February 18, 2004

Federal economic development agency threatensto leave distressed rural areas behind

A new, prohibitive private funding standard would shift focus to wealthy urban areas

Portland, OR U.S. Senator Ron Wyden today questioned a new Economic Development Administration (EDA) policy that threatens to change the focus of federal funding designed to help distressed rural areas, and instead use it to benefit areas with significant private-sector resources.David Sampson, Assistant Secretary of Commerce for Economic Development, discussed the fact that EDA has adopted new internal performance standards at a February 11 conference in Medford, Oregon. One of the new standards establishes a private/public investment ratio of 22:1 ($22 private dollars invested for every $1 of federal assistance) as a criterion for projects being considered for grants.This new policy threatens to put economic development funding out of reach for most economically distressed areas while diverting that funding to areas that already have significant economic muscle, Wyden said. While it is important that EDA leverage private sector investments, the Commerce Department is carrying this objective to an extreme that could hurt rural Oregon. They appear to be losing sight of their legislative mandate to assist economically depressed communities.Wyden wrote to Sampson today to outline his concerns. In the letter, Wyden discussed four construction projects EDA helped fund in Oregon in FY2002 and 2003. These four projects have created, or are projected to create, more than 800 jobs in Oregon; none would meet the new 22:1 private investment ratio.1) Reedsport: EDA funded $2.3 million in water supply improvements to support a new steel plant that has already provided more than 20 new jobs and a much-needed boost to the local economy. The company made a substantial $7.5 million investment in the project and anticipates that it will ultimately hire 120 local residents to work in the plant.2) Klamath Falls: EDA provided $900,000 for construction of water system improvements and road access improvements to a commercial area. A national chain is constructing a 227,000 square foot retail center at the site which will employ roughly 200 local residents. The private sector is investing a total of $13 million in the project.3) Eastern Oregon University in La Grande: EDA invested $2 million dollars for construction of a biomedical research lab that will promote job growth through the commercialization of research patents and a nursing education program. Over the next five years, the number of nursing graduates will double, accounting for over 380 additional high-paying jobs. The estimated future private investment is $10 million.4) The Dalles: EDA invested $2 million to establish a transportation link between The Dalles and the Columbia River waterfront by funding needed road and rail improvements. At the time the project was submitted to EDA, the City and the partnering companies estimated a total private contribution of $3.8 million with 110 jobs being created as a result.Under the new criterion, the EDA regional office would have been discouraged from supporting these private-public partnerships, which have created, or are creating, more than 800 jobs in Oregon. As these examples demonstrate, rural areas Oregon desperately need this partnership with the federal government in order to diversify their economies and create higher-wage, higher-skill jobs, Wyden wrote.In his letter, Wyden also asked for information on any projects in Oregon within the last ten years that would have met the 22:1 ratio.# # #The full text of Sen. Wydens letter follows:February 18, 2004The Honorable David SampsonAssistant Secretary of Commerce for Economic DevelopmentU.S. Department of CommerceEconomic Development Administration14th Street & Constitution Ave., N.W.Washington, DC 20230Dear Assistant Secretary Sampson:Following your presentation on February 11 in Medford, Oregon, I am writing regarding the Economic Development Administrations (EDA) recently revised internal performance standards which headquarters uses to evaluate the performance of its regional offices. I am concerned that at least one of these standards may dissuade regional offices from supporting vital economic development projects in distressed rural communities.The standards adopted in Fiscal Year (FY) 2003, and applied retroactively to FY2002, establish a private/public investment ratio of 20:1 as a criterion for projects being considered for grant selection. That ratio was further increased to 22:1 in FY2004. While it is important that EDA leverage private sector investments to the maximum extent possible, in doing so EDA should not forget its legislative mandate to assist economically depressed communities. Suffice it to say, most rural communities in my home state do not enjoy access to private entities with the financial means to support an economic development project with a private/public investment ratio of as high as 22:1 or even 20:1. A look at the four construction projects EDA helped fund in Oregon for all of FY2002 and FY2003 illustrates this point:1) Reedsport: EDA funded $2.3 million in water supply improvements to support American Bridge Company. The companys new steel plant has already provided more than 20 new jobs and a much-needed boost to the local economy. American Bridge made a substantial $7.5 million investment in the project and anticipates that it will ultimately hire 120 local residents to work in the plant.2) Klamath Falls: EDA provided the City of Klamath Falls with $900,000 for construction of water system improvements and road access improvements to a commercial area. Home Depot is constructing a 227,000 square foot retail center at the site which will employ roughly 200 local residents. The private sector is investing a total of $13 million in the project.3) Eastern Oregon University in La Grande: EDA invested $2 million dollars for construction of a biomedical research lab. Eastern Oregon University will partner with Oregon Health Sciences University and utilize the lab to promote job growth through the commercialization of research patents and a nursing education program. Over the next five years, the number of nursing graduates will double, accounting for over 380 additional high-paying jobs. The estimated future private investment in biomedical businesses to commercialize the patents is $10 million.4) The Dalles: EDA invested $2 million to establish a transportation link between the City of The Dalles and the Columbia River waterfront by funding needed road and rail improvements. The project is part of The Dalles Renaissance, an effort to revitalize its historic downtown, encourage business growth and increase tourist activity. At the time the project was submitted to EDA, the City and the partnering companies estimated a total private contribution of $3.8 million. One-hundred and ten jobs will be created as a result of the project.Under the new criterion, the EDA regional office would have been discouraged from supporting these private/public partnerships, which have created or are creating more than 800 jobs in Oregon. As these examples demonstrate, rural areas in my state desperately need this type of assistance from the federal government in order to diversify their economies and create higher-wage, higher-skill jobs. The 22:1 target ratio establishes an agency standard that is extremely difficult to obtain in rural regions, which often lack a strong private sector base.For the past three years, Oregon has had one of the highest rates of unemployment in the nation, and I am concerned that EDAs implementation of these new performance standards will unnecessarily place rural communities that are already hurting at even greater risk. That said, I would appreciate your office providing me with detailed information as to how many projects EDA has helped fund in the past ten years in the State of Oregon which have met the 22:1, or 20:1, target investment ratio based on actual investment figures rather than agency estimates. I would also appreciate receiving an answer as to whether or not EDA has included as one of its internal guideposts a measurement of an applicants level of economic distress when considering projects for grant selection.Answers to these questions might help me better understand why EDA has implemented these performance standards which seem to be inconsistent with the agencys mission to assist in the development of our nations economically vulnerable communities. I look forward to your response, and would greatly appreciate a response within the next three weeks.Sincerely,RON WYDENUnited States Senator

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