Press Briefing by Assistant Secretary of H.U.D. Andrew Cuomo and Deputy Secretary of Agriculture Bob Nash

The Briefing Room

11:39 A.M. EST

ASSISTANT SECRETARY CUOMO: Thank you and good morning. The President will announce today the winners of the empowerment zone competition. The empowerment zone competition happens to be the manifestation of an effort that actually began when the President first took office, which was the development of a new policy for -- a community development policy for distressed communities, be they urban, be they rural, but distressed communities that needed special assistance. A policy was developed that laid out the role of the federal government and the best response.

The premises of the empowerment philosophy, if you will, which you'll see underlying many of the programs of the Clinton administration, is basically twofold. The first point is that rather than have a federal government try to dictate solutions from Washington, or rather than have a local government dictate solutions to a community, let's get that local community from that distressed area at the table, coming up with a plan that meets their needs and controls their destiny. So the first point was, let the community come up with a plan itself.

The second point was, the end result for any community development action should be the creation of jobs; and for that, you need the private sector. You can't do it with government alone, be it federal, be it local. You need jobs, you need private sector participation. So the two premises of the empowerment zone program: one, local community involvement; number two, the creation of jobs. That was manifested specifically in the empowerment zone program, the empowerment zone competition that was announced in January by the President -- a competition that said to the nation, you come up with the best plans for community development; the federal government will judge what is the best plan and will make an award on that basis.

There were very few federal mandates up front; there were very few conditions. We basically said, you come up with a plan that you think works for your local community; we will judge the plans relative to each other; the federal government will then make awards.

Two separate categories for two different types of communities -- the urban communities were run and judged by the Department of Housing, Urban Development, HUD; the rural communities were judged by the Department of Agriculture -- Secretary Espy from the Department of Agriculture, Secretary Cisneros from the Department of HUD. That began in January. That concluded in July. The applications came back in July. At that point, we began a review process that involved about 100 federal executives from departments all across the federal government. We put together an interdepartmental task force to review the applications.

On the urban side -- and Secretary Nash will speak on the rural side -- but for the urban communities, we has six empowerment zones which were initially up for competition -- six empowerment zones. An empowerment zone would be awarded $100 million in social service block grant funding, but $100 million in very flexible federal funding, and tax credits to help bring in private sector companies to create the jobs that I spoke about. Six empowerment zones, $100 million per zone, and an extensive tax credit program.

There were also 65 enterprise communities. An enterprise community would be awarded $3 million in flexible funding. There are 95 between urban and rural. We're speaking just about the urban side. Secretary Nash will speak about the rural communities. But six urban zones, 65 enterprise communities. The enterprise communities would win $3 million and a more limited package of tax credits.

For the six zones we received 74 applications. For the 65 communities we received 218 applications. Now, the applications were, frankly, of a higher quality than we anticipated. The process generated excitement nationwide. You had communities coming to the table for the first time, promoted, enticed by the federal grant program. But communities came together and really came up with extraordinary efforts and remarkable plans. And the volume -- the 74 vying for six, and the 218 vying for 65 -- was more demand than we initially anticipated.

The result was, we have supplemented the initial funding available, and we will also supplement the six empowerment zones with an additional two supplemental zones. The supplemental zones will receive a significant cash award. They will not, however, at this time, receive any tax credits. We will also supplement the 65 enterprise communities with four what we refer to as "enhanced" enterprise communities.

The results, which the President will formally announce this afternoon, will announce as empowerment zones -- the six zones that I spoke about -- in no particular order, New York City; Chicago; Atlanta; Detroit; Baltimore; and for the bi-state zone -- there was one zone that was predicated on being a bi-state collaboration --that will be Philadelphia-Camden.

The supplemental zones, which are the zones that we found additional funding at HUD from the Economic Development Initiative to fund, will be Cleveland and Los Angeles. Cleveland will be awarded $90 million; Los Angeles will be awarded $125 million.

The enhanced enterprise communities, which will be in addition to the 65 enterprise communities -- there will be four enhanced enterprise communities. They will be Boston, Houston, Kansas City, and Oakland, California. They will receive $25 million each.

Q? Do they get the tax credits, too?

ASSISTANT SECRETARY CUOMO: The enhanced enterprise communities and the supplemental zones do not get tax credits. Both will get cash awards from a program at HUD called the Economic Development Initiative -- EDI Program. That is the sum and substance of what we have done on the HUD side. Remember that there is a corresponding program which has been run for the rural communities by the Department of Agriculture, which Secretary Nash will speak to. Any questions you have, it would be my pleasure to respond. Thank you.

DEPUTY SECRETARY NASH: Thank you very much. This is a unique program in several ways. Let me mention a couple. One, historically the federal government has attempted to superimpose urban programs on rural areas. This program recognizes the unique problems and opportunities in rural America. And that is why USDA operated the rural side of this program.

Secondly, this program -- unlike historically, many other federal programs that might send out a five-inch-thick application that it takes a Ph.D. from wherever to fill out -- the application that went out to these communities was about as thin as a dime. It said to the communities, you tell us what you want to do to develop jobs; how you're going to bring in the whole community; how you're going to sustain these programs after the federal dollars are gone; and tell us what you want your community to look like years down the road -- you do that, put together a good application, we'll fund it. That's different than most other federal programs.

On the rural side, we had an opportunity -- Secretary Espy did -- to designate three rural zones, each receiving $40 million and a full range of tax credits and other benefits. We also had an opportunity to identify 30 enterprise communities, each receiving approximately $3 million and some of the tax benefits in the program. We received 84 applications for empowerment zones and 133 applications for enterprise communities. I think you have a list of the communities, as well as the zones.

We selected -- and I'll highlight just a few seconds the three zones which received the $40 million -- one in Kentucky -- the lead applicant, the Kentucky Highlands Investment Corporation, one of the most successful, community-based economic development organizations, in our opinion, in the country.

Secondly, the Mid-Delta Empowerment Zone in Mississippi -- a collaboration between an old civil rights organization called the Delta Foundation and the Delta Council, a longstanding planter organization basically coming out of the plantation days representing large landowners, that have come together to say we're going to work together to improve the quality of life in the delta.

And in Texas, the Rio Grande Valley Empowerment Zone, where the tremendous problems we've had in the area called the Cologne where individuals without skills and abilities but there are jobs there -- they're going to concentrate on trying to provide skill abilities and small business loan funds for Hispanics in that area.

Those are the three empowerment zones at USDA we've designated. And, again, 30 other enterprise communities which should be on your list. We are very excited about this program because it is going to make sure that rural America is a fuller partner in America's dream. Thank you.

Q: If this has such a big private sector component, why does it take $100 million of federal money to get it going?

ASSISTANT SECRETARY CUOMO: We're trying to do two things simultaneously. First we're trying to come up with a comprehensive redevelopment plan for that local community. We say in the application, a planning process that coordinates the physical, human and economic needs.

The $100 million in cash, if you will, in federal grants is to create that infrastructure. Remember, these zones are fairly large. They can be up to 200,000 people. Geographically, the size will vary, but it can be eight, 10, 12, 15 square miles. So the $100 million is used to create the infrastructure, do the physical work -- roads, bridges, schools, et cetera -- job-training programs and the like; whatever the community determines.

The private sector then works hand in glove with the federal government to come into this now improved area, into this enhanced community, and hopefully, the partnership has a synergistic effect where both are increased. The private sector wants to come in; they have a lure of tax credits and the promise that the community is being revitalized. Hence, the $100 million development program.

Our opinion is one won't work without the other. You won't bring back the businesses unless you have a plan to show that community is going to be redeveloped. That's where the federal grant goes to help. But you can't redevelop the community unless you have the private sector coming to produce the jobs at the end.

Q: How does this fit in with the things the President announced a couple of days ago on downsizing HUD programs and consolidations? Will this have to be reworked if that gets through Congress, or what?

ASSISTANT SECRETARY CUOMO: Not at all. I happen to think that the President and Vice President's plans for reinventing, if you will, HUD mirror this exact philosophy. What this philosophy says is the federal government should dictate less, listen a little bit more; let that local community come to the table, come up with a plan, as Secretary Nash was speaking about, and let the feds help that plan. Now they call it devolution, after the November 8th election. Last year it was called empowerment, but it is the same, exact philosophy. Let the feds participate in an investment plan for that local community, driven by that local community.

Q: But this is already funded, right? This is already under existing --

ASSISTANT SECRETARY CUOMO: Yes.

Q: Will this be folded into the reinventing government plans that come out in the budget next month?

ASSISTANT SECRETARY CUOMO: Yes.

Q: Mr. Nash talked a little bit about the merits of the rural EZs. Could you talk about the selection of why these six cities and why Cleveland and L.A. got a little bump at the end?

ASSISTANT SECRETARY CUOMO: A little bump? A $125 million is more than a little bump, I think. The basic factors which went into the review process were the community involvement, first and foremost -- was this a plan that was generated by the community and will meet the needs of the community? We were not looking for a governmental designed or imposed plan. We were looking for a community that came together and came up with a plan to meet their own needs.

Secondly, to what extent was the private sector involved? What commitment did you have from the private sector to create jobs and enhance the community? In consideration of that, what other contributions did you have from what other levels of government -- state government, local government, county government, et cetera? And finally, on the bottom line was, how many jobs will be produced in that area at what period of time? So those are the basic factors which came into play.

Q: Can I follow up on that? Based on the commitments that you've gotten from the private sector, how do you -- both of you gentlemen can answer this -- how do you hope this will leverage out? How much investment do you ultimately think it will bring, say, over the next five years; how many new jobs over the next five years nationally and in all the zones together?

DEPUTY SECRETARY NASH: Let me start out by saying that the program is a 10-year program. The program is a 10-year program. I would estimate that on the rural and urban side, the amount of private nonprofit -- which includes foundations as well as state government -- will far outstrip the dollars that we're putting in. And this program, these are one-shot investments for these communities at this point.

Q: Ten to one, or are you talking about $10 of new investment for every dollar the government puts in, or what?

DEPUTY SECRETARY NASH: Many of these programs already, now, are matching, although there is no required match, with at least equal to the amount of money we're putting in, I know on the rural side from state, nonprofit, private, which includes commercial banks. I hate to estimate what it will be exactly in two years, but it will far outstrip it.

ASSISTANT SECRETARY CUOMO: I think on the urban side, it's basically the same. You will see, when you have a chance to review the actual applications, you have some awards that are being announced today which have leveraged 10, 20 to one the federal resources which are being put in. You have some applications, some cities which will be awarded empowerment zones that have been able to entice about $2 billion in private sector commitments into a distressed community.

So, as Secretary Nash said, the leveraging is across the board. The ratio may vary from zone to zone.

Q: Why was Secretary Espy able to swing an empowerment zone for his old congressional district, and Vice President Gore wasn't able to swing a city zone for Memphis?

DEPUTY SECRETARY NASH: This process involved -- began at about 80 individuals from most of the federal departments in the government. From there, it went to an expert panel which included community development folks from USDA and several other agencies. From there, it went to my office. The Secretary was involved, in our instance, at the beginning with the finalists that were recommended to him.

The empowerment zones that were designated, and particularly the one in Mississippi, I would think, by any objective reason, is probably the best in the nation. And I would encourage individuals to read that application.

Q: When can we get copies of those applications?

Q: Can I get Mr. Cuomo to respond to that question, too?

DEPUTY SECRETARY NASH: Let me just -- a follow-up question about where can you get copies of the applications? Let me say this, the applications -- the application form that went out was as thin as a dime. Some of the applications that came back in were this high. They are in a building over on -- close to Andrew's office. And any time anyone would like to go over there and look at them, we'd be happy to let them look at them.

Q: Could Secretary Cuomo respond to my question?

ASSISTANT SECRETARY CUOMO: I think Secretary Nash did. The response is, we went through a very elaborate review process to go through these applications with some of the best talent we could find in the federal government. It was an inter-departmental effort; they worked very long and hard for about five, six months to review them. And we think the quality of the applications selected will speak for themselves.

Q: When and how does the money start coming? When and how do we start reaping the benefits?

DEPUTY SECRETARY NASH: The dollars will flow as soon as the President makes the official designation. Now, the money actually goes to the state government in the respective communities and zones. Those state governments have up to two years to disperse all the money. In some cases they may stage it, depending on the particular needs of the applicants.

Q: Secretary Cuomo, a kind of a tale of two cities -- can you please detail what was so strong about Detroit? And secondly, the situation with Cleveland -- did they get, I mean, were they the second cut? Did they lose out on the top six for any particular reason? Was the extra money given to them because they didn't get the tax zones? Starting with Detroit, please.

ASSISTANT SECRETARY CUOMO: As I said in my initial remarks, I can't overemphasize the level of quality that these applications -- all of the applications had. It was a ferocious competition. You had 74 quality applications vying for six slots. And there were many factors that were taken into consideration. I mentioned the factors in the review process. There was also the factor of geographic diversity, which is one of the factors that had to be weighed.

We took the 74, we analyzed them, we reviewed them. We came up with several award categories, basically. You have first, the six empowerment zones. Then, given the level of quality, given the need for geographic diversity, we came up with supplemental zones, which are Cleveland and Los Angeles. They are all very good applications. If one were to say that the empowerment zones were judged to be of a somewhat higher quality than the other zone, that would be a fair account.

Q: Could you tell us, sir, the relatively low level of award to Washington, D.C., reflects a perceived lack of need, or does it perceive a lousy application?

ASSISTANT SECRETARY CUOMO: Well, I think your terminology is a little tough, but as I said, the competition was very, very significant. Washington, D.C., was vying with 218 communities on the enterprise community side. So the competition on both, for the empowerment zones and the enterprise communities was ferocious, as I said before. I would not say that a community that did not happen to win had a lousy application. The quality was outstanding across the board, and they just had -- were going through a very tough process.

Q: Were these communities that applied for the empowerment zone and got edged down to the lower categories?

ASSISTANT SECRETARY CUOMO: In some cases.

Q: Mr. Nash, the three zones, rural zones were put in the biggest pockets of rural poverty. Was that expected going into the process -- that you would put one in Appalachia, one in the Delta and one in the Southwest?

DEPUTY SECRETARY NASH: It was not expected or predetermined. Those areas -- Appalachia, which have had pervasive poverty for 60, 70 years or more, the Mississippi Delta is wellknown, and the Cologne is a newly impoverished area along the Delta -- all based upon need -- are there. What they had to do, in addition to documenting that need, which we're all aware of, is put together a very good application that exhibited that they would really make a difference and create jobs. An area that was the poorest area in the country had put together a poor application would not be selected.

Q: Had you hoped to get one in each of those three areas? Was that --

DEPUTY SECRETARY NASH: It was not predetermined. That's the best way I can answer that -- not predetermined.

Q: Mr. Cuomo, obviously, all of New York City will not be a zone. Can you be specific on where in New York -- like South Bronx or what part of the Bronx, if it is the Bronx -- and how many jobs will be expected to come out of it?

DEPUTY SECRETARY NASH: The parameters -- and you're right -- when we announce a city, that is the city from which the zone has been selected. It is at most an area of 200,000 people, so it is obviously an area within that city, and geographically in the large cities, it is not that significant a size in geography.

In New York, it's Harlem with a piece of the South Bronx. But it's right on the East River. Harlem goes across the East River, takes in some of the South Bronx.

Q: Is there going to be any federal oversight on how this money is spent? Any regulations keeping the community involved? Even before the announcement, the city has said -- Chicago -- that they're going to abandon the community council that formed the application. They're going to reform it, and a political struggle has already started to how you're going to spend this money and how you're going to form the council?

DEPUTY SECRETARY NASH: What we will do is, we will hold the cities to the plans they submitted, because that's what the award is being made based on, as Secretary Nash said. We did not dictate up front. We left it to the communities to come up with a plan that met their need. We were trying to get away from federal dictation and mandate, let the communities come up with a plan.

They did that; they came up with a plan. The plans have an implementation methodology in them which is part -- one of the factors we looked at in the selection. So we will monitor them. This is a lot of federal taxpayers' dollars. We will monitor the plans, we will not add regulations beyond those which we have spoken about, but we do expect the cities to run the program the way they laid out the program, because that's why we made the decision.

Q: How high a percentage of the new jobs do you expect to be created will actually go to people living in those zones and communities, and what types of jobs will need to be attracted to these areas?

ASSISTANT SECRETARY CUOMO: It's hard to say as a uniform federal policy what we think will happen, because every application is different, as you'll see when you get a chance to review them. But the jobs created by definition will be created primarily for people within the "zone," because the way the tax credit works is the tax credit only goes to people who live in the zones. So if the premise is the private sector company came into that area because of the inducement of a tax credit, then those jobs would, by definition, by law, have to go to zone residents.

DEPUTY SECRETARY NASH: Let me respond to a couple of questions about the types of jobs in rural America, for an example. Too often, raw products -- particularly agricultural products --leave rural America to be processed, packaged, handled outside of rural America. Part of several of these applications will envision adding more value to agricultural products. This is not farming; I'm talking about people who work in factories and small businesses and plants. That's one example.

Another example -- billions of dollars are spent in this country on tourism. Many of the tourists come to some of the largest cities. There are many things about rural America, its history, its culture, its music, where people can visit rural America and leave some of those dollars in rural America -- just a couple of examples.

Q: Is DDI money authorized, or is it discretionary? What's the status of it?

ASSISTANT SECRETARY CUOMO: It is authorized and it is a appropriated.

Q: Is my math correct that it's $1.3 billion in cash awards? I only count 91 enterprise communities listed in the back.

ASSISTANT SECRETARY CUOMO: On the $1.3 billion --

Q: It's either $1.308, or $1.32 billion?

ASSISTANT SECRETARY CUOMO: Sounds right.

Q: depending on if it's 91 or 95? We have 91 listed. Okay, you say 95 enterprise communities and four enhanced? So it's 95 total?

ASSISTANT SECRETARY CUOMO: It includes --

Q: Okay.

Q: There were several news reports that suggested there was some ferocious last-minute lobbying on those zones. Did the list of winners change over the weekend or -- and did last-minute lobbying play any part in who was selected?

DEPUTY SECRETARY NASH: There were a number of people who wrote, called, visited. But it did not change our process, which was in place from the very beginning.

Q: Jack Kemp has criticized your proposal as being the wrong system and method for doing this. He favors capital gains relief for companies to bring in open plants, factories and investment. First, what's wrong with that idea and, second, do you expect your model to survive in the Republican-controlled Congress if this program gets any funding at all down the road?

ASSISTANT SECRETARY CUOMO: Two things. First, on accepting your characterization of Mr. Kemp's statements about this, I think the President's empowerment zone plan takes the best of Mr. Kemp's theory of enterprise communities and makes it even better.

The premise of the enterprise zone plan under Mr. Kemp was that the solution to a distressed community was to bring in a business. How do you bring a business into a distressed community? Offer them a tax credit. We agree with that premise. However, I don't think it's as easy as offering a tax credit to bring a business back because some of the communities we're talking about are highly distressed, they have been for a number of years. To bring back a business is easier said than done. To offer a business a potential savings on potential profits that they might make if they happen to move into the distressed zone, I don't know is all that likely.

What we have said is this: Yes, offer the tax credit to bring back the business. And that's the tax credit component of this. But also do two things. One, tell that business that you have a comprehensive, intelligent plan for the redevelopment of that community. So, yes, they're coming back to what is a distressed community today. But you have a plan to improve that community and here it is: new roads, new bridges, new transportation system, et cetera. And, number two, make sure you have a plan that when that business comes back that it actually winds up making life better for the people in that zone. You have had experiences under the enterprise zone plan from past years where a business moves into a community, puts in a business, builds a big wall around itself to keep it safe, and does business as usual. And people come in from the suburbs and they go to their new job, which happens to be located in the distressed community, and they leave.

That wasn't the point. It wasn't to physically locate a business in a distressed community, it was to make that business work for the people in the area. Our plan does that -- comprehensive redevelopment, helps bring in the business, but also the tax credit to bring the business in.

So I think it does everything Mr. Kemp's proposal did, plus.

Q: How about looking forward to Congress, a Republican-controlled Congress -- they might favor a capital gains rate, may want to gut your approach?

ASSISTANT SECRETARY CUOMO: I think this program, this approach, laid out by the President last year is everything the Republicans are talking about this year. What this approach says is mandate less from the federal government, fewer categorical programs from the federal government, more responsibility on the local level, more flexibility on the local level. That is everything that they're now talking about in their proposed program reinventions. That's what this does already.

DEPUTY SECRETARY NASH: That's before the election.

Q: Is there any idea to excuse federal regulations, such as environmental regulations to help business? And if that's the case, what's the mechanism for that?

ASSISTANT SECRETARY CUOMO: When the applications were put in, one of the benefits through this process, winners or losers, were these applications also served as a request for waivers across the federal government. These applications that have been filed asked for over 1,000 waivers of federal regulations. We are now working our way through those waiver requests, but many of them would do what you -- some are environmental, some are regulatory on existing programs. But if the local community thought, or the local government thought, they needed regulations to help implement and expedite their plan, they did that in their application and we're responding to them.

Q: How much is tax break and how much is cash in the bottom line total? Is this a $4 billion, two-year program?

ASSISTANT SECRETARY CUOMO: On the urban side, the general rule of thumb is 1.5 to one -- $100 million and the tax credits per large zone are about $225 million. So forget the 1.5 to one. One hundred million is the cash grant for an empowerment zone. And about, as an estimate, on the tax credit, because it would actually depend on the size of the community, how many people actually wind up using the tax credit -- but use as an estimate between $200 million and $250 million.

Q: Is there any upper limit on that -- on how much tax credit one zone could get?

ASSISTANT SECRETARY CUOMO: The limit was set by the number of people that could be in a zone which is 200,000. So there was a cap by the population.

Q: What was the total compiled cost of this, over what period of time?

ASSISTANT SECRETARY CUOMO: I'll get that number for you.

Q: What about other communities -- the tax credits, how much would they --

DEPUTY SECRETARY NASH: Let me make one point, if I could. On the rural side, the maximum number of people in a zone or community is 30,000. The total number of cash is $88.5 million for the communities and $120 million for the zones.

What was the other question?

Q: The tax credits for the communities.

DEPUTY SECRETARY NASH: The ratio was about the same as between rural and urban. I don't have the exact number.

Q: That's $40 million cash and $48.5 tax credits?

DEPUTY SECRETARY NASH: No, no, no, no, no. Enterprise communities are about $2.95 million, okay.

Q: For the zones?

DEPUTY SECRETARY NASH: The zones, it's $120 million -- three times --

Q: Forty --

DEPUTY SECRETARY NASH: Yes.

Q: Plus, what are the tax credits?

DEPUTY SECRETARY NASH: The tax credits -- I don't have the exact number on tax credits for the rural zones.

ASSISTANT SECRETARY CUOMO: The total cost of the cash grant and the tax credits is $3.5 billion over a period of years. The tax credits are over a period of years; they're not in a single year, the way the cash grant is distributed. So the total over a period of years is $3.5 billion.

Q: But is there anything in the act that would allow for the expansion of tax credits beyond the six urban empowerment zones?

ASSISTANT SECRETARY CUOMO: That is a legislative option that is being considered.

Q: But it's not in there now?

ASSISTANT SECRETARY CUOMO: No. The overall plan for implementation for these communities is 10 years. The tax credits are over a period of about five years. Okay?

Q: For those cities that lost, is there anything that they get out of this process -- any sort of consolation prize?

DEPUTY SECRETARY NASH: One of the things we've said throughout this process is that there will really be no losers. All of the applicants will get priority treatment to the extent under -- to the extent allowed under law for federal grants and loans and other programs. They will not be forgotten.

They will also have an opportunity to apply for waivers with the federal government. So we will work with them; they will be a special category.

END 12:14 P.M. EST