PROGRAM HIGHLIGHTS

SUMMARY OF BUDGET ESTIMATES

1. SUMMARY OF BUDGET REQUEST

   The fiscal year 2001 Budget proposes $150 million for Round II Urban Empowerment Zones (EZs). Fiscal year 2001 would be the first year of mandatory funding for the Round II EZs, which would total $1.45 billion over the life of their designation, including discretionary funding.

   As a result of the EZ Round II competition held in 1998, fifteen applicants were chosen for EZ designation, and will receive approximately $100 million over a 10-year period. The 1999 Omnibus Appropriations Act (P.L. 105-277) provided $45 million and the 2000 Appropriations Act (P.L. 106-74) provided $55 million in discretionary funds for the 15 Round II EZs. Of this total, each newly designated EZ received $3 million and $3.666 million, respectively, "for use in conjunction with economic development activities consistent with the strategic plan of each empowerment zone." These funds, as well as the flexible block grant funds requested in 2001, will complement the tax incentives authorized by the Taxpayer Relief Act of 1997 and the other benefits available to designated EZs. The proposed mandatory funding would provide a consistent and reliable source of flexible funding over the life of the program to encourage comprehensive planning for revitalization in the 15 new Zones to better integrate America's poor into the larger metropolitan economy. This funding would assist the 15 urban EZs in their revitalization efforts, with a special emphasis on stimulating job creation linked to welfare reform.

   The Empowerment Zone/Enterprise Community (EZ/EC) program reflects HUD's strong commitment to involve key strategic partners in community revitalization. The EZ/EC program encourages residents, States and localities, as well as private companies and non-profit organizations to work together to address local needs. The EZ/EC program also involves cooperation of other Federal Departments to respond to local conditions and produce results. The program directly advances the Department's Strategic Goal #4, "Improve community quality of life and economic vitality" through increasing the number and quality of jobs in urban and rural communities. The Annual Performance Plan performance indicator for the EZ/EC program, 4.1.a, is "Increasing the share of EZs and ECs that show satisfactory progress towards locally defined benchmarks continues to be at least 95 percent," as measured through the new performance measurement system (PERMS). The EZ/EC program reflects HUD's commitment to empowerment with accountability because communities are assessed in terms of the performance relative to progress made on projects and programs in their strategic plans. Moreover, this program is an innovative approach to community revitalization which recognizes that attracting private investment is necessary for sustainable economic revitalization. The EZ/EC initiative also recognizes that local communities working together, through a bottom-up approach, can best identify and develop local solutions to the problems they face, and encourages communities to develop comprehensive strategic plans for change. The EZ/EC program also supports Strategic Goal #3: "Promote Self-Sufficiency and Asset Development of Families and Individuals." The EZ/EC program is a key element in the strategy to produce suitable jobs in distressed areas and to empower low- and moderate-income persons to take advantage of those jobs.

   EZ outcomes are locally determined and can vary substantially from year-to-year. However, EZ activities also contribute to outcome indicator 1.1.1-homeownership levels; 1.2.1, 1.2.2, 1.2-reducing "worst case" housing needs; 1.2.5 - 1.2.8-increasing affordable housing units; 2.3.1-minority homeownership; 3.2.2 improving transition from welfare to work; 3.2.7- youth employment; 4.1.1, 4.1.2, 4.1.3-city/suburban poverty, employment and income ratios; 4.2.1- central city homeownership ratio; 4.2.4-city resident opinion of neighborhood; 4.2.5-capital available for housing rehabilitation, 4.3.1-reduction in reported crime; and 4.3.3-reduction in urban blight.

   Empowerment Zones embody the core principles of the President's Community Empowerment agenda. The EZ/EC initiative combines Federal tax incentives with direct funding for job creation, physical improvements and social services. It requires unparalleled levels of private sector involvement and investment. It brings all stakeholders in a community�residents, nonprofits, businesses, and Government�to the table to develop a locally fashioned and locally controlled comprehensive revitalization strategy. It makes the private sector the driver of economic growth, with the government acting as a partner. As in the first round, communities that chose to compete for Round II EZ designation were challenged to develop their own comprehensive strategic plans for revitalization, with the input of residents and a wide array of community partners. HUD chose to invest in those 15 communities that developed the most innovative plans and garnered significant local and private sector commitments. The conceptual framework of the program is embodied in four key principles:

   • The Strategic Vision for Change identifies what a community will become in the future and includes a clear statement of the values that the community used to create its vision. The vision should include coordinated strategies that will help to achieve the community's goals, and should take into account the development of a performance measurement system that will provide the framework for evaluating progress and adjusting the Strategic Plan.
   • Community-Based Partnerships emphasize the importance of involving all community stakeholders in the revitalization of distressed neighborhoods. Key partners include residents; businesses; local political leaders; local, State and Federal Governments; community development corporations; local public health and social service departments; regional planning organizations; unions; environmental groups; schools and universities; interfaith non-profit organizations; and other community groups. A successful EZ should be able to leverage the resources that these partners bring to the table. Key partners should be included in the governance structure, and all partners should be held accountable for their commitment to revitalizing the community.
   • Economic Opportunity includes creating jobs for Zone residents and linking residents to jobs within the Zone and throughout the region. Successful economic opportunity strategies provide entrepreneurs with technical assistance and greater access to capital and credit; assist businesses to expand and create job opportunities for residents; provide residents with jobs; and provide residents with job training and placement services, with an emphasis on linkages to welfare-to-work and school-to-work initiatives.
   • Sustainable Community Development advances the creation of livable and vibrant communities through physical, environmental, community, and human development. In successful Zones, these approaches preserve the environment and historic landmarks; address brownfields cleanup and redevelopment; advance the use of telecommunications as a means of improving community coordination and interaction; explore the economic development advantages of energy efficiency and the use of renewable energy resources; and improve the quality of and/or access to programs supporting families, affordable housing, youth development, substance abuse prevention, healthcare, human services, education, childcare, transportation, and public safety.

   These principles are drawn from the experiences of communities around the Nation that have used them successfully to develop holistic approaches to community revitalization. Applicants were challenged to address these principles in their Strategic Plans, which describe in detail the community's strategy for revitalization and is the vehicle for building commitments, large and small, among all of the individuals and organizations that will be working together to strengthen their community.

   Progress for any EZ/EC is measured by the progress that the community makes in implementing its Strategic Plan. A wide variety of indicators have been developed, based on three of the four core principles, against which EZ/ECs report specific activities. (There are no specific indicators for the Strategic Vision for Change goal.) Under Community-Based Partnerships, communities report on governance and capacity building activities; under Economic Opportunity, communities report on workforce development, business assistance and capital and credit access activities; and under Sustainable Community Development, communities report on housing, public safety and crime prevention, infrastructure, environment, health, education, human services and family support, and other similar activities. A computerized system to collect this data has been implemented and Round I communities entered accomplishments for the first time in late 1998.

   For the first round of funding (1994), more than 500 urban and rural communities applied to be designated as an urban Empowerment Zone or Enterprise Community. Since that time, EZs and ECs have evolved from establishing governance structures and performance benchmarks to actively implementing programs that will help to revitalize their communities. Significant progress is being made thanks to strong partnerships between government, the private sector, non-profits, and community residents. In the time since their designation, the 72 urban EZs and ECs have generated an estimated $10 billion in private and public investment to revive inner city neighborhoods once considered beyond repair, and to create jobs and help families move from welfare to work. In addition, education and job training has been provided to over 42,000 Zone residents, resulting in the employment of approximately 30,000 people. The funding requested here is essential in order to enable the Round II EZs to achieve similar results.

2. CHANGES FROM 1999 ESTIMATES INCLUDED IN 2000 BUDGET

   Actual obligations were $6.4 million less than expected in 1999 mainly due to the fact that two EZ grants were not obligated by the end of fiscal year 1999. They are both expected to be obligated early in fiscal year 2000.

3. CHANGES FROM ORIGINAL 2000 BUDGET ESTIMATES

   The fiscal year 2000 Appropriations Act (P.L. 106-74) provided $55 million in discretionary funding versus the fiscal year 2000 request of $150 million in mandatory funding. The obligations and outlays in 2000 shown in this justification only reflect activity against the discretionary account.

EXPLANATION OF INCREASES AND DECREASES

The fiscal year 2001 request is the first of 9 years of mandatory funding to provide flexible grants to the 15 Round II Urban EZs authorized by the Taxpayer Relief Act of 1997. The increases in obligations and appropriations in 2001 reflect the additional funding requested in 2001. Although outlays increase for this reason as well, they also increase because the 1998, 1999, and 2000 appropriations are expected to outlay at a higher rate than the previous 2 years.

PROGRAM DESCRIPTION AND ACTIVITY