, both by Department of Commerce staff and also by independent consultants who have been retained by the Office of the Special Assistant for Regional Economic Coordination. I should say from the outset that these reviews were primarily oriented towards an assessment of the comprehensiveness of the plan, so they differ from the more functional orientations of the other Federal agencies that have reviewed the plan. The general consensus, as far as I can tell from reading those reviews, is that the Upper Great Lakes document needs to be strengthened primarily in two areas. The first area is what one might call the development strategy, and the second area is the criteria for project identification and selection. Both these areas are very important and represent an integral part of the comprehensive planning process; they should, however, be done on a continuous basis, and the continuity is mentioned here because it is very relevant. Now, insofar as the development strategy is concerned, 1 think that what has been identified by the reviews is that not enough attention has been paid to the various links among projects and among different sectors of the regional economy. For example, the transportation network that has been proposed for the region has not yet been appropriately linked to an anticipated population distribution for the region. Now, it is recognized that this is not a trivial exercise, however, one should make an effort to do something about important linkages. Also, the industry-by-industry analysis included in the plan is very good. Most reviewers thought that it was done very well. The locational aspects for each separate industry were taken into account, however, here again no attempt was made to integrate those locational aspects so that one generates an integrated and comprehensive plan, including the geographic manifestation of the industrial locational decisions. In summary, one might say that the plan really could improve to some extent in terms of what one could call the cross-impacts— the cross-impact effects, especially in view of the need for a developmental strategy. Now, the second area is the area of criteria for evaluation of projects and, in general, the whole evaluation procedure should be improved and elaborated. Again, here— and this point was mentioned by Mr. France-in this whole business of regional analysis the geographic dimension is a very important element in the planning and allocation of resources. For example, the plan is talking about closing the job gap and yet no explicit effort has been made to discuss where the new jobs will be created, i.e., to discuss the spatial aspect of the job gap and link the various projects, as they have been selected, to the goal of closing that gap. 24 Another point which has been brought up by the Department of Commerce review process is that some gaps in data and research could be identified more carefully, which would have improved substantially the credibility of the document. This point has been brought out by some other people here in today's review process. Now, in conclusion, 1 think that the general feeling among the reviewers has been that the document is very good insofar as the analysis of the present and projected social and economic conditions as well as the resource conditions for the region is concerned. The plan does a good job in analyzing both the regional economy and the potentials and the problems that are associated with the space-economy of the Upper Great Lakes region. But it looks like at least the reviewers felt as if the plan should be elaborated on the development of strategy, and in terms of the evaluation of programs and projects and, in particular, to try to connect the job gap goal to specific projects and to specific places within the region. As a final remark, I would like to say that, as stated by the Department of Agriculture representative, the most important payoff that one should associate with planning is the process itself, more than the document that is generated at a specific point in time. That is to say that the involvement in the planning process by the managers of the region is more important than the document that comes out, and it has been the impression of most people who reviewed the plan that behind the plan there is a continuous and healthy planning process. And with this, I think I rest. MR. PANTOS: Thank you very much. Al, would you like to make any closing remarks? MR. FRANCE: Just a point, so that we are all understanding some of the constraints within which we have had to operate: Number one, we do use an evaluation system with projects that come before the Commission, and it is a shortcoming that we have not incorporated that into the plan in more detail. It is a system which was developed for us by the University of Michigan, and we have found it to be very useful in literally applying priorities to the specific project requests that come before the Commission. And that, of course, is an ongoing system that we would contemplate using throughout this program. With respect to the spatial aspects of closing the job gap, here we have the same difficulty that we would have in defining growth centers in the region. I would admit freely that the regional commissions must come to grips with certain political aspects of development, and so, consequently, we have skirted the question perhaps, not out of cowardice but out of a practical realization of the problems that accompany a direct approach to the specification of given communities and areas for future investment. But that is not to say that we do not have a fairly clear idea as to where those investments and those developments should take place. MR. PANTOS: Now, as far as where we go from here, as mentioned at the outset of the meeting, the review process has been explicitly set out in the document which you have all seen. At the present point, we have completed the review by the Federal Advisory Council, and according to the review process, the Federal Cochairman and the Upper Great Lakes staff will now take those comments under consideration and revise the plan as appropriate and resubmit the plan to the Department of Commerce, together with a report of the disposition which they have made of the comments which have been received from this group and from the review elements. Then it will be the responsibility of the Office of the Special Assistant to the Secretary to make recommendations to the Secretary concerning the final disposition of the plan. The Secretary, under his authority, will then make his decision and submit his recommendation to the White House, notifying the Federal Advisory Council members of the various agencies represented here as to the action he has taken. The Federal Cochairman will inform the Commission, made up of the Governors of the three States, as to the Secretary's action. I think that Mr. France has already begun the revision of the document based on the early meetings that have been held with our own staff and other agencies within the Department. So I think the procedure is rather clear as far as where we go from here. 25 We have, as you have noted, made a complete record of this meeting and it will be printed. The record will also incorporate the written comments that have been made by all of the agencies as well as the consultants and the others who have participated and the full exercise will be recorded for use in further discussions by the Commission and also in Al's discussions with the Governors. One other point, and that is there are two other plans which are now before the agencies represented here for written comment. These are the plans of the New England and the Four Corners Commissions, and we expect to put them through the same process as that of the Upper Great Lakes plan. There are two additional Commissions which are in the process now of finalizing their plans: The Coastal Plains and the Ozarks Commissions; and I believe that early next year we'll have those plans put through this review process. I think it becomes abundantly clear at this point that the exercise that we've been going through calls for a very substantial Federal funding over the next five years, if these plans are to be implemented. That is obvious. The planning has not been done simply as an academic exercise; and if these plans or any portion of them, are recommended for implementation, then that raises the question as to how the implementation process would proceed. Rather than get into a discussion of that subject here today, because it is already noon, I think that what we would like to suggest-and, here, if any of you have comments to the contrary we would like to hear them-is that we develop a paper which sets out the options on methods of proceeding and then have another meeting of this Council for discussion of that point. I think the Secretary would value the advice of the Council on the question of implementation, and I think that perhaps, as we get into this more with the other Commission plans, we'll begin to, I think, appreciate more the implications of these plans in two respects. In one respect, what we have done here is identify, through the process of planning at the State and Federal level in the region, a number of priorities for public investment in this area. Certainly, if this planning process is to mean anything, this will have implications for the priorities of those Federal agencies which have funding responsibilities in the region. This raises, of course, the question as to whether those priorities are to be accomplished through a Commission budget or through supplementary funds through the agencies or whether those priorities are to be accomplished through some redirection of agency programming. Certainly, this is an important question. It's one which is directly related to the whole growth issue which we have mentioned in passing many times today and it's one, 1 think, which merits very serious consideration in order for the Commission program to continue, at least as it is now constituted. So, unless anyone has some other way of proceeding, 1 would suggest that we attempt to put down some of the approaches on this and look at them analytically and that we do have a separate meeting of the Federal Advisory Council on this. This is not a question of implementation of this plan but the question of implementation in general, because, if you'll notice the small print in the mandate of the Federal Advisory Council, it does talk about giving recommendations to the Secretary on implementation as well as on the substance of the plan. MR. STEWART: When will the transcript be ready and how many copies can we anticipate? 1 think it would be very helpful if the Ozarks Regional Council on Economic Development had a copy. MR. PANTOS: The proceedings of the meeting will be edited and printed, and we will make copies available to all interested parties. MR. BINDER: George, a point of information. 1 don't think you mentioned the date by which this Commission will have its revised report back to you. Is there any known date for that? MR. FRANCF: Well, I think we arc somewhat along the way in accommodating some of the written responses that have been made, but it would occur to me that we would be well advised to await the transcript of this proceeding before we proceed much further. So following that, I would hope that within two to three weeks time thai the Commission would be in a position to respond to the points raised at this meeting. MR. PANTOS: We all want to move as quickly as possible on this because 1 think we have a plan here, which has been generally accepted by most agencies and has been reviewed and found to be a good plan. There are. of course, major points that have to be reconciled, but, by and large, 1 think we have a plan that lias met with the general approval of most of the reviewing agencies and consultants. So, therefore, we are extremely desirous of getting this plan in final form from the Commission as soon as possible so that we can then proceed to the next step. I think that the other regional commissions which are now in the process of getting their plans together will benefit from this process. So I would hope that we will be in a position early next year to come up with the final version of the plan. MR. BINDER: Thank you. MR. PANTOS: Are there any further points or comments or observations? Well, I would like to thank you for your comments and recommendations and for the seriousness which you have attached to this problem. I would particularly like to thank everybody for staying until the very end. We look forward to seeing you at the Sixth Meeting of the Federal Advisory Council. Thank you. (Whereupon, at 12:07 o'clock p.m. the meeting was adjourned.) 27 4P .-m ( > (/.eft to Right) E. L. "Bud" Stewart, jr., Federal Cochairman, Ozarks; Chester M. Wiggin, jr., Federal Cochairman, New England; Assistant Secretary of Commerce Robert A. Po- desta; Alfred E. France, Federal Cochairman, Upper Great Lakes; and G. Fred Steele, jr., Federal Cochairman, Coastal Plains. Al France responds to Great Lakes Plan. question regarding the Upper APPENDIX A WRITTEN STATEMENTS OF EXECUTIVE AGENCIES 29 DEPARTMENT OF AGRICULTURE OFFICE OF ASSISTANT SECRETARY WASHINGTON, D.C. 20250 November 3 1970 Mr. Alfred E. France \ Federal Co-Chairman Upper Great Lakes Regional Commission Main Commerce Building Washington, D. C. 20230 *&<# 10 tf& Dear Mr. France * ***** The agencies of the Department of Agriculture have reviewed the Upper Great Lakes Regional Commission Economic Development Plan and Five-Year Program. The document is well prepared and should provide an excellent base for the\work of the Commission. The plan is not detailed, but should aid in developing operational projects. The attraction of new industry through tax incentives requires new legislation. We believe that any package should apply to depressed rural areas, rather than a single region. In Chapter IV, page 21, we believe that the consultant on electric power problems should consult with the rural electric cooperatives to improve the distribution of power in rural areas. We note that health services are cited as inadequate. Yet, the plan does not provide for rationalization of health services. Would Commission leadership aid in developing clinics where physicians could pool facilities and have better supporting services? Could scarce professional medical personnel be made more effective by using the skills of trained technical personnel, such as corpsmen released from military service? Limited attention is given to public facility development of water and sewer systems, adequate fire protection systems, and other public facilities. It is the experience of the Farmers Home Administration that resources are not adequate to meet needs on a timely basis. The Industrial Development Fund apparently will meet only "hookup" needs rather than system development or overhaul. Mr. Alfred E. France 2 There are limited opportunities to provide better employment within agriculture, but more rational use of available land resources could help. However, development of extensive beef enterprises may reduce total farm employment. We appreciate the opportunity to review the plan and look forward to its implementation. T. K. COWDEN Assistant Secretary DEPARTMENT OF THE ARMY WASHINGTON. D.C. 20310 1 6 NOV 1970 DECEIVED Mr. Roy Finger son Upper Great Lakes Regional Commission Room 2093, U.S Department of |\/Qy ] f , Commerce Building 14th and E Streets, N.W. Upper Great Washington, D.C. 20230 Lionel r*r . . es UWffl aissio a Dear Mr. Finger son: We have reviewed the Regional Economic Development Plan and Five Year Program you sent to us on behalf of the Upper Great Lakes Regional Commission. The report indicates that participation by the Department of the Army has been limited to building small craft harbors on the Great Lakes and to studies to increase shipping on the Great Lakes-St. Lawrence Seaway Transportation System. Currently, we have two additional major studies under way: The Great Lakes Basin Framework Study and the Upper Mississippi River Basin Survey. Representatives of your Commission are participating in these studies which, undoubtedly, will highlight water and related land resources problems of interest to the Corps of Engineers. The Commission's Regional Economic Development Plan and Five Year Program emphasizes increasing forestry production and processing into pulp, paper and other products. Since the pulp and paper processing industry is a large user of water, the adequacy of water supplies and environmental impacts should be examined. Currently, the North Central Division of the Corps is negotiating with the Commission to make a study of the economic potential of commer- cial ports in the Region. We are prepared to work with your Commission Mr. Roy Fingerson on this and other phases of your work, especially programs to clean up and restore lakes and shorelines. We appreciate the opportunity to review and comment on this plan. Sincerely ikx Robert E. Jordan, III Special Assistant to the aUbcretary of the Army (Civil Functions) THE SECRETARY OF COMMERCE Washington, D.C. 20230 September 15, 1970 Honorable Alfred E. France Federal Cochairman Upper Great Lakes Regional Commission Department of Commerce Washington, D. C. 20230 Dear Al: I have read the Upper Great Lakes economic plan prepared by your office and I congratulate you and the members of your staff for a job well done. While I wish to consult with the members of the Federal Advisory Council before giving you formal comments, I thought it would be helpful to you and to the members of your Commission to know that our preliminary appraisal of your work is in general decidedly positive. Attached for your use are the two independent appraisals prepared under the direction of Mr. George Pantos of my staff. I suggest that while the plan is being reviewed in greater detail by members of the Federal Advisory Council, your staff get together with Mr. Pantos to discuss the attached appraisals. I hope that this preliminary review of your plan will be helpful to you and the Governors of the Upper Great Lakes Commission in your forthcoming meeting. Sincerely, Secretary ov Co Secretary ov Commerce Attachments August 13, 1970 REVIEW NO. 1 (Prepared by SAREC) Review of Upper Great Lakes Regional Economic Plan and Five-Year Program General We have reviewed the above document in accordance with the basic guidelines which were endorsed by the Regional Commissions as drawn up in the July 14, 1967, Federal Register. Paragraph 307. 51 of this document pertains to comprehensive regional planning. The Federal Register states that the commission plans when fully developed should generally include the following elements: a. Review of prior studies; b. Framework for analysis; c. Review of the regional economy; d„ Review of conditions inhibiting growth; e. Review of major plans and pending decisions; f. Establishment of regional goals; g. Determination of development strategy; h. Review of existing program adequacy; and i. Criteria for project identification. Further to the above, the Federal Register in Para. 307. 52 suggests review standards which the Secretary of Commerce should consider. These are: a. Consistency with national economic trends; b. Interregional consistency; c. Transference of employment; and d. National benefits. BUY U.S. SAVINGS BONDS REGULARLY ON THE PAYROLL SAVINGS PLAN In the opinion of the reviewer, the UGL regional economic development plan represents an excellent takeoff for the planning process in that region, and notwithstanding specific comment citing certain problems or gaps of detail noted below, the most important criteria of the Federal Register on comprehensive planning have been met. With respect to criteria "a" (Review of Prior Studies), as recommended in Para. 307. 51 of the Federal Register, it can be safely assumed that a vast amount of prior research has gone into the UGL plan. Adequate reference to previous research and the sources from which the conclusions of the UGL document are drawn attests to this. Other criteria which appear to have been adequately met include "c" (Review of the Regional Economy) as analyzed in Chapter II of the UGL plan, "d" (Review of Conditions Inhibiting Growth) -- most of which is covered in the relevant Chapters I, II, III and IV, outlining the problems of the region and what remedial measures can reasonably be taken to improve the situation. Criteria "f" (Establishment of Regional Goals), is covered by the goals of bringing the region up to the national employ- ment average -- 4% unemployment rate-- and increasing per capita income with the national average as a working goal. Criteria "g" (Determination of Development Strategy) and n V l (Criteria for Project Identification) have all received fairly balanced treatment taking into consideration certain constraints on detail which a comprehensive document of this type imposes. The UGL plan, however, seems to be somewhat deficient in one area as outlined under the Federal Register (Para. 307.51) Section "b" (Frame- work of Analysis). Section "b" recommended that, "The regional plan should include an estimate of the gaps in research and data needed to conduct effective development planning". Employment and unemploy- ment estimates, cost and cost-benefit calculations are given without sufficient caution to the reader. The limitations of these estimates and projections should be clearly stated. Unintentionally giving the UGL plan an air of precision which it does not possess, will not enhance the end product. In actuality, the estimates^projections and global figures are based in many instances on crude, but perhaps the best available data. A brief chapter devoted to the limitations and constraints imposed by lack of data and methods of estimating together with the weaknesses inherent in these estimates would give the UGL plan a more unbiased and credible appearance. (More will be said on this as we proceed with a more detailed review of the UGL plan. ) Evaluating the UGL plan from the Federal Register Para. 307. 52 (Review Standards), suggests that the plan in seeking recommended ways and means to bring the UGL, region up to the national average is not an unrealistic goal. To this extent, it is reasonably consistent with the national economic picture and with foreseeable national economic trends. (Needless to say, bringing the lagging region up to the national average is an illusive goal, since the national average yardstick itself moves up as the lagging regions improve along with the rest of the country. This, however, does not appreciably detract from the national average as a useful measuring device. ) The question of interregional consistency (Section ,f b" of Para. 307.52) would require knowledge of and equivalent evaluation of other regions, in particular, those regions adjacent to the Upper Great Lakes and comparing these for consistency. Unfortunately, this type of review standard is at present generally not available, since the data base and knowledge with respect to adjacent areas is lacking except perhaps in isolated instances of Federal expenditures in certain categories (e.g., education, defense). As regards Para. 307.52, Section "c" (Transference of Employment) this is a problem with which the commission is well aware of. In Section "d" (National Benefits) the UGL plan clearly indicates the national benefits which would accrue if substantially higher employment, reduction of outmigration and higher per capita income could be achieved. This would naturally accrue to the country as a whole, considering the great cost of high unemployment and under utilization of resources evidenced in the lagging regions. Detailed Review A. Substantive . The Summary and Chapter I present a very good delineation of the problem which the UGL region faces, that is, the need to create more jobs and reduce unemployment together with upgrading of the per capita income of the region. (This may require an improvement of the industrial mix over that which the region currently possesses. ) The economic history of the region and current economic status as out- lined in Chapters I and II, containing the basic population and employ- ment estimates, give a solid foundation for coming to grips with these long-term problems by the remedial action recommended later in Chapters III and IV. - 4 - Part 3 of Chapter I appears somewhat tenuous. Looking at the graphical presentation following page 16, it shows that the Federal per capita outlays for Fiscal Year 1967 were $567 compared to the three-state area outside the region of $636 as compared to $861 for the U.S. average. A super- ficial glance at the block diagrams indicates that defense contracts probably account for the greatest discrepancy. Also housing and urban development expenditures naturally assume a greater proportion of the non-regional 3 -State area since the UGL region is essentially a rural and sparsely populated area of the country. The UGL plan indicating that the expendi- ture gap has been a "severe handicap" in the region's efforts to develop its economy, may have certain credence when comparing the region's lack of defense contracts to that of other areas which enjoy a booming local economy because of Federal defense outlays. This would suggest that very much higher public or private investments are necessary than is now the case in the UGL region. These need not necessarily be defense contracts which are currently being reduced somewhat on a national basis. The proportion of social security, agriculture, transportation, and certain other benefits, however, is equivalent or higher in the UGL region than in the three-state area outside the region or in the U.S. as a whole. This would suggest that much higher expenditures in these specific areas would need to be made to bring about a positive impact from the Federal sector side. Chapter II of the UGL plan gives a detailed sector -by -sector analysis of the region's economic and development potential. The manufacturing sector is detailed into 13 branches of industry with useful discussion of present trends and the future outlook of these branches of industry, both in terms of industrial mix and the subregional profiles pertaining to manufacturing. Insight is thereby obtained into origin of regional income and earnings by the population within the region whereby the specific areas of slow growth and stagnating conditions are revealed. Beginning on page 14, Chapter II, the manufacturing growth potential is examined in terms of the growth center concept. This theme is con- tinued in subsequent Chapter III under "Strategy and Goals" and repre- sents one of the more strongly developed parts of the UGL regional plan. Possible growth centers above 10, 000 in population are shown on a map following page 6 of Chapter III, assessing the potential for development of these towns and cities in the region. 39 clusters of population of 10, 000 and over have been selected. This represents an excellent beginning and could be the genesis of an evolving growth center approach to the region's economic problems. (In the more sparsely populated areas it may be useful to examine some of the towns which are presently - 5 - under 10, 000 in order to determine their potential and possible response to economic development assistance. Particularly in the northern country where tourism and other forms of economic activity can become a major asset, adhering to an arbitrary number -- be it 10, 000, 50, 000 or 200, 000 - must be tempered with the unique characteristics of the region itself before making a final determination that certain areas can not benefit from special economic help. ) Chapter II also contains a wealth of data concerning the highway system, airport development, water transportation, problems of education, vocational and technical educational programs, labor mobility, popula- tion characteristics, health care, minority populations and environmental considerations, so important to the region. Chapter III which is devoted to the planning and goals for regional economic development cites the historical forefront which Michigan, Minnesota, and Wisconsin have had in the regional planning field. For that reason, it is stated, the UGL regional commission has attempted to avail itself of all the information of a planning and research nature which these states have had to offer. Project evaluation, the need for governmental coordination and local participation appears to be adequately treated. Under program goals much attention is focused on the development of an employment goal. Employment targets are examined in terms of the estimated "job gap, " that is, the difference between the estimated level of employment at a future date without economic assistance , and the level of employment desired as a target or goal (an additional 165, 000). The regional effort, it is said would contribute to the creation of 100, 000 jobs. This leaves a gap of 65, 000 still apparent. The employment projections as depicted on the graphical presentation following page 15 are interesting but incomplete. The trend lines drawn from 1960 outward seem to indicate that the whole graph is a projection when in reality "actual" numbers and "estimates" are available almost to the very latest period (1969). The trend lines, therefore, as shown on this chart are misleading. Also the revised trend projection of 1, 044, 000 jobs by 1980 may be excessively optimistic when taking into consideration the tendency toward outmigration if jobs are not generated within the region. The UGL regional plan specifies a series of six investment incentives, such as accelerated depreciation, tax credits for employment expansion, reduced interest rates, and other forms of direct and indirect assistance for the private sector to induce self-sustaining economic growth in these regions. The case which the UGL plan makes is definitely a persuasive one and should be given serious consideration and strong support. It may be added that the arsenal of economic incentives and public infrastructure tools which are advocated are not mutually exclusive -- rather they complement each other and probably could not do an adequate job if not used in combination. This is brought out on page 24 of the study. A misleading impression of preciseness is conveyed on the tax incentive estimates. It is hoped this will not detract from this important tool for stimulating the private sector of the depressed regions. Also, an indus- trial development fund is recommended in Chapter IV( which might just as well have been included under Chapter III)whereby private entre- preneurs are given special assistance to locate in lagging areas. The feasibility of a development bank in the broader context of develop- ment assistance might also be worthwhile for investigation. A five-year program is laid out in Chapter V which is aimed at creating approximately 100, 000 new jobs at a total cost of approximately $870 mil- lion, thereof $382 million of which would be Federal funds and $164 million presumably would be matched state and local monies. The remaining $325 million is the estimated cost of the private investment incentive program such as tax credits and interest rate subsidies. The Upper Great Lakes five-year program is of plausible dimensions and the expenditures envisaged of approximately $870 million, averaging about $175 million per year, does not appear exorbitant. Actually, it may be on the conservative side. Undoubtedly, a serious undertaking with the intention of bringing about the creation of 100, 000 additional jobs in the region would require a public expenditure of this magnitude, and if successful would be well worth the expenditure cited. The actual amount of public investment and revenues foregone, amounting to an estimated $8, 700 per job, does not appear excessive when compared to programs of this sort in other countries. A certain inconsistency, however, appears in that it would require another $565 million of public investments to close the entire job gap if the block diagram following page 1 of Chapter IV, is interpreted correctly. We assume that absorption of the 65, 000 residual employables which are over and above the 100, 000 (by 1980) may be considered as too ambitious to be included in the current five-year program. In other words, the UGL plan implies that even with the expenditure of the $870 million in the five-year program, much still remains to be done to bring the region to the national average of 4% unemployment without the necessity of out- migration. On page 3 of Chapter V the return on investment is analyzed suggesting a ratio of 5. 3:1 in terms of benefits that would accrue from taxes paid by those employed in new facilities, and savings that would ordinarily have been expended to support these workers if unemployed on the welfare rolls. These estimates are open to question and during the period that the Commerce Department Regional Task Force on Tax Incentives studied the matter, numerous critiques were presented contesting the validity of these ratios. As the matter stands, much more research must be ex- pended to strengthen the underpinnings of this assertion. Also on Chapter IV, pages 7 and 8, discussion is devoted to the number of new jobs that would be created directly and indirectly in manufacturing and the additional direct and indirect employment over a ten-year period if a Z0 percent tax credit is implemented. The UGL document on page 7, Chapter IV, reads, "the additional direct and indirect employment over a ten-year period would amount to 45, 000 jobs. Taking into account the effect on still other activities, the figure of 50, 000 new jobs seems a realistic one. " One should not quibble about numbers which have a standard error possibly much greater than the difference quoted. Caution is therefore suggested that these statistics should not be taken at their precise quantitative value. The ratio of 5. 3:1 is by no means a "hard figure" to the last decimal point, and that common sense should temper these statements. The credibility of the UGL plan would thus be improved. A brief word on the industrial development fund which is described on page 8 of Chapter IV; it is a novel and interesting idea. This cost of $29 million over a five-year period for the purposes considered is not excessive. The improvement of industrial resources (e. g. , forest, timber, mineral studies, new educational programs) represents an innovative idea and provides a point of departure for a variety of new programs. The regional highway program which purportedly will have an $825 million shortfall over the next 10 years suggests that a good deal of additional research and detailed investigation be conducted on this important sector in terms of cost -benefit against other forms of economic development assistance. - 8 - The highway, airport and water transportation as a matter of organizational clarity might be better subsumed under the general heading "transportation requirements" B. Statistical and Graphical Presentations . Although the UGL plan is well supplied with graphic presentations and statistical tabulations keyed into the text, certain more detailed statistical tables could usefully be included in the appendix. As the UGL, plan is now written, there is only one fairly comprehensive table included on the last page of Chapter IV. This statistical table shows a breakout of Federal expenditures proposed in the five-year program. Even this table, however, might also include state and local expenditures, or a further statistical compilation might be added covering these estimates. Also, the additional $325 million estimated Federal contribution for busi- ness and industrial incentives to the private sector should be shown to give the total magnitude of expenditures which have been recommended in an earlier chapter on the economic development plan. Further to sugges- tions on the organizational and editing side, the present draft does not adequately identify the numerous graphical and statistical presentations in either page sequence or in series. If this were done and properly indexed under a separate index of graphs and statistical tables in the text (in addition to the suggested statistical appendix), it would be most helpful for easier reading and reference purposes. Somewhat more detailed and comprehensive labor force and unemploy- ment statistics showing the actual trends between 1960-1970 might be usefully appended to this document as backup to the discussion in the text. The map following page 4 of Chapter II, has Crawford County, Michigan, left blank. This oversight cannot be readily identified in the legend on the map. We assume the lack of data might be due to disclosure problems as indicated on the map following page 6. The graphical presentation following page 14, Chapter II, should have statistical backup. In particular, the graph should reveal where "actual" numbers can be delineated from "estimated" and "projected" statistics. The general upward trend lines as shown in this graph, aside from giving only the vaguest notion of anticipated growth rates could thus be made considerably more meaningful. C. Limitations of Data . Citing data limitations where appropriate would not necessarily detract from the UGL plan. On the contrary, the credibility of the plan would be enhanced by showing the actual gaps in previous research and the data still needed to improve its overall effectiveness. For example, the Upper Great Lakes regional labor force estimates and the steps being taken to correct these inadequacies such as do exist could be briefly stated. In the other areas where estimates have been used, such as in calculating the probable cost of the tax incentive program for the region, it may be useful to qualify these estimates. As stated earlier, the UGL regional economic plan represents a commendable job as a first effort and the remarks above are not to be construed as a "critique, " rather, as constructive suggestions intended to improve the final product. Since this represents a "first cut" effort, it may be useful if the UGL Commission plan is distributed to the other regional commissions for pur- poses of mutual benefit since the pool of knowledge incorporated in this document could no doubt be utilized by other commissions coupled with feedback for the UGL staff. U.S. DEPARTMENT OF COMMERCE Office of the Secretary Washington, D.C. 20230 ■e, October 1, 1970 *> MEMORANDUM FOR Mr. Alfred E. France, Federal Co-Chairman °<> Upper Great Lakes Regional Commission r Policy Developmer SUBJECT: Comments on Regional Economic Development Plan FROM : Steven Special Assistant^tb^the Secretary for Policy Development These comments are in response to a request to the members of the Intradepartmental Committee on Regional Economic Development. The following comments are made in the hope of giving constructive advice: The Commission should be commended in light of the following points : First, the plan gives evidence of careful balanced thought. It is both readable and informative in qualitative and quantitative sense. Indeed, many of the macro-statistical measures are advanced for this type of planning. Second, there is clear evidence of a regional approach within a national perspective. Third, the process by which the plan was written consisting of task forces, studies, and involvement of the states seems to be quite promising. Fourth, there is evidence of a T long sighted' approach in terms of suggesting innovative policy and incentives above and beyond current legislation. Finally, there is a notable shift of emphasis to promotion of industrial, commercial, and service development which tends to be the most promising in terms of a "jobs" policy. In light of future guidelines for the planning process, the following constructive points should be taken into account: First, program and sector priorities should be more clearly defined or, alternatively, proposed programs should be reduced in scope in order to provide guidance in view of scarce resources . Second, discussion of problems and potentials in the Region should be narrowed down in order to provide a more operational focus . Third, there seems to be a certain vagueness or ambiguity concerning strategy. One could read the strategy as either 'growth center' or 'worst first.' Fourth, some thought should be given to more involvement of the businessman into the work of the Commission in order to respond more immediately and imaginatively to immediate plant and job needs . Finally, some of the programs suggested (i.e., soil survey, timber extension, mineral mapping, agricultural research, and small park development), seem to be (on the surface) low priority in terms of the regional 'jobs' goals set forth. cc: Mr. George Pantos F „ rm CD-121 UNITED STATES GOVERNMENT A.O. 206-10) Memorandum U.S. DEPARTMENT OF COMMERCE OFFICE OF THF SECRETARY Alfred E. France Federal Cochairman Upper Great Lakes Regional Commission \j ' ,\> Robert T. Miki, Senior Economist / )y L Office of the Assistant Secretary > for Economic Affairs DATE: October 1 , 1970 In reply refer to: SUBJECT: Upper Great Lakes Plan As you requested, I have reviewed the final draft of the Regional Economic Development Plan and Five Year Program (dated August 1970), which was prepared by the Upper Great Lakes Regional Commission The report highlights clearly the forces historically that have shaped the economy of the region. It identifies adequately, I believe, the factors that inhibit and those that stimulate economic development of the region. The report lays out the Commission's recommended path to economic development, stressing public investment and entrepreneurial incentives for private investment. In this light, the compendium of projects seems to be consistent with the stated objective of filling the job gap. Alternative options of both strategies and projects presumably have been evaluated and their payoff potentials adjudged to be smaller than those presented in the plan. I raise several points, clarification of which may be helpful in more adequately specifying investment requirements. 1. The proposed programs of Federal and State-local expenditures and of incentives are each expected to contribute 50,000 permanent jobs, a total of 100,000 jobs over five years. Other things being equal, the five year plan would meet almost two-thirds of the 165,000 jobs estimated to be required. Although the plan devotes considerable discussion to the incentives program, it offers no contingency plan in the event a program of tax incentives is not adopted. Without the tax incentive program, only one-third of the employment objective would be achieved. Substitute programs would probably require additional Federal funding. 2. The relationship between public and private investment needs to be clarified. To illustrate the seeming inconsistencies: On page 111-19, $9,000 of public investment is said to "trigger" $24,000 of private investment. According to this line of reasoning, the $5^+6 million of public investment should "trigger" — if this is, in fact, a functional relationship — nearly $1.5 billion of private investment and not $1.2 billion, an estimate cited on Summary page 1 . Yet, page 1 1 1 — 1 8 gives another interpretation of the private-public investment relationship -- an interpretation that does not postulate a functional rel ati onshi pi BUY U.S. SAVINGS BONDS REGULARLY ON THE PAYROLL SAVINGS PLAN Historically, about 20 percent, or $6,000 of total investment has been public,- and the remaining $24,000 has come from the private sector. This breakdown, plus an unexplained "added public" investment of $3,000 cited in the chart facing page 18, suggests that the total investment per job of $33,000 is composed of $9,000 in public investment plus $24,000 in private investment. It is incorrect to use such a breakdown to connote causality as page I II -19 does in the use of the same figures. 3. The employment expected to be created from the $1.2 billion in private investment does not seem to have been taken into account. Page IV-3, for example, attributes the 50,000 jobs created to environmental (presumably direct Government) investments. k. Several charts would benefit from clarification. Specifically: In the chart facing page III-8, "added public" investment of $3j000 is added to a percentage breakdown . In the chart facing page IV-2, a figure of $565 million is cited, although there is no discussion of what it represents and where it cane from. I hope these comments are helpful to you. Pi in any way on these matters of clarification. Please let me know if I can help cd-121 UNITED STATES GOVERNMENT *,., Memorandum U.S. DEPARTMENT OF COMMERCE OFFICE OF THE SECRETARY Alfred E. France, Federal Cochairman Upper Great Lakes Regional Commission M*A" FROM : Ralph H. Sullivan Office of Assistant Secretary for Science and Technology SUBJECT: Upper Great Lakes Plan ^ >„ DATE: October 1, L970 In reply refer to: As requested, I have reviewed the revised Upper Great Lakes Regional Economic Development Plan. The plan is essentially directed toward providing the basis for new industrial opportunities and new jobs, thereby solving many of the economic and social problems of the region. As such, the plan appears to be complete, comprehensive, and forward-looking. Necessarily, the plan deals with basic building blocks for economic development, such as road networks, vocational education, and energy resources. This is all for the good and indispensable. As a follow-on to this five-year plan, attention should be directed to the utilization of scientific and technical advances to piggy-back new industry onto the planned improved infrastructure of the region. For example, other regions of limited resources are using the latest technologies to manufacture items such as plastic skis, knock-down furniture, and light-weight, high value products that can be shipped without prohibitive transportation costs. A conscious, systematic effort to introduce such industry could pay rich results, as witness the record of Vermont in developing sophisticated industry, and Utah in providing industry with required scientific and technical information. The increasing activity of the Department of Commerce in the areas of useful application of science and technology should aid in follow-on developments to the plan. The new National Technical Information Service will be able to deliver locally technical and economic information from the resources of the Department and other agencies. The Office of Field Services is expanding its efforts to provide the businessman with technical as well as economic assistance. The National Bureau of Standards is increasingly making the results of its work more readily available to industry. The fishing industry-related components of the new National Oceanographic and Atmospheric Sciences Agency will be directly helpful to the region. I trust that the foregoing will be helpful, assistance, please let me know. If I can be of further BUY U.S. SAVINGS BONDS REGULARLY ON THE PAYROLL SAVINGS PLAN THE ASSISTANT SECRETARY OF COMMERCE WASHINGTON, D.C. 20230 Mr. Alfred E. France Federal Cochairman Upper Great Lakes Regional Commission U. S. Department of Commerce Washington, D. C. 20230 Dear Al, At my request, members of our Office of Planning and Program Support reviewed the Commission's Regional Economic Develop- ment Plan and Five Year Program and we are forwarding herewith our comments. We believe that this effort is a considerable improvement over last year's Prospectus for Regional Development: First Year Investments. Last year, you will recall, we indicated that we thought the Prospectus lacked the broad analysis of the Region's problems and potentials. We also suggested that the emphasis on recreation and tourism was ill-timed because the major backbone highway system required to tie the Region to the mass markets of the south had been deferred, and that not enough attention had been given to commodity-producing sectors such as timber and minerals. However, the current document gives much more attention to these points and is much improved over last year's Prospectus. The Plan includes a number of other good features, some of which are mentioned below. 1. The section discussing the administrative and coordinative problems which beset a Regional Planning Commission provides good insight into the difficulties associated with joint local, state and federal programs. It also indicates that positive steps are underway to improve coordination. 2. The Plan includes an elaborate description of the Region's problems. The analysis of the problems and potentials of the lumber and mining industries is particularly good. 3. The individual slotting proposal developed in the manpower training program is constructive and warrants investigation into the feasibility of broader application. 4. The Commission appears to have worked productively with the three member states in developing a vocational -technical educational facilities construction program suited to the peculiar problems of the Region. Our reviewers also noted several aspects of the Plan which we believe might be expanded and improved in the future. 1. The job-gap statistic provides a useful target for regional development efforts, and provides a measure of total need. However, a more detailed analysis might provide some insight as to where the jobs are needed, and for whom. This could then be meshed with the job generating impact of the proposed projects to produce a more specific development program for "places. " 2. The Plan states that the Commission proposes to generate 100, 000 jobs, half of which are associated with private investments based on a proposed system of federal tax credits and the remainder with environmental improvements. Because the proposed environmental improvements projects, such as highways and airports, are described in general terms, it is not clear what the specific impact of the proposed actions is expected to be. We suggest that future planning efforts endeavor to identify the anticipated employment opportunities associated with all project proposals. We understand that a meeting to discuss the Commission's Plan will be called for late in October. Mr. Victor Kimm, Acting Director of Planning and Program Support is available to represent us at the meeting and discuss our comments in more detail. We hope that our comments are useful and will be of assistance in strengthening future planning documents. We look forward to closer cooperation with the Commission. Sincerely, Robert A. Podesta Assistant Secretary for Economic Development cc: George J. Pantos UNITED STATES GOVERNMENT Memorandum U.S. DEPARTMENT OF COMMERCE OFFICE OF BUSINESS ECONOMICS SUBJECT: DATE: October 6, 1970 Mr. George J. Pantos, Special Assistant to the Secretary for Regional Economic Coordination Department of Commerce In reply refer to: Robert E. Graham, Jr. , Chief Regional Economics Division yfv/V Office of Business Economics ^7^ Upper Great Lakes Regional Economic Development Plan The report on the Upper Great Lakes Regional Economic Development Plan is unusually comprehensive. It contains a substantial amount of descriptive analysis which sheds light on the region's problems and describes the course by which the region arrived at its current economic status. The report would be more complete and useful, however, if several areas were treated more explicitly. First, a statement regarding the policy assumptions underlying the proposed plan for the Upper Great Lakes would be helpful. That is, does national policy call for the rate of population growth in each area to be approximately the same, with no net outmigration from an area, or is this implied policy one directed to the Upper Great Lakes area only? Is this policy to be accomplished without consideration of its effect on the national economy? Has adequate consideration been given to a comparison of the region's resource base and its population? It may be that the current net outmigration is needed to bring the two into a balance which is justified by national efficiency considerations and which is possibly inevitable in any event. These questions regarding population policy are raised because they seem to be among the implicit aims of the report. The plan calls for two types of action programs. One is designated to improve the resources of the area -- human and natural -- and, as a result, improve the area's competitive position as an economic producer. Improvements in the region's transportation and vocational - technical education systems exemplify this type of program. The re- port would be more useful if it included an analysis of the effect of the proposed programs on the region's production capacities. Such analysis would specify the type of industries which would respond to the program and tell why the response. Again, how would the proposed improvements change the area's competitive position from a production or marketing standpoint? (More) BUY U.S. SAVINGS BONDS REGULARLY ON THE PAYROLL SAVINGS PLAN The second type of action program calls for tax incentives such as tax reductions (corporate and personal) and investment credits. This portion of the plan rests upon subsidies rather than basic improvement in the area's economic structure as a means of increasing production. While subsidies may be necessary as a "pump primer", unless they are accompanied by measures that will lower costs of production in the area the temporary nature of their effects should be recognized. More- over, the validity of the comment that the proposed tax credits "... will lead to increased revenues much greater than the temporary loss" (Chapter IV, page 1) would seem to be questionable. For such a favor- able situation to develop, it would be necessary for the tax incentives to cause a net increase in regional income over and above what could be gained via alter native^of these funds. Since the plan gives little indication of improvement in the region's basic productive capability, I assume that most of the anticipated increase in production in the Upper Great Lakes, should it occur at all, would represent a geographic redistribution of economic activity rather than a net increase in the total. If this is the case, increased tax revenues anticipated in the future in the Upper Great Lakes would probably be offset by reduced revenues in those areas which suffered a reduction in economic activity. A regional plan should be oriented more closely to conditions in the region to which it pertains than is the case here. That is, the Upper Great Lakes Regional Economic Development Plan appears to be very general and probably could be applied to any area of the country as well as to the Upper Great Lakes area. This generality implies a failure to address specific problems, the solution of which might be expected to improve the productivity of the area with regard to specific lines of economic activity. The Commission report refers to special projections which it had pre- parede specially for its use. Such projections are essential to economic development planning, but I would suggest two modifications where projections are called for in the future. First, the projection should be more comprehensive than the one requested by the Commission appears to be. That is, to be most effective a projection should cover the entire economy and be prepared in sufficient detail so that probable problem areas can be identified and specific remedial measures made a part of the overall plan. Secondly, the Regional Economics Division has completed a set of pre- liminary projections covering the entire Nation on a regional basis. The projections are uniform among the regions thereby making possible interregional comparison. In addition to identifying future problem areas, the projections form a framework for measuring quanti- tatively the economic impact of any proposed program. 3. I would urge that the Department utilize this projection program of the Regional Economics Division instead of having each Commission develop, or have developed for it, independent, noncomparable projections which are duplicative in purpose. This would be in the interests of economy and would also produce data which are interregionally comparable thereby giving the policy makers useable information on which to base allocative decisions. October 14, 1970 U.S. DEPARTMENT OF COMMERCE Bureau of the Census Washington, D.C. 20833 OFFICE OF THE DIRECTOR subject Upper Great Lakes Plan From: Mr. Alfred E. France Federal Cochairman Upper Great Lakes Regional Commission Walter F. Ryan & a£OV /T/^ Associate Director / *+ Assistant Director for Operations Review of Five Year Plan In reviewing the Great Lakes Regional Commission's Five Year Plan, we have focused our response so as to be consistent with the area of review assigned to FACRED . Furthermore, the Federal Cochairman, Alfred E. France, has indicated in his foreword that reviewers of this plan will recognize that some aspects of economic development are touched upon only briefly. Therefore, our response is not intended so much as a criticism as it is to outline our position with respect to those admittedly briefly covered aspects. One of the most important recommendations is that the plan be made available to the 0E0 Regional Office in Chicago, and to such 0E0 Headquarters divisions as Economic Development Division, OPD. This should go a long way in making it possible for 0E0 anti-poverty planning to be keyed into planning of other federal agencies (perhaps this has already been partially done, but the importance of this step justifies repetition). In connection with this recommendation, it should be pointed out that many of our CAAs are increasing their activities in the area of economic development. Within the next several months, we will be discussing with our Regional Offices how the Economic Develop- ment Division can give them more assistance in developing their economic development programs. Getting back to the specific area to which we would like to see more attention given to the plan, we would like to mention the following: 1. Long range forecasts for specific growth centers within the Region and their implications for this plan; 2. The advantages of consolidating political subdivisions; 3. The use of water transport linkages to the south (rather than just the Great Lakes) ; 4. The role and use of higher educational institutions in developing the natural, human, industrial and financial resources of the areas and in reducing the emigration of brainpower; 5. The potential for production aimed primarily at meeting local consumption needs; and 6. Ways other than through increased employment in which low and middle income residents can more equitably share in the economic development of the areas. In general, it appears that the overall thrust of the plan is based on a simple formula of large infusions of capital at the expense of concentrating on the internal development of resources and the retention within the region of the income that is developed. Notwithstanding those areas to which we should prefer more attention be given, we do feel that the plan was well done and provides a comprehensive summary of the problems and economic resources of the area. The mechanism of the review process will, we trust, provide an opportunity for a real exchange in ideas and will result in an improvement in the plan which can be based on the work that has been done up to this time. Particular notice is made of several suggestions in the plan which have been considered or are now being planned by 0E0. One is the 20% federal income tax credit on private investments. Economic Development Division is currently considering a simulation of 3 tax incentives, one of which is very similar to the one proposed in the plan. A copy of this proposal is attached. It is possible that at some point during the year 0E0 could make a decision to use the Upper Great Lakes Region as one of the experimental areas to conduct our simulation in subsequent years. Although this is not intended as a preliminary decision to do so, it simply points out one area where joint discussions might be mutually beneficial. In any case, we do think that tax incentives based on investment credits alone are not sufficient and that consideration should be given to the other tax incentives which are included in our attached proposal. Another area in which 0E0 activities could be productively coordinated with those of the Regional Commission is in conjunction with the Opportunity Funding Corporation and the Community Development Corporations, which we have in Minnesota and Wisconsin. In addition to the tax credit, the regional plan provides for $29 million to be made available to an industrial develop- ment fund which would provide such things as access roads, rail links, sewer lines and special manpower training. It certainly seems to make sense to combine our respective activities if at all possible. I. Program Area: Economic Development - 232 II. Program Type: Demonstration III. Program Title: Anti-Poverty Tax Incentives - Simulation Experiment IV. Background: The use of a tax incentive program is to effect and achieve an intro- duction of capital and technical business expertise into poor areas, under certain specialized conditions. The poor lack a great deal more than money. Most lacking are those resources — human, social, and economic— with which to generate steady, livable incomes in poverty areas. Especially the mechanisms and institutions by which money is generated are missing. For this reason, the economic development programming of 0E0 is concerned with economic institution- building. That is, the ability to change the environment, creating the means by which they can help themselves by joint, concerted effort has to include economic development. The poverty area is underdeveloped in those institutions— businesses industries, fiscal and financial units. How to build the necessary institutions in the economic sector becomes a priority problem for the development of these impoverished areas. Under Title I-D the first steps have been made in this direction. V. Program Objectives: To develop a program(s) using the tax system in creating conditions under which private enterprise, using its capital and know-how, can assist in the creation of viable business to be eventually spun-off, enabling the poor to become owners of productive enterprises. The need to experiment with new methods of stimulating the economic growth and strength of areas in which the poor now live and work is essential to a long term anti-poverty strategy. These means must include: a) a local development group; b) private enterprise; and c) federal resources. The means must include a local development group, because without self-help and local control the interests and resources of the local area are often overlooked. As we have learned over and over again, well-conceived anti-poverty programs will not work unless the poor play an appropriate role in their direction. The means must also include private enterprise because that is where know-how and capital is mobilized and only with strong business support can any broad economic program succeed. Finally, the means must include federal resources because the crisis of the city cannot be handled only with local and private funds alone. - 2 - VI. FY 71 Funding Recommendations: A. Title: Anti-Poverty Tax Incentives - Simulation B. New Program C. Hypothesis Changes in tax legislation can create an incentive to attract well-established companies into special partnership with CDC ' s and that such partnerships can result in viable economic ventures for ghetto or rural depressed areas. The ultimate objective is to bring industry into a poor area, under a joint venture worked out between an established company and a CDC and to gradually spin off ownership of the new enterprise through the sale from the initial contractor to the community. D. Demonstration: 1. Initial research conducted by the Center for Community Economic Development, "Preliminary Notes for a Field Experiment to stimulate Anti-Poverty Tax Incentives". 2. Robert S. Robin, "Private Enterprise and the Poor does a Partnership Make Sense"? An analysis of the fiscal aspects of the Community Self Determination Act. E. Role of Other Agencies and Groups: In setting up the project the involvement of the U. S. Treasury will be mandatory. In addition, contacts will be made with the U. S. Chamber of Commerce, National Association of Manufacturers and other such organizations for involve- ment in the planning and selection of firms. F. Universe of Effect: A successful demonstration and the adoption of tax incentive provision by the Congress could affect the economic future of many poverty areas . G. Project Design: In general terms, the approach assumed here involves a CDC and an outside firm agreeing to establish some enterprise within the poverty community. The outside firm would provide the know-how and all or part of the capital for setting up the enterprise. Once the enterprise was successfully started and local managers trained, the CDC would buy out the outside firm's interest in the project. Tax incentives would enhance other motivations for getting the outside firm to enter into a turnkey arrangement. At various stages the outside firm would receive incentives in the form of tax credits and extra business deductions to induce it to overcome the inertial forces which have kept business from operating in impoverished communities. In addition, the tax credits could also serve as a source of need capital for the CDC. There are three different kinds of tax incentives to be stimulated in the proposed experiment. First, there is an " anti-poverty investment " credit against the total federal tax liability of the outside firm--a discount, of the amount of federal taxes to be paid—based on the firm's investment in the poverty area. Second, there is a local payroll allowance incentive — a business deduction in addition to the regular payroll expense deduction based upon the size of the payroll in the new venture and certain related employee expenses. The third is a sustained profitability incentive which will reduce the tax liability on a scale which varies inversely with the sale price to the CDC. H. Relation to future years: It will take four to five years of full operation to demonstrate the feasibility of the model. However, there would be significant milestones passed from the second year on that an objective evaluation could give us the information to make decisions on whether or not the model can be expanded and replicated by 0E0 or other agencies. It is significant to note that the costs would be obligated during the first year to insure the involvement of the interested parties. I. Duration and A-sociated Costs: If we decide to explore the entire possibility and start some demonstration models this FY, a conservative estimate for two projects would be approximately $2,000,000. If we decide to just continue the development phase of this model the costs would be: Developmental and Assessment 2-Demonstration Projects 3-Demonstration Projects and Evaluation Projects 71 $ 200,000 72 $2 ,000,000 73 $3 ,000,000 J. Policy Significance Should the program succeed, it would lay the foundation of a national effort to engage private enterprise in developing ghetto areas. The advantages of undertaking such a program are both political and programmatic. It is an opportunity for 0E0 to directly involve the business community in poverty programs in a meaningful way. It is a means of bringing sound business assistance to the poverty neighborhood on a partnership basis. In addition, it will enable us to get important information on the costs of doing business in the ghettoes. Without a much better fix on these costs no national program of ghetto economic development can be costed out. U.S. GOVERNMENT Small Business Administration Washjngton, D.C. 20416 OFFICE OF THE ADMINISTRATOR Honorable Alfred E. France Federal Co-Chairman Upper Great Lakes Regional Commission U.S. Department of Commerce Washington, D. C. 20230 Dear Mr. France: As a member of the Federal Advisory Council, we have completed our review of the revised Upper Great Lakes Economic Development Plan. We find the Plan to be comprehensive and a logical approach to the long-range development of this great region. Of special interest to the Small Business Administration in the review process is the appraisal of problems and solutions in the development plan and identification of areas of cooperation with the Regional Commission. We are enclosing a summary of our findings and recommendations. We will look forward to further participation, however, in our combined effort to reach the Commission's goals. Sincerely, Einar Johnson Deputy Adminis Enclosure SMALL BUSINESS ADMINISTRATION REVIEW UPPER GREAT LAKES REGIONAL ECONOMIC DEVELOPMENT PLAN AND FIVE YEAR PROGRAM The Secretary of Commerce, Maurice H. Stans has set forth the principal purposes to be achieved by this review process, and the desired scope of the review by the Federal agencies, which are represented on the Federal Advisory Council for Regional Economic Development. (FACRED) The following areas are of interest to the Small Business Administration: 1. To inform the review elements of regional problems and proposed solutions by the Upper Great Lakes Regional Commission. 2. To permit review elements to identify areas of cooperation with the Regional Commission. With respect to the FACRED REVIEW , consideration has been given to: A . Revie w for conflicts in authority, jurisdiction and legislation : The proposed five-year program of public investments, demonstrations, and legislative recommendations does not appear to conflict with SSA authorities. B . Review for priorities and timing from the standpoint of the Agency: Commission Priorities: The Commission's top priority is to reduce within a 10-year period the Region's high unemployment rate which is considered the Region's most serious problem. A related goal is to stem the high rate of out-migration, chiefly among the Region's young population. A major goal is to help close the gap between the Region's rate of economic growth and that of the Nation as a whole. Prioriti es from the standpoint of SBA: 1. To stimulate small business in deprived areas. Although most areas of our country continue to enjoy growth and prosperity, we find msny regions which suffer from high unemployment, out-migration and low median family incomes. These economic conditions exist in both urban and rural com- munities. In keeping with national goals it has been the policy of SBA to allocate a reasonable portion of its resources to such deprived areas. By extending assistance to existing small businessmen in these communities, SBA can usually improve their economic conditions. U.S. GOVERNMENT Small Business Administration £■>. ■" .\ v Washjngton, D.C. 20416 OFFICE OF THE ADMINISTRATOR Honorable Alfred E. France Federal Co-Chairman Upper Great Lakes Regional Commission U.S. Department of Commerce Washington, D. C. 20230 Dear Mr. France: As a member of the Federal Advisory Council, we have completed our review of the revised Upper Great Lakes Economic Development Plan. We find the Plan to be comprehensive and a logical approach to the long-range development of this great region. Of special interest to the Small Business Administration in the review process is the appraisal of problems and solutions in the development plan and identification of areas of cooperation with the Regional Commission. We are enclosing a summary of our findings and recommendations. We will look forward to further participation, however, in our combined effort to reach the Commission's goals. Sincerely, Einar Johnson Deputy Adminis Enclosure SMALL BUSINESS ADMINISTRATION REVIEW UPPER GREAT LAKES REGIONAL ECONOMIC DEVELOPMENT PLAN AND FIVE YEAR PROGRAM The Secretary of Commerce, Maurice H. Stans has set forth the principal purposes to be achieved by this review process, and the desired scope of the review by the Federal agencies, which are represented on the Federal Advisory Council for Regional Economic Development. (FACRED) The following areas are of interest to the Small Business Administration: 1. To inform the review elements of regional problems and proposed solutions by the Upper Great Lakes Regional Commission. 2. To permit review elements to identify areas of cooperation with the Regional Commission. With respect to the FACRED REVIEW , consideration has been given to: A . Review for conflicts in authority, jurisdiction and legislation : The proposed five-year program of public investments, demonstrations, and legislative recommendations does not appear to conflict with S5A authorities. B . Review for priorities and timing from the standpoint of the Agency: Commission Priorities: The Commission's top priority is to reduce within a 10-year period the Region's high unemployment rate which is considered the Region's most serious problem. A related goal is to stem the high rate of out-migration, chiefly among the Region's young population. A major goal is to help close the gap between the Region's rate of economic growth and that of the Nation as a whole. Prioriti es from the standpoint of SBA: 1. To stimulate small business in deprived areas. Although most areas of our country continue to enjoy growth and prosperity, we find many regions which suffer from high unemployment, out-migration and low median family incomes. These economic conditions exist in both urban and rural com- munities. In keeping with national goals it has been the policy of SBA to allocate a reasonable portion of its resources to such deprived areas. By extending assistance to existing small businessmen in these communities, SBA can usually improve their economic conditions. 2. To promote minority entrepreneurial opportunity. Minority groups - generally have not had an equal opportunity to enter the mainstream of our national socio-economic life. While minorities constitute 15% of our total population, only 3% of business entrepreneurs are of this group. Since financing is vital to getting started in business, SBA can play an important role by allocating a portion of its resources to this deserving cause. The members of the minority groups, of course, include American Indians. In each of the three states comprising the Upper Great Lakes Economic Development Region, there are Indian reservations. The Commission's report states that l 'most Federal and state programs seeking to alleviate poverty among the Indians have fallen short of the mark." within 3SA, we have made a concerted effort to assist the Indian tribes in achieving many of their economic goals. We would anticipate that similar assistance would be provided in the Upper Great Lakes Region. 3. To promote small businesses' contribution to economic growth and competitive environment. Under the Small Business Act, we are obligated to assist small businesses in gaining access to credit. This is important because small business provides one-third of our gross national product, and small business provides more than 407, of our total national employment. SBA is dedicated in extending assistance to small business concerns that contribute to the growth and development of our Nation. C . Revie w for Relationship to Existing Policies of the Agency: As indicated earlier, SBA ' s programs which are designed to stimulate small business in deprived areas, and to promote minority entrepreneurship are closely related to the Commission ' s program gosls. SBA is equipped with many tools to help local communities increase employment opportunities and accelerate their rate of economic growth. These tools include both management and financial assistance. Moreover, SBA's economic development program is specifically designed to implement the Commission's major goA industrial development is jobs. To generate employment opportunities, the emphasis within SBA, in the Nation's slower growing areas with high unemployment rates, has been on manufacturing, because manufacturing is still, for the country as a whole, the largest single source of wages and salary payments. The Commission' s Plan indicates an emphasis on the newer growth industries in the Upper Great Lakes Region to stimulate its economic development. These faster growing industries in the Region, during the period 1960 through 1967, were machinery (electrical and non-electrical), fabri- cated metals, textiles and apparel, and transportation equipment. The latter includes boats and accessories, trailers, campers, and a variety of specialized items, mostly associated with recreation. Much of the Region's transportation equipment manufacture is, thus, in the non- automobile segment of industry. Such miscellaneous manufacturing industries producing cement, stone, clay and glass products, leather goods, plastics and rubber products, sporting goods, toys, and precision instruments have also enjoyed a healthy growth rate in the Region. Among the resource-based industries, several pulp and paper products offer growth possibilities. Most of the recent industrial growth has oeen in the 24 counties in the southern part of the Region. The 95 remaining counties had a net loss in manufacturing employment of 3.87=,. The north enjoys relatively little secondary manufacturing. The goal is to extend the Region's industrial development northward. The largest share of the Region's future industrial growth is expected to be in the machinery, metal working, transportation equipment, and apparel industries. Many of these offer opportunities for small business. The fabricated metal products industry, which consists of many small plants and a few large ones has more "home grown" enterprises than any other category and offers wide opportunities for local entrepreneur- ship, the Commission's Plan points out. In the textile and apparel industry which is labor intensive, the Plan calls attention to the opportunities for small specialty firms featuring specialized sportswear as a supplement to other recreation-oriented goods produced in the Region. (Ch.I) SBA's financial assistance programs are designed to assist small businesses in the above-mentioned growth industries of the Region. Despite the emphasis on manufacturing in the slower growing areas of the country, SBA has not neglected other sectors. It uses a substantial portion of its resources to assist businesses in the retail trade sector, with the aims of increasing not only more employment opportunities, but greater competition and resulting lower prices. SBA also assists eligible small firms in the services industries, one of the fastest growing sectors in our economy. In the service- oriented field, SBA has become increasingly active in the franchising area with the aim of increasing minority participation, in particular. The Commission's report points specifically to the need for a franchise operation in the northern part of the Region which would operate a truck line to bring supplies and pick up shipments on a daily schedule, (p. 9, Ch.I) No mention is made, however, of SBA's potential in this regard. Tourism: Tourism is one of the most important economic activities of the Region. Tourists who use commercial lodgings spend more than $300 million annually within the Region, the Commission's report points out. This sum does not include hundreds of millions of dollars spent for food, entertainment, gasoline, camping supplies, boats and related equipment. Nor does it con- sider such indirect benefits as the local tax base created by an estimated $2 billion invested in privately owned cottages, permanent and part-time employment, or the support and supply industries which serve the resorts. The Commission's Plan estimates that with proper development, management, and promotion, the number of tourists could be more than doubled and the expenditures of tourists in the Region could be tripled within the next decade. These figures are based on a private and public investment in private accommodations and public facilities of approximately $1.2 billion. Since most of the Region's existing resorts are now open only in the summer, the key to year-round operations - the Plan's aim - is winter tourism. At present, small operators dominate the tourism industry, the report points out. The aim, however, is to attract large operators through private investment incentives. The small resort owners, the report states, need more direct credit assistance to modernize, expand, and operate their properties. At the same time, the report contends that the present tourist facilities within the Region do not meet the demands of many of today's travelers who seek much more elaborate facilities. The plan calls for the development over the next 10 years of new projects, such as "high quality resorts with skiing, golf and convention facilities, and new year-round vacation home resort communities." (p. 41, Ch.II). Presumably, the present small-scale operators will provide supply and service functions. The report points to the opportunity for the local communities to encourage private investment on a planned basis, which can redound to the benefit of private investors as well as the communities. Alert communities, the report states, will plan for marinas, golf courses, restorations, and other amenities for visitors. Technical counseling services will be offered to small operators of private tourist facilities and to communities interested in improving their services to tourists. SBA can play an important role in the implementation of the Commission's goals in the development of tourism in the Region. The various types of financial and management assistance programs would appear to be of prime importance in carrying out this phase of the program. E . Areas of Cooperation Between SBA (A Member of FACRED) and the Re gional Commission . As indicated earlier, one of the principal purposes of the review process for the Development Plan is "to permit review elements to identify areas of cooperation with the Regional Commission." The subject Plan states that "particular stress was laid on coordinating plans and programs of Federal, State and local groups in order that they will have a more favorable impact on regional economic development." The report also points out that "a primary requirement for the development of the Commission's 5-year plan was to take into account the plans of Federal agencies for investment in the Region so that Commission resources would not overlap or duplicate them but, on the contrary, would fill missing links in the development of the economy." At the same time, the report points out that "in almost all instances, Federal agencies have found it difficult to project specific expenditures and programs Jji the Region..." (p. 11, Ch. Ill) Our study of the Commission's Development Program and 5-year Plan does not reveal a high degree of coordination with SBA's programs, many of which are closely related to the Plan's goals. APPENDIX B EXECUTIVE ORDER NO. 11386, DATED DECEMBER 28, 1967, ESTABLISHING THE FEDERAL ADVISORY COUNCIL 79 Presidential Documents Title 3 — THE PRESIDENT Executive Order 11386 PRESCRIBING ARRANGEMENTS FOR COORDINATION OF THE ACTIVI- TIES OF REGIONAL COMMISSIONS AND ACTIVITIES OF THE FEDERAL GOVERNMENT RELATING TO REGIONAL ECONOMIC DEVELOPMENT, AND ESTABLISHING THE FEDERAL ADVISORY COUNCIL ON REGIONAL ECONOMIC DEVELOPMENT WHEREAS the proper discharge of Federal responsibilities under the Appalachian Regional Development Act of 1965 (79 Stat. 5, 40 U.S.C. App.) and the Public Works and Economic Development Act of 1965 (79 Stat. 552, 42 U.S.C. 3121 et seq.), as amended by Public Law 90-103, 81 Stat. 257, requires that the participation of the Federal Government in regional development activities be effectively coordinated; WHEREAS the President is required by the Appalachian Regional Develop- ment Act of 1965 to provide effective and continuing liaison between the Federal Government and the Appalachian Regional Commission; WHEREAS the Secretary of Commerce has responsibility under the Public Works and Economic Development Act of 1965 for Federal economic development activities designed to alleviate conditions of substantial and persistent unemployment and underemployment in economically distressed areas and regions of the Nation; WHEREAS the Secretary of Commerce is directed by the Public Works and Economic Development Act of 1965 to coordinate the Federal Cochairmen appointed to regional commissions established before or after the date of that Act; WHEREAS the Secretary of Commerce is required by the Public Works and Economic Development Act of 1965 to provide effective and continuing liaison between the Federal Government and each regional commission established under Title V of that Act; and WHEREAS the Secretary of Commerce has been Chairman of the President's Review Committee for Development Planning in Alaska, established to provide general direction and guidance to the Federal Field Committee for Development Planning in Alaska, established by Executive Order No. 11182, dated October 2, 1964; NOW, THEREFORE, by virtue of the authority vested in me by the Appalachian Regional Development Act of 1965, the Public Works and Economic Development Act of 1965, and section 301 of Title 3 of the United States Code, and as President of the United States, it is ordered as follows: SECTION 1. Functions of the Secretary of Commerce. The Secretary of Commerce shall — (a) Provide the effective and continuing liaison required by section 104 of the Appalachian Regional Development Act of 1965 and by section 503(c) of the Public Works and Economic Development Act of 1965 between the Federal Government and each regional commission established under those FEDERAL REGISTER, VOL. 33, NO. 1 — WEDNESDAY, JANUARY 3, 1968 81 THE PRESIDENT Acts, and between the Federal Government and the Federal Field Committee for Development Planning in Alaska (hereinafter referred to as "the Field Committee ,, ). (b) Obtain a coordinated review within the Federal Government of plans and recommendations submitted by the commissions and the Field Committee. (c) Provide guidance and policy direction to the Federal Cochairmen and the Chairman of the Field Committee with respect to their Federal functions. (d) Promote the effective coordination of the activities of the Federal Government relating to regional economic development. (e) In carrying out the functions set forth in section 1 (a), (b), (c), and (d) the Secretary of Commerce shall — (1) Review the regional economic development plans and programs submitted to him by the Federal Cochairmen, budgetary recommendations, the standards for development underlying those plans, programs and budgetary recommendations, and legislative recommendations; and advise the Federal Cochairmen of the Federal policy with respect to those matters, and where appropriate, submit recommendations to the Director of the Bureau of the Budget. (2) Review and advise the Chairman of the Field Committee with respect to the tentative plans and recommendations of the Field Committee, and receive and consider the final plans and recommendations of the Field Committee and transmit them to the heads of interested Federal departments and agencies and to the President. (3) Resolve any questions of policy which may arise between a Federal Cochairman and a Federal department or agency in the implementation of regional development programs. (4) Appoint a Special Assistant and other staff as required to assist him in carrying out these functions. SEC. 2. Establishment of the Council, (a) There is hereby established the Federal Advisory Council on Regional Economic Development, hereinafter referred to as "the Council." (b) The Council shall be composed of the following members: The Secretary of Commerce, who shall be the Chairman of the Council (hereinafter referred to as "the Chairman"), the Secretary of Agriculture, the Secretary of the Army, the Secretary of Health, Education, and Welfare, the Secretary of Housing and Urban Development, the Secretary of the Interior, the Secretary of Labor, the Secretary of Transportation, the Director of the Office of Economic Opportunity, the Administrator of the Small Business Administra- tion, the Federal Cochairman of the Appalachian Regional Commission, such Federal Cochairman as are appointed by the President under authority of Title V of the Public Works and Economic Development Act of 1965, and the Chairman of the Field Committee. (c) Whenever matters within the purview of the Council may be of interest to heads of Federal departments or agencies not represented on the Council under section 2(b) of this order, the Chairman may consult with the heads of such departments and agencies and may invite them to participate in meetings and deliberations of the Council. FEDERAL REGISTER, VOL. 33, NO. 1 — WEDNESDAY, JANUARY 3, 1968 82 THE PRESIDENT (d) The Council shall meet at the call of the Chairman. SEC. 3. Functions of the Council. The Council shall assist the Secretary of Commerce in carrying out the functions set forth in section 1 of this order, and shall, as requested by the Secretary of Commerce — (a) Review proposed long-range economic development plans prepared by the regional commissions and the Field Committee. (b) Recommend desirable development objectives and programs for such regions and Alaska. (c) Review proposed designations of additional economic development regions under Title V of the Public Works and Economic Development Act of 1965. (d) Review Federal programs relating to regional economic development, develop basic policies and priorities with respect to such programs, and recommend administrative or legislative action needed to stimulate and further regional economic development. (e) Review proposed department or agency regional economic development plans. (f) Recommend surveys and studies needed to assist the Secretary of Commerce and the Council in carrying out their functions. SEC. 4. Responsibilities of the Participating Federal Agencies, (a) Each Federal department and agency the head of which is referred to in section 2(b) of this order shall, as may be necessary, furnish assistance to the Council in accordance with the provisions of section 214 of the Act of May 3, 1945 (59 Stat. 134,31 U.S.C.691). (b) The head of each such Federal department or agency shall designate an Assistant Secretary or equivalent level official who shall have primary and continuing responsibility for the participation and cooperation of that department or agency in regional economic development as required by this order. (c) The head of each such Federal department or agency shall keep the Secretary of Commerce and the Council informed of all proposed regional economic development plans of his department or agency. (d) The head of each such Federal department or agency shall, consonant with law and within the limits of available funds, cooperate with the Council and with the Secretary of Commerce in carrying out their functions under this order. Such cooperation shall include, as may be appropriate, (1) furnishing relevant available information, (2) making studies and preparing reports, (3) in connection with the development of programs, priorities, and operations of the department or agency, giving full consideration to any plans and recommenda- tions for the economic development of the various regions, including recommendations made by the Council, and (4) advising on the work of the Council as the Chairman may from time to time request. SEC. 5. Responsibilities of the Federal Cochairmcn and the Chairman of the Field Committee. The Federal Cochairmen, and the Chairman of the Field Committee as appropriate, shall- - FEDERAL REGISTER, VOL. 33, NO. 1 — WEDNESDAY, JANUARY 3, 1968 83 THE PRESIDENT (a) Maintain continuing liaison with the Secretary of Commerce with respect to the activities of the regional commissions and the Field Committee. (b) Adhere to general Federal policies affecting regional economic develop- ment that are established by the Secretary of Commerce. (c) Inform the appropriate Federal departments and agencies of programs and projects to be considered by the commissions, and attempt to obtain a consensus within the Federal Government through consultation with appro- priate Federal agency representatives before casting a vote on any such matter. (d) Represent the participating Federal departments and agencies in connection with the activities of the regional commissions. (e) Submit to the Secretary of Commerce regional economic development plans and programs of the regional commissions, budgetary recommendations, legislative recommendations, and progress reports, as requested by the Secretary of Commerce, on the activities of the regional commissions. (f) Submit reports required by section 304 of the Appalachian Regional Development Act of 1965 and by section 510 of the Public Works and Economic Development Act of 1965 to the Secretary of Commerce for review prior to transmittal to the President or the Congress. SEC. 6. Appalachian Program, (a) Funds appropriated pursuant to sections 201 and 401 of the Appalachian Regional Development Act of 1965 shall be available to the Federal Cochairman of the Appalachian Regional Commission for the purposes of carrying out that Act. (b) The Federal Cochairman of the Appalachian Regional Commission is delegated the functions conferred upon the President by sections 214(a), 302(a), and 302(c) of the Appalachian Regional Development Act of 1965, which shall be exercised by him in accordance with the provisions of this order. SEC. 7. Construction. Nothing in this order shall be construed as subjecting any function vested by law in, or assigned pursuant to law to, any Federal department or agency, to the authority of the Council or the Secretary of Commerce, or as abrogating or restricting any such function in any manner. SEC. 8. Definition. Except as the context may otherwise require, any reference herein to any Act, or to any provision of any Act, shall be deemed to be a reference thereto as amended from time to time. SEC. 9. Prior Executive Orders, (a) Executive Order No. 11182, as amended, is hereby further amended as follows: (1) By changing the heading of the o r der so as to read as follows: "ESTABLISHING THE FEDERAL FIELD COMMITTEE FOR DEVELOP- MENT PLANNING IN ALASKA'. (2) By striking the words "the Housing and Home Finance Administrator 1 ' from section 1(b) and by inserting in lieu thereof the words "the Secretary of Housing and Urban Development, the Director of the Office of Economic Opportunity". (3) By substituting the following for subsection (a) of section 2: "(a) Subject to the general direction and guidance of the Secretary of Commerce, the Field Committee shall serve as the principal instrumentality for developing coordinated plans for Federal programs which contribute to FEDERAL REGISTER. VOL. 33, NO. 1 — WEDNESDAY, JANUARY 3, 1968 84 THE PRESIDENT economic and resources development in Alaska and for recommending appropriate action by the Federal Government to carry out such plans." (4) By striking from sections 3(e) and 3(f) the words "Review Committee" and by inserting in lieu thereof the words "Secretary of Commerce." (5) By revoking Part II. The President's Review Committee for Develop- ment Planning in Alaska, established by that Part, shall be deemed to be hereby abolished. (6) By redesignating Part III and section 31 thereof as Part II and section 21, respectively. (7) By redesignating Part IV and sections 41, 42, and 43 as Part III and sections 31, 32, and 33, respectively, and by striking from the redesignated section 33 the words "and the Review Committee". (b) The Federal Development Committee for Appalachia, established by Executive Order No. 11209 of March 25, 1965, is hereby abolished and that order is hereby revoked. IS/ LYNDON B. JOHNSON THE WHITE HOUSE, December 28, 1967. [F.R. Doc. 68-111; Filed, Jan. 2, 1968; 10:37 a.m.] FEDERAL REGISTER, VOL. 33, NO. 1 — WEDNESDAY, JANUARY 3, 1968 85 APPENDIX C OUTLINE OF PLAN REVIEW PROCESS 86 OUTLINE OF REGIONAL PLAN REVIEW PROCESS A. Introduction The review process described in this statement reflects experience to date in conducting the Federal review of regional plans. The procedure is based on several premises: 1 . The individual Regional Commission plan has been developed by the Federal Cochairman and the Commission staff in close consultation with member agencies of the Regional Advisory Council. 2. Before the plan is referred to the Department of Commerce, Federal Agencies at the regional level have made a review and provided inputs. 3. The review provided for herein is at the Federal headquarters level and the Federal Cochairman will involve his Commission, as required by Commission policy and practice, in responding to recommendations and suggestions from the agencies and guidance from the Secretary of Commerce. B. Purposes The principal purposes to be achieved in the review process are: 1. To provide the Secretary and Federal Cochairman with appraisals by expert sources on problems and solutions in the regional plan; 2. To inform the review elements (agencies of the Department of Commerce and other concerned departments and agencies of the Executive Branch) of regional problems and proposed solutions by the Commission; 3. To permit review elements to identify areas of cooperation with the Regional Commission; and 4. To provide the Secretary and the Federal Cochairman a basis for formulating budget requests. C. Review Elements The review elements are: 1 . The Secretary of Commerce; 2. The Assistant Secretary for Economic Development; 3. The Special Assistant to the Secretary of Commerce for Regional Economic Coordination (SAREC); 4. Member agencies of the Federal Advisory Council on Regional Economic Development (FACRED); and 5. Department of Commerce (DOC) Intradepartmental Committee. 87 D. Review Schedule (Steps) 1. Draft plan submitted by Federal Cochairman to SAREC. SAREC performs review and provides comments to the Federal Cochairman within 1 5 days. 2. SAREC transmits draft plan to Secretary for preliminary information purposes. 3. Draft plan distributed by SAREC or by the Federal Cochairman to the Assistant Secretary for Economic Development, the DOC Intradepartmental Committee, and member agencies of FACRED suggesting a 60-day deadline for comment. 4. Federal Cochairman submits to SAREC a report on his disposition of review element comments. SAREC prepares recommendations to the Secretary on the plan and review element comments within 15 days of receipt of Federal Cochairman's report. 5. Secretary of Commerce supplies guidance to the Federal Cochairman. 6. The Regional Commission takes action on the plan and the Federal Cochairman resubmits to Secretary of Commerce. 7. Secretary of Commerce reviews and submits the plan and his recommendations to the White House, notifying the Federal Cochairman and review elements of his actions. E. Focus of Review by Review Elements 1 . SAREC— The review in SAREC considers the following: (a) Does the plan meet the minimum acceptable planning requirements outlined in Secretary of Commerce memorandum of January 10, 1968 to Director, Bureau of the Budget? (b) Does the plan meet the requirements of Section 307.5 in Title 13 of the Code of Federal Regulations published July 14, 1967? (c) Does the plan respond to written guidance from the Secretary of Commerce beginning with his memorandum of January 28, 1970? 2. Assistant Secretary for Economic Development -Review by this office should include: (a) Are the Commission's projections consistent with national trends, EDA information regarding conditions in the region, and public investment payoffs? (b) How do EDA plans for redevelopment areas and districts relate to the regional plan? (c) What are the opportunities for mutually-supportive coordination between EDA activities and the programs proposed in the plan? 3. DOC Intradepartmental Commit tee -Members review the plan from the standpoint of their agency expertise, identifying potential contributions to the plan's goals and objectives. (List of member agencies attached.) 4. FACRED-FACRED review should be concerned principally with policy considerations and improvement of coordination. (List of member agencies attached.) (a) Review for conflicts in authority, jurisdiction, and legislation. 88 (b) Review for priorities and timing from the standpoint of the agency. (c) Review for relationship to existing policies of the agency. (d) Review to identify and make recommendations on national policy needs revealed by the plan. 5. Secretary of Commerce— The Secretary's review concerns are principally two: (a) Are there broad policy, authority, or jurisdictional problems that he must personally consider and decide upon or recommend action to the President and the Congress? (b) How does he assess the priority of the claims of the Regional Commission on national resources with reference to other priority claims for these resources? Attachments — 1, List of Member Agencies, DOC lntradepartmental Committee. 2. List of Member Agencies, Federal Advisory Council on Regional Economic Development. AUGUST 31, 1970 89 THE FOLLOWING COMMENTS FROM THE DEPARTMENT OF TRANSPORTATION WERE RECEIVED AFTER THE DEADLINE AND TOO LATE TO BE INCLUDED IN THE TABLE OF CONTENTS THE SECRETARY OF TRANSPORTATION WASHINGTON, D.C. 20590 f \ P " • ?'i Honorable Maurice Stans Secretary of Commerce Washington, D. C. 20230 Dear Mr. Secretary: While Department of Transportation representatives offered informal comments on the Upper Great Lakes Regional Commission's revised regional economic development plan at the November 24 FACRED meeting, this letter constitutes our formal views on that plan. I should like to re-emphasize that this Department has always believed the Commission's overall planning strategy to be a sensible one. Much of the revised plan is excellent, and its assessment of the region's resources and development potential is especially good. We are dis- appointed, however, that none of the major points raised by this Depart- ment in last year's review appear to have been heeded. In particular, the plan continues to assume, erroneously we believe, that large-scale transportation investments, by themselves, are reliable catalysts of economic growth. The plan's transportation section remains essentially unchanged, except for providing incremental highway and airport investment cost projections over the next decade or so. (Last year's version made estimates for only one year ahead.) The Commission is to be commended for providing these incremental price tags for highway and airport developments, and we find no grounds to dispute them. However, with respect to the plan's proposed scenic highways, no information has been provided on the criteria used for choosing among candidate sites. Also, it still is not clear whether the justification for the lateral backbone highway is dependent on the existence of the proposed highway across Canada to the Eastern United States. Our evaluation of the airport development section of the revised plan has been hampered by its lack of specificity regarding the type of develop- ment to be considered in allocating funds; too, no criteria are given for fixing schedule priorities. In this latter regard, a number of airports listed on the Commission's tentative first-priority schedule, are not in the current National Airport Plan. Also, the projection of $8.3 million for five-year Federal airport funding for the Upper Great Lakes Region under the Airport Development Aid Program appears to be low, apparently because it is based on allocations made under the old Federal-aid Airport Program in FY 1969. -2- With the passage of the 1970 Airport/Airways Act, planning can now be carried out more confidently since its three-year contracting authority greatly facilitates long term multi-phase programs. The Act provides more than $280 million annually for airport development programs and $15 million for planning grants. The Commission should coordinate closely with the Federal Aviation Administration airport field office on choices of specific projects. As we commented last year, some convincing analysis is badly needed to substantiate the Commission's view that the Upper Great Lakes Region will benefit in some significant way from projected increases in air cargo shipments on the Great Circle routes between Asia and Europe. The Department of Transportation takes no exception to the Commission's discussion of water-related issues in its revised plan. However, we are concerned that much of the Commission's work will be redundant or counter- productive if its planning activities are not integrated into the already existing high level of interagency activity in this area. In this connection, the Department has already completed an extensive analysis of the Seaway toll policy and legislation has recently been enacted providing, in essence, no toll increases and abolition of overdue and future obligations for interest on the debt. The Department is also: (1) about to embark on a study of rail rate discrimination with respect to Great Lakes ports; (2) conducting a demonstration program with private industry to establish the feasibility of extending the Seaway's naviga- tion season; and (3) examining the feasibility of a general cargo feeder system for the Great Lakes. Other issues raised by the Commission, such as promoting U.S. -flag service to Great Lakes ports, are, we understand, actively under consideration by the Maritime Administration. The Commission's revised plan notes that it has questions about the role of rail service in transportation development currently under active consideration. There are a number of areas the Commission may wish to investigate. For example, it may wish to: (1) explore how it might exploit its area's natural resources by using the unit train concept; (2) analyze the potentials of developing solid waste disposal depots; and (3) assess the costs and benefits of relocating rail yards, particularly in rural areas and anywhere where rail activity might enhance regional development. In regard to rail service, any useful regional plan must strive to establish clearly the profit potentials for private investment, inasmuch as decision-making in this area is predominantly a function of the private sector. Let me reiterate my concern about one of the fundamental assumptions underlying the Commission's planning strategy, i.e., that the expansion of the Great Lakes region's travel business and the realization of its business and industrial growth possibilities can somehow be automatically -3- "kicked-off" by large-scale investments in transportation facilities and services. Convincing quantitative analysis to support this assumption will be needed before the strategy can itself be confidently supported, whatever its other merits. Moreover, while the plan adheres to a "growth center" strategy for capturing the benefits of economic growth, the Commission's objectives call for the worst areas to be given priority in funding. Potential "growth centers" are not designated, operationally defined or quantita- tively analyzed. Perhaps the Commission should first select a few small urban centers whose growth potential is great for pilot demonstrations designed to investigate directly what factors may be impeding economic development in this region. Such pilot projects might provide the key breakthroughs for developing an integrated plan for the entire region. Within the framework of such an experiment the Commission would be able to test its own predictive capabilities for identifying "growth" centers and by varying its approaches test their respective merits. If such an experiment should show that certain types of transportation support were critical to the successful exploitation of "growth center" potentials then the Commission could calculate the cost of putting such support in future economic development proposals. In conclusion, our Department hopes that the Commission will be able to identify those factors that positively influence rapid social and economic development and, particularly, how supportive transportation investments can facilitate or stimulate such economic growth. Sincerely, **ATtS<** PENN STATE UNIVERSITY LIBRARIES llllllllllllllllllllllllllll ADDDD7D c ibMSM7