‘The Empowerment Zones and Enterprise Communities (EZ/EC) program was enacted into law as part of the Omnibus Reconciliation Act of 1993 (Liebschutz). That act authorized nine Empowerment Zones (EZ) and 95 Enterprise Communities (EC) for round I of the program. Of these, three zones and 30 communities were to be established in rural areas. The Taxpayer Relief Act of 1997 authorized 20 round II Empowerment Zones to be designated by January 1, 1999; 15 of these were for urban areas and 5 for rural. The Omnibus Consolidated and Emergency Supplemental Appropriations Act, 1999 (P.L. 105-227) provided grant funding for these 20 round II rural and urban EZs and authorized 20 additional rural ECs.
‘The EZ/EC legislation built upon earlier efforts under Federal and State legislation to establish enterprise zones by including tax credits and other supply-side incentives for business development. Unlike previous initiatives, EZ/EC added major new features that make it a very different program. Designated EZs and ECs receive block grants that can be used for a wide range of purposes. Although an existing block grant program - the Social Services Block Grant (SSBG) - has been employed to fund round I, the eligible uses of these funds have been broadened to include virtually anything that might fall into a comprehensive community and economic development program. The funds, which are administered through State agencies - in most cases the same ones that administer the regular SSBG program - are to remain available throughout the 10-year period of the EZ/EC designations.
‘The principle difference between Empowerment Zones and Enterprise Communities is in the level and type of financial resources provided to them. Empowerment Zones receive much larger SSBG grants - $100 million for urban zones, $40 million for rural zones - than Enterprise Communities, which receive $2.95 million each. Businesses located in EZs also receive tax credits and other tax incentives not available within ECs. By creating this two-tiered approach, Congress in effect established a test to determine the importance of these financial incentives for stimulating development in high-poverty communities.
'The eligibility requirements for the Round I Rural EZs and ECs are: a population of up to 30,000; an area of up to 1,000 square miles; a minimum 20 percent poverty rate in all census tracts, 25 percent in 90 percent of the tracts, and 35 percent in half of the tracts; and being an area of pervasive poverty, unemployment and general distress.
‘In important ways, the EZ/EC program is more of a community development program than [one of economic development]. Applications for EZ/EC designations were competitive and had to be supported by comprehensive, long-term strategic plans for development. The planning process itself had to include broad public participation, and not merely the product of a planning office or consulting firm. In effect, the application procedure constituted a significant process of community development, and communities that took the process seriously found themselves mobilized for action and in possession of a [practical] plan. Recognizing the value of this planning process and the desirability of sustaining the progress made by the 227 round I applicants, USDA designated the most unsuccessful applicants as Champion Communities and provided them with special financial and technical assistance to implement parts of their strategic plans. USDA in particular used the Champion Communities as the basis for significant outreach to spur development in these hard-to-reach communities and to date has invested some $290 million in its business and infrastructure development programs in these communities.
‘The program was unique in one other aspect; communities were deÞned not on the basis of existing political subdivision boundaries but on census tracts. Tracts were eligible according to a somewhat complicated combination of poverty rates, that assured that almost all areas had a minimum poverty rate of 20 percent and most had rates of 25 or 35 percent. The poverty rate requirements were most stringent for Empowerment Zones. Not surprisingly, although designated rural EZ/ECs are located in 24 States, they are concentrated in Appalachia, areas of historically high Black population along the east coast and across the South, and in Hispanic communities in the Southwest. The other major concentrations of poverty - on Indian reservations - were expressly excluded by the round I enabling legislation.
‘In August 1997, the Taxpayer Relief Act of 1997 authorized a second round of Empowerment Zones, 15 urban and 5 rural. The statute provided tax benefits to the new zones, but grant funding had to be requested in separate legislation. The Clinton administration requested $1.7 billion over 10 years for Social Service Block Grants to round II zones - the same level as for round I. In October 1998, Congress provided $55 million in first-year funds for 20 round II zones, as well as $5 million in first-year funds for 20 new rural ECs. In April 1998, Vice President Gore announced the beginning of competition for the Round II designations and both HUD and USDA held an extensive series of regional workshops for applicants, whose strategic plans had to be submitted by October 9, 1998. The designations of round II EZs and ECs were announced on January 13, 1999.
‘The round II legislation broadens eligibility for the EZ/EC program by lowering the maximum required poverty rate from 35 percent to 25 percent, making Indian reservations eligible for round II zones, and permitting one of the five rural zones to be designated in an area experiencing high population “emigration.” One of the new rural EZs and one of the round II ECs qualified on out migration. One EZ and four ECs are Indian reservations and another five EZs and ECs include tribes as partners [including FUTURO - ed.].’
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‘In June 1998, Representative Maurice Hinchey (New York) introduced HR 4071, that would have used half of the title XX funds proposed for rural round II Empowerment Zones to fund 33 new rural Enterprise Communities at $3 million each, in effect creating a round III of the initiative. The Hinchey proposal would have also broadened program eligibility to include other criteria besides poverty and established a small program of grants to assist applicants [in] developing] their strategic plans. Similar legislation (S. 2418) was introduced in the Senate. Ultimately, Congress chose to add 20 rural Enterprise Communities without changing the eligibility criteria.’
J. Normal Reid is Associate Deputy Administrator, Office of Community Development, USDA Rural Development, and has been associated with the implementation of the rural Empowerment Zones and Enterprise Communities program since its beginning.
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