Statement of Roy A. Bernardi
May 21, 2002
Office of Community Planning and Development
before the U.S. House of Representatives
Committee on Ways and Means
Subcommittee on Oversight
afternoon Chairman Houghton, Ranking Member Coyne, and distinguished
Members of the Subcommittee. My name is Roy Bernardi. I am the Assistant
Secretary for Community Planning and Development in the Department
of Housing and Urban Development.
The Department is pleased that this hearing is occurring in conjunction
with the Community Renewal Implementation Conference. Over 400 participants
including tax law specialists, executive directors, planning coordinators,
city managers, mayors, and residents have gathered to learn how
Federal tax incentives and community partnerships can encourage
economic development in Empowerment Zones (EZs) and Renewal Communities
(RCs). The Department�s most recent information shows that businesses
in EZs have made only a modest use of the Federal tax incentives.
This conference is just the beginning of HUD�s aggressive and comprehensive
campaign to market the existing tax incentives to businesses and
individuals in the 30 Empowerment Zones and 40 Renewal Communities
that HUD has designated.
The Community Renewal Tax Relief Act of 2000 provided for 12 rural
and 28 urban Renewal Communities and set forth 2 rural and 7 urban
Round III Empowerment Zones. The new legislation provided for measures
that included a $22 billion package of tax benefits, of which $11
billion is unique to the EZ/RC communities.
In the Fall of 2001, HUD received over 100 Renewal Community applications
from 35 states. Our eligibility and completeness review yielded
77 qualifying applications. The enthusiasm for this program is evidence
that our neighbors from coast to coast are anxious to reduce poverty
and provide opportunity through tax incentives. In January, Secretary
Martinez was able to announce 40 RCs with the most severe economic
distress, 20 of which were Enterprise Communities that chose to
become RCs. Unlike many grant competitions, Congress mandated that
the applications be judged strictly by objective criteria. At a
minimum the applicants needed to have a set of continuous census
tracts with at least 20% poverty and 9.4% average unemployment.
The 40 RCs selected had an average poverty rate of 40% and an average
unemployment rate of 17.1% percent.
Unlike many Federal programs, which provide cash grants for narrowly
defined projects, HUD requires Renewal Communities to adhere to
four of six required goals to promote economic growth at the local
level. Renewal Communities commit to a combination of reducing local
taxes, improving local services, reducing crime, reducing local
government requirements, involving community partners, and soliciting
in-kind donations. In return, the U.S. Treasury agrees to reduce
the Federal tax burden through the Renewal Community Employment
Credit, Commercial Revitalization Deduction, Zero Percent Capital
Gains, and Increased Section 179 Deduction for Renewal Community
Businesses. The tax incentives are the beginning of the strategic
alliances that are being formed among private, public, and nonprofit
actors in our 40 Renewal Communities. Ultimately, the success of
RCs and EZs will stem from grass roots implementation in communities.
Presently, we are aware of the efforts being made by several Renewal
Communities and Empowerment Zones to market their tax incentives
to potential business partners. In Eastern Kentucky, RC staff is
going door to door with tax publications raising enthusiasm in the
business communities. In Memphis, Tennessee, the mayor has brought
together representatives from non-profit, for-profit and other levels
of government to help target tax incentive outreach strategies.
Nissan has expressed interest in the rural Mississippi RC because
of the new tax incentives. A business in Burlington, Vermont is
considering using the RC tax savings to have more full-time, rather
than part-time employees. I will defer to other witnesses and let
them share with the subcommittee their accomplishments in detail.
New Empowerment Zones are also enthusiastic about tax incentives.
Tucson, Arizona has launched an Empowerment Zone tax incentive website
that has already received over 2500 hits since March 1. Finally,
in my hometown of Syracuse, New York, developers will use the tax
exempt EZ Facility Bond to help build Destiny, a 65 acre lakefront
recreation, commercial and retail center that will include a replica
of Erie Canal, rock climbing, hotels and a monorail link to the
airport and convention center.
closing, the Department believes tax incentives should be at the
center of its job creation efforts by helping small businesses grow,
creating an entrepreneurial environment, and showing to large corporations
that these economically distressed areas represent opportunities
with great hope.
you for this opportunity to testify and I would be pleased to respond
to your questions.
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