[Federal Register Volume 60, Number 8 (Thursday, January 12, 1995)]
[Rules and Regulations]
[Pages 3034-3045]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-734]
[[Page 3033]]
_______________________________________________________________________
Part II
Department of Housing and Urban Development
_______________________________________________________________________
Office of the Assistant Secretary for Community Planning and
Development
_______________________________________________________________________
24 CFR Part 597
Designation of Empowerment Zones and Enterprise Communities; Final Rule
Federal Register / Vol. 60, No. 8 / Thursday, January 12, 1995 /
Rules and Regulations
[[Page 3034]]
DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
Office of the Assistant Secretary for Community Planning and
Development
24 CFR Part 597
[Docket No. R-95-1702; FR-3580-F-03]
RIN 2506-AB65
Designation of Empowerment Zones and Enterprise Communities
AGENCY: Office of the Assistant Secretary for Community Planning and
Development, HUD.
ACTION: Final rule.
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SUMMARY: This rule makes final an interim rule published on January 18,
1994 that implemented that portion of Subchapter C, Part I (Empowerment
Zones, Enterprise Communities and Rural Development Investment Areas)
of Title XIII of the Omnibus Budget Reconciliation Act of 1993 dealing
with the designation of urban Empowerment Zones and Enterprise
Communities. The interim rule, consistent with the statute, authorized
the Secretary of HUD to designate not more than six urban Empowerment
Zones and not more than 65 urban Enterprise Communities based upon the
effectiveness of the strategic plan submitted by a State or States and
local government(s) nominating an area for designation.
EFFECTIVE DATE: February 13, 1995.
FOR FURTHER INFORMATION CONTACT: Michael T. Savage, Deputy Director,
Office of Economic Development, Room 7136, Department of Housing and
Urban Development, 451 Seventh Street SW, Washington, DC 20410,
telephone (202) 708-2290; TDD (202) 708-2565. (These are not toll-free
numbers.)
SUPPLEMENTARY INFORMATION:
Paperwork Reduction Act
The information collection requirements contained in this rule were
approved by the Office of Management and Budget (OMB) for review under
the Paperwork Reduction Act of 1980 (44 U.S.C. 3501-3520), and assigned
OMB Control Number 2506-0148.
I. Background--the January 18, 1994 Interim Rule
On January 18, 1994 (59 FR 2700), HUD published an interim rule
that implemented that portion of Subchapter C, Part I (Empowerment
Zones, Enterprise Communities and Rural Development Investment Areas)
of Title XIII of the Omnibus Budget Reconciliation Act of 1993 which
addresses the designation of urban Empowerment Zones and Enterprise
Communities. Title XIII also provides for the designation of rural
Empowerment Zones and Enterprise Communities. As noted in the January
18, 1994 interim rule, the urban part of the program is administered by
HUD as a Federal-State-local partnership. The rural part of the program
is administered by the Department of Agriculture. The Department of
Agriculture also published an interim rule on January 18, 1994 (59 FR
2686). (The program is hereafter referred to as the EZ/EC program.)
The EZ/EC program is a key step in rebuilding communities in
America's poverty-stricken inner cities and rural heartland. It is
designed to empower people and communities across the nation in
developing and implementing strategic plans to create job opportunities
and sustainable community development. The program combines tax
benefits with substantial investment of Federal resources and enhanced
coordination among Federal agencies.
Designated Enterprise Communities are eligible for new Tax-Exempt
Facilities Bonds for certain private business activities. States with
designated Enterprise Communities will receive approximately $3 million
in Empowerment Zone/Enterprise Community Social Service Block Grant
(EZ/EC SSBG) funds to pass through to each designated area for approved
activities identified in their strategic plans. Enterprise Communities
will receive special consideration in competition for funding under
numerous Federal programs, including the new National Service and
proposed Community Policing initiatives. The Federal Government will
focus special attention on working cooperatively with designated
Enterprise Communities to overcome regulatory impediments, to permit
flexible use of existing Federal funds, and to assist these Communities
in meeting essential mandates.
Designated Empowerment Zones will receive all the benefits provided
to Enterprise Communities and other communities with innovative visions
for change. Empowerment Zones are awarded substantial Empowerment Zone/
Enterprise Community Social Service Block Grant funds, in the amount of
$100 million for each urban Zone. An Employer Wage Credit for Zone
residents is extended to qualified employers engaged in trade or
business, in designated Empowerment Zones. Businesses are afforded an
increased deduction under section 179 of the Internal Revenue Code for
qualified properties.
The preamble to the January 18, 1994 interim rule described in
detail the eligibility requirements for Empowerment Zones and
Enterprise Communities and the nomination process. This information is
not repeated in this final rule.
The Department also published on January 18, 1994, a notice
inviting applications on nominations for areas as Empowerment Zones and
Enterprise Communities (59 FR 2711). Title XIII of the Omnibus Budget
Reconciliation Act of 1993 authorized the Secretary of HUD to designate
up to six urban Empowerment Zones and up to 65 urban Enterprise
Communities. The purpose of this document is to make final the interim
regulations published on January 18, 1994. The designated Empowerment
Zones and Enterprise Communities will be announced by separate notice
published in the Federal Register.
II. Differences Between Final Rule and Interim Rule
This final rule makes only editorial and technical correction
changes to the January 18, 1994 interim rule. As will be discussed in
the following section of this preamble, HUD received several good
suggestions and recommendations of matters that the rule should address
or expand upon, or terms that should be defined. These changes are
largely directed to the nomination process, to the eligibility process,
to the contents of the strategic plan or to the evaluation of the plan.
Because of the need to have applications submitted by June 30, 1994 so
that HUD and the Department of Agriculture could make designations
within the time period set by statute, any significant or substantial
revisions to the interim rule would have delayed the application
process, and therefore delayed the designation process. Any significant
or substantial revisions made at this time to the nomination process,
evaluation process, etc., would have no effect since the designation
process is complete.
HUD anticipates that if another round of designations is authorized
by the Congress, there will be accompanying legislation that may make
changes to the existing EZ/EC program, and thus require amendments to
the regulations in 24 CFR part 597. At the time of this rulemaking, HUD
will again consider the comments received on the January 18, 1994, and
if they remain applicable to the new round of designations (the issue
of applicability depends upon the type of legislative changes, if any,
made to the EZ/EC program by the Congress), [[Page 3035]] these
comments will be adopted in new regulations.
The technical changes made by this final rule are largely directed
to that section of the rule (Sec. 597.200(d)) which addresses the use
of EZ/EC SSBG funds and therefore are relevant even after the
designation process is complete. The following provides a list of the
editorial/technical changes made to the interim rule by this final
rule.
1. In Sec. 597.3 (Definitions), the second paragraph of the
definition of ``urban area'' inadvertently omitted the phrase
``jurisdiction of the'' before the words ``nominating local
government.'' (See 59 FR 2704, second column).
2. In Sec. 597.200 (Nominations by State and local governments),
HUD sets forth the procedures for nominations by State and local
governments of areas for designation as an Empowerment Zone and/or
Enterprise Community. Paragraph (d) of that section addresses the
elements of the strategic plan which must be developed as part of the
application for designation, and paragraph (d)(12) specifically
addresses how the Social Services Block Grant (SSBG) funds for
designated Empowerment Zones and Enterprise Communities will be
utilized. Several technical errors were made in paragraph (d)(12), and
these are as follows:
a. Paragraph (d)(12)(i)(A) discusses the commitment concerning the
use of EZ/EC SSBG funds. The rule provides for the commitment to be
made by the ``applicant as well as by the State government(s).'' In
this paragraph, HUD inadvertently omitted reference to the full range
of nominating entities that would have to make this commitment, and
only listed ``State governments.'' (Note that Sec. 597.501 provides for
nomination by States and local governments [the preamble also discusses
this at page 2701, second column] and Sec. 597.502 provides for
nominations by State-chartered economic development corporations.)
Accordingly, the final rule corrects this paragraph to include not only
State governments, but local governments and State-chartered economic
development corporations. The final rule also explains that the
``services or activities'' referenced in this paragraph are the
``services or activities which can be used to achieve or maintain the
goals set forth in paragraph (d)(12).''
b. Paragraph (d)(12)(ii) provides, in error, that Empowerment Zone
or Enterprise Community SSBG funds (EZ/EC SSBG funds) may be used to
achieve certain goals set forth in this paragraph by ``undertaking one
of the below specified options.'' (See 59 FR 2706, first and second
columns.) The correct wording should provide that States and local
governments may undertake ``one or more'' of the options set forth in
the paragraph. One option available to States and local governments for
the use of EZ/EC SSBG funds was inadvertently omitted from the interim
rule. This option provides for the use of EZ/EC SSBG funds to promote
the economic independence of low-income residents, such as capitalizing
revolving or micro-enterprise loan funds for their benefit.
c. In paragraph (d)(12)(ii), the interim rule provides that EZ/EC
SSBG funds ``may'' be used to maintain the goals set forth in paragraph
(d)(12). (See page 2706, first column.) The rule should have stated
that the EZ/EC SSBG funds ``must'' be used to maintain the goals set
forth in paragraph (d)(12), and that the goals ``may be achieved'' by
undertaking the program options listed in (d)(12)(ii).
d. The interim rule inadvertently omitted the paragraph that
provides guidance concerning how designated empowerment zones and
enterprise communities may meet the goals specified in paragraph
(d)(12). (See 59 FR 2706, middle column.) This paragraph does not
dictate how the goals may be met, but offers guidance as to how they
may be met. This rule makes this correction by adding a new paragraph
(iii), and the succeeding paragraphs are redesignated accordingly.
e. In paragraph (d)(12)(v) of the interim rule, the Department
provided that the State must obligate EZ/EC SSBG funds in accordance
with the strategic plan within two years from the ``date of designation
of the Empowerment Zone or Enterprise Community.'' (See page 2706,
middle column.) This time frame is incorrect. This paragraph should
have provided that the State must obligate funds two years from the
date ``the funds are paid to the State.'' This paragraph is also
corrected by this document to add that ``funds not obligated must be
remitted to the Secretary of Health and Human Services.'' This sentence
was inadvertently dropped in the rule text.
f. Two requirements pertaining to the strategic plan were
inadvertently omitted from paragraph (d)(12). One requirement provides
that the strategic plan must indicate how the EZ/EC SSBG funds will be
invested and used for the period of designation, and the second
provides that the strategic plan must provide for periodic reporting of
information by the relevant State. These requirements are now set forth
in (d)(12)(vii) and (viii).
g. In addition to the above corrections, this document corrects
missing or erroneous punctuation in paragraph (d)(12). For example,
some paragraphs ended in periods, and should have ended in semicolons.
4. In Sec. 597.200, paragraph (d)(17) is corrected by removing the
``and'' which follows the semicolon at the end of this paragraph. (See
59 FR 2706, third column.)
5. In Sec. 597.200, paragraph (d)(18) is corrected by removing the
period at the end of the paragraph, and replacing it with a semicolon.
(See 59 FR 2706, third column.)
6. In Sec. 597.201 (Evaluating the strategic plan), paragraph
(b)(9) should end with a semicolon and not a period. (See 59 FR 2707,
third column.)
7. In Sec. 597.201 (Evaluating the strategic plan), paragraph
(c)(1) should end with a semicolon and not a period. (See 59 FR 2708,
first column.)
8. In Sec. 597.301 (Selection factors for designation of nominated
urban areas), paragraphs (a) (1), (2) and (3) should each end with a
semicolon instead of a period, and the word ``and'' should follow the
semicolon in paragraph (a)(3). (See 59 FR 2709, first column.)
The above changes are the only ones that have been made to the
interim rule by this final rule.
III. The Public Comments
General Comments
The January 18, 1994 interim rule provided for a 30-day public
comment period. The public comment period expired on February 17, 1994.
Comments, however, were accepted through March 1, 1994. By this date, a
total of 45 comments had been received. The commenters consisted of
State and local jurisdictions (or agencies of such jurisdictions),
State legislators and non-profit organizations. Twenty-two (22) of the
commenters were from the State of California.
The majority of the commenters gave the interim regulations
favorable marks, stating that, overall, the interim rule clearly
delineates the role of the State and participating entities. As noted
earlier in this preamble, HUD received several good suggestions and
recommendations from the commenters that will be considered in any
future rulemaking needed for a new round of designation. Other
suggestions raised by commenters, although equally with merit, could
not be adopted (even if HUD were making substantive changes at this
time) given the current statutory framework of the EZ/EC Program, and
other requests for changes or clarification were determined to be
adequately addressed by the January 18, 1994 interim rule. The
following provides a summary of the significant [[Page 3036]] issues
raised by the public commenters, and HUD's response to these issues.
General Comments on the Rule
Comment. One commenter stated that the interim rule as a whole did
not adequately address the needs of extremely low-income persons.
Response. HUD disagrees with the commenter. The eligibility for
designation as an Empowerment Zone or Enterprise Community requires a
significant level of poverty, and the strategic plan required various
descriptions of how the nominated area would address the need of low-
income persons, for example, through the creation of economic
opportunities, home ownership, education or other route to economic
independence for low-income families, youth and other individuals. (See
Sec. 597.200.)
Comment. Two commenters stated that the rule should explicitly
address the need of areas in which military base closures have occurred
or will occur.
Response. Military base closure was explicitly referenced in the
rule. Note that Sec. 597.102(b)(1) of the rule provides in relevant
part that ``Unemployment shall be demonstrated by * * * (2) Evidence of
especially severe economic conditions, such as military base or plant
closings, or other conditions which have brought about significant job
dislocation within the nominated area.''
Comment. One commenter stated that the rule should have taken into
consideration areas which have both rural and urban characteristics.
Response. HUD strived to the extent possible, given the statutory
framework and requirements, to be as flexible as possible in describing
eligibility for nominated areas, and to recognize that some urban areas
will have rural characteristics. To a significant degree, however, this
flexibility was limited by the statutory requirements for eligible
urban areas.
Comment. One commenter stated that the rule and program structure
perpetuate the inner city as a place for only low-income persons to
live. The commenter stated that while EZ/EC SSBG eligible expenditures
give latitude for communities to address social problems, they leave
little room for needed neighborhood economic development programs that
could make urban neighborhoods better places to live, to raise
families, to shop, to work and to grow businesses.
Response. The entire EZ/EC program is directed to uplifting the
economic and social environment of the designated urban area. HUD
believes that the four key principles of the program, set forth in
Sec. 597.200, and the specific elements embodied in each principle,
clearly make this point.
Comments on Terms Used
Comment. One commenter stated that the rule should have defined the
terms ``community'' and ``low-income.'' Another commenter stated that
the interim rule should have defined the term ``long-term unemployed.''
Response. HUD acknowledges the merit of these suggestions, and
definitions for these terms will be considered for any future
rulemaking that may be necessary for a new round of designations.
Comment. Two commenters stated that the term ``disadvantaged''
should be defined in the regulation. The commenter stated that this
term should be defined to mean household or individual income below 30
percent or 50 percent of the area-wide income.
Response. This term appears in Sec. 507.200(d)(12) which addresses
the use of EZ/EC SSBG funds. EZ/EC SSBG funds are administered by the
Department of Health and Human Services. Accordingly, HHS has
responsibility for defining this term. Although this term is not
defined in the HHS regulations governing Social Service Block Grant
Funds (see 45 CFR part 96, subpart G), HHS should be able to provide
guidance to grantees on the meaning of this term.
Comment. One commenter stated that the definition of ``State-
chartered economic development corporation'' was not very clear.
Response. The statute defined this term, and the rule simply
incorporated the statutory definition.
Comments on Census Tracts and Census Tract Data
Comment. Twenty-four (24) commenters objected to the failure to use
census block data instead of census tract data. The commenters pointed
out that many city boundaries do not coincide with census boundaries,
and these cities would be disqualified. In addition to requesting use
of census block data in lieu of census tract data, other suggestions
submitted by commenters included: Excluding significantly-sized public
facilities from calculation of a city's total mileage; and allowing an
entity to request EC designation to be extended on a case-by-case basis
to coterminous properties adjacent to an eligible poverty census tract.
Response. HUD is unable to adopt the suggestions of the commenters.
The statute requires the use of census tract data, and does not permit
the exclusions or case-by-case exceptions as suggested by the
commenters.
Comment. One commenter requested that the rule exclude portions of
census tracts incapable of development, such as those that may be
covered by water.
Response. In determining what constitutes census tracts, and what
areas are not included or excluded in census tracts, HUD follows
existing regulations applicable to census tracts issued by the U.S.
Census Bureau.
Comment. Another commenter stated that census retail trade data
does not accurately characterize central business districts. The
commenter stated that the rule excludes central business districts
(CBDs) as defined by the 1987 Census Retail Trade unless poverty rate
for each tract in the CBD is not less than 35 percent for an EZ and 30
percent for an EC.
Response. Central business districts are addressed in
Sec. 597.100(f). HUD's rule provides some flexibility since the last
Census of Retail Trade was in 1982. The issue of characterization of
CBDs is not a question of whether an area was listed in the Census of
Retail Trade, but whether the area fits characteristics of CBDs. HUD's
rule allows applicants to demonstrate that the character of an area has
changed, and does not meet the definition of CBD as used in the most
recent Census of Retail Trade.
Comments on Population Levels
Comment. Twelve commenters stated that the 50,000 population
limitation excludes many cities in need of EZ/EC assistance, and
requested that the population limit be increased to 200,000 for all
urban nominated areas.
Response. The population limitation of 50,000 found in
Sec. 597.100(a)(2) is directly from the statute.
Comment. Another commenter said that the rule should have excluded
prison and hospital populations from the populations caps.
Response. This concern was accommodated by HUD at the time of
issuance of the January 18, 1994 interim rule. The application process
allowed cities to deduct institutional populations or populations in
group quarters.
Comments on Pervasive Poverty and Unemployment
Comment. One commenter stated that the test for pervasive poverty
should meet all three criteria, not simply one, and that a higher test
should be utilized to determine unemployment.
Response. HUD believes that each of the three factors presented in
Sec. 597.102(a), in and of itself, adequately exemplifies an area that
has pervasive [[Page 3037]] poverty. Similarly, HUD believes that each
of the two factors presented in Sec. 597.103(b) adequately exemplifies
an area of unemployment. However, these comments will certainly be
considered if another round of designations is authorized by the
Congress.
Comments on Poverty Rate
Comment. Sixteen commenters stated that the definition of low or
zero population industrial or commercial census tracts should be
extended to include zero population census blocks which meet the same
criteria. Two other commenters stated that the requirement for a non-
contiguous area to separately meet the poverty rate criteria makes no
sense where the non-contiguous area consists of a single census tract.
Response. Poverty rate is addressed in Sec. 597.103 of the rule.
The existing EZ/EC legislation provides no flexibility to adopt the
comments suggested by the commenters.
Comment. Other commenters asked that HUD take into consideration
the unique poverty rates of their own States or communities due to the
high cost of living.
Response. HUD believes that the poverty rate factors in the rule
are sufficiently broad to encompass the unique poverty and high cost of
living characteristics of any individual State or community.
Comments on the Strategic Plan
Comment. Three commenters stated that the strategic plan principle
concerning employment should emphasize job creation for low-income
persons. Another commenter stated that the strategic plan principle
concerning employment should emphasize job creation for minority
businesses.
Response. HUD agrees with the commenters and such emphasis will be
considered in future rulemaking that may be necessary for any
additional rounds of designations that may be authorized.
Comment. Two commenters stated that the rule should require an
explanation of how participants in the planning process are
representative of the ``affected'' community.
Response. This requirement was included in the application, and HUD
will consider including this requirement in the text of the regulation
in any future rulemaking that may be needed.
Comment. Two commenters stated that the rule should emphasize that
public funds cannot be used to encourage plant relocations or pirating
of jobs from one place to another.
Response. This issue was addressed in Sec. 597.200(3) of the rule,
and the EZ/EC application included a certification to this effect.
Comment. Two commenters stated that the rule should allow
designated communities to use funds and other resources identified in
the strategic plan for properties directly adjacent to the boundaries
of the designated census tracts.
Response. HUD provides flexibility on this issue. Businesses and
enterprise communities do not receive tax incentives and the only
funding that flows from EZ/EC designation is title 20 funding. The
latter can be used outside of the EC if the use of the funds benefits
the EC residents directly.
Comment. Two commenters stated that the rule did not discuss the
applicability of existing plans (e.g., CHAS) to the strategic planning
process.
Response. Although the rule does not specifically reference the
CHAS, the rule contains reference to other local planning efforts and
to consolidated planning efforts (See Secs. 597.200(d)(15) and
597.201(b).) Once the Consolidated Plan final rule is published, it
will bring all plans into conformance.
Comment. One commenter stated that the rule should require
jurisdictions to disclose areas considered for nomination, but not
selected, and to explain why they were not selected.
Response. This issue is addressed to some extent in Sec. 597.201(c)
of the rule, but HUD will consider expanding on this issue in any
future rulemaking that may be needed.
Comment. One commenter, in response to the requirements of
Sec. 597.200(d) (14), (15), and (16), stated that the rule should
require applicants to explain which existing resources (including the
amounts) will be shifted from other geographic locations to the EZ/EC
area to fulfill the applicant's commitment to resources to the EZ/EC
area.
Response. HUD believes that such a requirement would be an
unwarranted intrusion in local government processes.
Comment. Two commenters stated that the rule should identify
specific regulatory and other impediments to implementing the strategic
plan, and indicate whether waivers can be accomplished administratively
or through statutory changes.
Response. HUD cannot identify specific regulatory barriers for each
applicant. The applicant is in a better position to advise HUD where
there are barriers and other impediments to implementation of the plan,
and HUD asks applicants to identify such barriers in Sec. 597.200(d)
(17) and (18).
Comment. Other commenters made several other suggestions for the
strategic plan, including: requiring the same standards for citizen
participation for strategic plan revisions as required for initial
development of the plan, requiring benchmarks that identify benefits to
low-income persons and long-term unemployed persons, and encouraging
activities that specifically meet the needs of low-income persons.
Response. All these suggestions have merit and HUD will consider
these in any future rulemaking that may be needed.
Comments on Evaluation of the Strategic Plan
Comment. Several commenters made suggestions for changes to
Sec. 597.201 which describes how the strategic plan will be evaluated.
The suggestions included evaluating the plan based on the number of
quality jobs provided to low-income persons; allowing community-based
partnerships to include labor unions; allowing community-based
partnerships to include low-income persons, long-term unemployed
persons, and residents of the area to be designated; providing minimum
standards for participation in the development of the plan; and
providing for low-income persons to monitor the implementation of the
plan.
Response. All of these suggestions will be taken into consideration
in any future EZ/EC rulemaking.
Comment. One commenter stated that the rule must promote affordable
housing and without affordable housing in proposed zones, the EZ/EC
program will fail.
Response. Affordable housing was promoted through the rule. See
Secs. 597.200(d)(12)(ii)(B)(3) and (g)(3), and 597.201(b)(8).
Comment. One commenter stated that a city's compliance with the
affordable housing requirement may make the city ineligible for EZ/EC
designation. The commenter stated that as a result of compliance with
this requirement, some cities do not have concentration of poverty
described in the threshold requirements for EZ/EC designation. Another
commenter stated that the evaluation of a plan should have included a
review of whether a jurisdiction is affirmatively furthering fair
housing, and also required applicants to submit a certification that
they are in compliance with fair housing laws. The commenter also
stated that the rule should provide for revocation of designation as a
zone or community if the jurisdiction fails to comply with these laws.
Response. With respect to the first commenter's concern, the
poverty rates set forth in the interim rule are based on
[[Page 3038]] the 1990 Census, which HUD believes provides a fair and
impartial measure of poverty level. With respect to the second
commenter's concern, these suggestions will be considered in future
rulemaking.
Comments on Submission of Nomination of Designation
Comment. Two commenters stated that the affected community should
have access to the same information and reports, at no cost, that are
available to HUD.
Response. Following completion of the designation process, the
information contained in applications will be available to the public
through requests made under the Freedom of Information Act.
Comment. One commenter suggested that the rule require the affected
State to receive a copy of notice of intent to participate by the
community, at the same time the local community sends the notice to
HUD.
Response. HUD will consider adopting this suggestion in future
rulemaking.
Comments on the Selection Factors for Designation
Comment. One commenter stated that the rule should include
procedures for appealing selections based on geographic diversity. The
commenter notes the rule allows HUD to designate a lower rated
application over a higher rated application in the interests of
geographic diversity of the designations (see Sec. 597.301). Another
commenter states that the geographic diversity provision should be
strengthened by providing that each State will receive at least one
urban designation as either an EZ or EC. A third commenter stated that
HUD should reserve two of the six urban zone designations for small
cities with populations under 100,000.
Response. HUD is not inclined to adopt any of these commenters'
suggestions as regulatory requirements. These suggestions limit the
flexibility that is needed in the selection process. However, HUD will
re-evaluate these issues at the time of any future rulemaking.
Comments on Other Provisions
Comment. One commenter stated that the rule should be explicit
about the eligibility of areas for designation within the Commonwealth
of Puerto Rico.
Response. Pursuant to Title XIII, no areas of Puerto Rico were
eligible for designation.
IV. Other Matters
National Environmental Policy Act. A Finding of No Significant
Impact with respect to the environment was made in accordance with HUD
regulations in 24 CFR part 50, which implement section 102(c) of the
National Environmental Policy Act of 1969 (42 U.S.C. 4332) at the time
of development of the interim rule. That Finding remains applicable to
this final rule and is available for public inspection and copying
during regular business hours in the Office of the Rules Docket Clerk,
Room 10276, 451 Seventh Street SW, Washington, DC 20410.
Executive Order 12866, Regulatory Planning and Review. This rule
was reviewed and approved by the Office of Management and Budget as a
significant rule, as that term is defined in Executive Order 12866,
which was signed by the President on September 30, 1993. Any changes to
the rule as a result of that review are contained in the public file of
the rule in the office of the Department's Rules Docket Clerk.
Regulatory Flexibility Act. The Secretary, in accordance with the
Regulatory Flexibility Act (5 U.S.C. 605(b)), has reviewed this rule
before publication and by approving it certifies that the rule will not
have a significant economic impact on a substantial number of small
entities within the intent and purpose of that Act. The Act is intended
to encourage Federal agencies to utilize innovative administrative
procedures in dealing with individuals, small businesses, small
organizations, and small governmental bodies that would otherwise be
unnecessarily adversely affected by Federal regulations. To the extent
that this rule affects those entities, its purpose is to reduce any
disproportionate burden by providing for the waiver of regulations and
by affording other incentives directed toward a positive economic
impact. Therefore, no regulatory flexibility analysis under the Act is
necessary.
Executive Order 12611, Federalism. The General Counsel, as the
Designated Official under section 6(a) of Executive Order 12611,
Federalism, has determined that, although the policies contained in
this rule may have a substantial direct effect on States or their
political subdivisions that are designated as Empowerment Zones or
Enterprise Communities, this effect is intended by the legislation
authorizing the program. The purpose of the rule is to provide a
cooperative atmosphere between the Federal government and States and
local governments, and to reduce any regulatory burden imposed by the
Federal government that impedes the ability of States and local
governments to solve pressing economic, social, and physical problems
in their communities.
Executive Order 12606, The Family. The General Counsel, as the
Designated Official under Executive Order 12606, The Family, has
determined that the provisions of this rule will not have a significant
impact on family formation, maintenance or well being, except to the
extent that the program authorized by the rule will empower communities
and their residents to take effective action to solve difficult and
pressing economic, human, community and physical development challenges
that have a negative impact on families. Any such impact is beneficial
and merits no further review under the Order.
Semiannual Agenda. This rule was listed as sequence number 1851 in
the Department's semiannual agenda of regulations published on November
14, 1994 (59 FR 57632, 57665) under Executive Order 12866 and the
Regulatory Flexibility Act.
List of Subjects in 24 CFR Part 597
Community development, Empowerment zones, Enterprise communities,
Economic development, Housing, Indians, Intergovernmental relations,
Reporting and recordkeeping requirements, Urban renewal.
In accordance with the reasons set out in the preamble, 24 CFR part
597 is revised to read as follows:
PART 597--URBAN EMPOWERMENT ZONES AND ENTERPRISE COMMUNITIES
Subpart A--General Provisions
Sec.
597.1 Applicability and scope.
597.2 Objective and purpose.
597.3 Definitions.
597.4 Secretarial review and designation.
597.5 Waivers.
Subpart B--Area Requirements
597.100 Eligibility requirements and data usage.
597.101 Data utilized for eligibility determinations.
597.102 Tests of pervasive poverty, unemployment and general
distress.
597.103 Poverty rate.
Subpart C--Nomination Procedure
597.200 Nominations by State and local governments.
597.201 Evaluating the strategic plan.
597.202 Submission of nominations for designation.
Subpart D--Designation Process
597.300 HUD action and review of nominations for designation.
597.301 Selection factors for designation of nominated urban areas.
[[Page 3039]]
597.302 Number of Empowerment Zones and Enterprise Communities
designated.
Subpart E--Post-Designation Requirements
597.400 Reporting.
597.401 Periodic performance reviews.
597.402 Validation of designation.
597.403 Revocation of designation.
Subpart F--Special Rules
597.500 Indian Reservations.
597.501 Governments.
597.502 Nominations by economic development corporations or the
District of Columbia.
597.503 Use of census data.
Authority: 26 U.S.C. 1391; 42 U.S.C. 3535(d).
Subpart A--General Provisions
Sec. 597.1 Applicability and scope.
(a) This part establishes policies and procedures applicable to
urban Empowerment Zones and Enterprise Communities, authorized under
Subchapter U of the Internal Revenue Code of 1986, as amended, relating
to the designation and treatment of Empowerment Zones, Enterprise
Communities and Rural Development Investment Areas.
(b) This part contains provisions relating to area requirements,
the nomination process for urban Empowerment Zones and urban Enterprise
Communities, and the designation and administration of these Zones and
Communities by HUD. Provisions dealing with the nomination and
designation of rural Empowerment Zones and Enterprise Communities will
be promulgated by the Department of Agriculture. HUD and the Department
of Agriculture will consult in all cases in which nominated areas
possess both urban and rural characteristics, and will utilize a
flexible approach in determining the appropriate designation.
Sec. 597.2 Objective and purpose.
The purpose of this part is to provide for the establishment of
Empowerment Zones and Enterprise Communities in urban areas, to
stimulate the creation of new jobs, particularly for the disadvantaged
and long-term unemployed, and to promote revitalization of economically
distressed areas.
Sec. 597.3 Definitions.
Designation means the process by which the Secretary designates
urban areas as Empowerment Zones or Enterprise Communities eligible for
tax incentives and credits established by Subchapter U of the Internal
Revenue Code of 1986, as amended (26 U.S.C. 1391 et seq.) and for
special consideration for programs of Federal assistance.
Empowerment Zone means an urban area so designated by the Secretary
pursuant to this part. Up to six such Zones may be designated,
provided, that if the Secretary designates the maximum number of zones,
not less than one shall be in a nominated urban area the most populous
city of which has a population of 500,000 or less; and no less than one
shall be a nominated urban area which includes areas in two States and
which has an area population of 50,000 or less.
Enterprise Community means an urban area so designated by the
Secretary pursuant to this part. Not more than 65 such communities may
be so designated.
HUD means the Department of Housing and Urban Development.
Local government means any county, city, town, township, parish,
village, or other general purpose political subdivision of a State, and
any combination of these political subdivisions which is recognized by
the Secretary.
Nominated area means an area nominated by one or more local
governments and the State or States in which it is located for
designation pursuant to this part.
Population census tract means a census tract, or, if census tracts
are not defined for the area, a block numbering area.
Poverty means the number of persons listed as being in poverty in
the 1990 Decennial Census.
Revocation of designation means the process by which the Secretary
may revoke the designation of an urban area as an Empowerment Zone or
Enterprise Community pursuant to Sec. 597.403.
Secretary means the Secretary of Housing and Urban Development.
State means any State of the United States.
Strategic plan means a strategy developed and agreed to by the
nominating local government(s) and State(s), which have provided
certifications of their authority to adopt such a strategy in their
application for nomination, in consultation and cooperation with the
residents of the nominated are, pursuant to the provisions of
Sec. 597.200(c). The plan must include written commitments from the
local government(s) and State(s) that they will adhere to that
strategy.
Urban area means:
(1) Any area that lies inside a Metropolitan Area (MA), as
designated by the Office of Management and Budget; or
(2) Any area outside an MA if the jurisdiction of the nominating
local government has a population of 20,000 or more, or documents the
urban character of the area.
Sec. 597.4 Secretarial review and designation.
(a) Designation. The Secretary will review applications for the
designation of nominated urban areas to determine the effectiveness of
the strategic plans submitted by nominating State and local
government(s) in accordance with Sec. 597.200(c). The Secretary will
designate up to six urban Empowerment Zones and up to 65 urban
Enterprise Communities.
(b) Period of Designation. The designation of an urban area as an
Empowerment Zone or Enterprise Community shall remain in full effect
during the period beginning on the date of designation and ending on
the earliest of:
(1) The close of the tenth calendar year beginning on or after the
date of designation;
(2) The termination date designated by the State and local
governments in their application for nomination; or
(3) The date the Secretary modifies or revokes the designation, in
accordance with Secs. 597.402 or 597.403.
Sec. 597.5 Waivers.
The Secretary of HUD may waive for good cause any provision of this
part not required by statute, where it is determined that application
of the requirement would produce a result adverse to the purpose and
objectives of this part.
Subpart B--Area Requirements
Sec. 597.100 Eligibility requirements and data usage.
A nominated urban area may be eligible for designation pursuant to
this part only if the area:
(a) Has a maximum population which is the lesser of:
(1) 200,000; or
(2) The greater of 50,000 or ten percent of the population of the
most populous city located within the nominated area;
(b) Is one of pervasive poverty, unemployment and general distress,
as described in Sec. 597.102;
(c) Does not exceed twenty square miles in total land area;
(d) Has a continuous boundary, or consists of not more than three
noncontiguous parcels;
(e) Is located entirely within the jurisdiction of the unit or
units of general local government making the nomination, and is located
in no more than two contiguous States; and
(f) Does not include any portion of a central business district, as
this term is [[Page 3040]] used in the most recent Census of Retail
Trade, unless the poverty rate for each population census tract in the
district is not less than 35 percent for an Empowerment Zone and 30
percent for an Enterprise Community.
Sec. 597.101 Data utilized for eligibility determinations.
(a) Source of data. The data to be employed in determining
eligibility pursuant to the criteria set forth at Sec. 597.102 shall be
based upon the 1990 Decennial Census, and from information published by
the Bureau of the Census and the Bureau of Labor Statistics. The data
shall be comparable as to point or period of time and methodology
employed. Specific information on appropriate data to be submitted will
be provided in the application.
(b) Use of statistics on boundaries. The boundary of an urban area
nominated for designation as an Empowerment Zone or Enterprise
Community must coincide with the boundaries of census tracts, or, where
tracts are not defined, with block numbering areas.
Sec. 597.102 Tests of pervasive poverty, unemployment and general
distress.
(a) Pervasive poverty. Pervasive poverty shall be demonstrated by
the nominating entities by providing evidence that:
(1) Poverty is widespread throughout the nominated area; or
(2) Poverty has become entrenched or intractable over time (through
comparison of 1980 and 1990 census data or other relevant evidence); or
(3) That no portion of the nominated area contains any component
areas of an affluent character.
(b) Unemployment. Unemployment shall be demonstrated by:
(1) Data indicating that the weighted average rate of unemployment
for the nominated area is not less than the national average rate of
unemployment; or
(2) Evidence of especially severe economic conditions, such as
military base or plant closings or other conditions which have brought
about significant job dislocation within the nominated area.
(c) General distress. General distress shall be evidenced by
describing adverse conditions within the nominated urban area other
than those of pervasive poverty and unemployment. A high incidence of
crime, narcotics use, homelessness, abandoned housing, and deteriorated
infrastructure or substantial population decline, are examples of
appropriate indicators of general distress.
Sec. 597.103 Poverty rate.
(a) General. The poverty rate shall be established in accordance
with the following criteria:
(1) In each census tract within a nominated urban area, the poverty
rate shall be not less than 20 percent;
(2) For at least 90 percent of the population census tracts within
the nominated urban area, the poverty rate shall not be less than 25
percent; and
(3) For at least 50 percent of the population census tracts within
the nominated urban area, the poverty rate shall be not less than 35
percent.
(b) Special rules relating to the determination of poverty rate.
(1) Census Tracts with no population. Census tracts with no population
shall be treated as having a poverty rate which meets the standards of
paragraphs (a)(1) and (2) of this section, but shall be treated as
having a zero poverty rate for purposes of applying paragraph (a)(3) of
this section.
(2) Census tracts with populations of less than 2,000. A population
census tract which has a population of less than 2,000 shall be treated
as having a poverty rate which meets the requirements of paragraphs
(a)(1) and (a)(2) of this section if more than 75 percent of the tract
is zoned for commercial or industrial use.
(3) Adjustment of poverty rates for Enterprise Communities. Where
necessary to carry out the purposes of this part, the Secretary may
reduce by 5 percentage points one of the following thresholds for not
more than 10 percent of the census tracts, or, if fewer, five
population tracts in the nominated urban area:
(i) The 20 percent threshold in paragraph (a)(1) of this section;
(ii) The 25 percent threshold in paragraph (a)(2) of this section;
and
(iii) The 35 percent threshold in paragraph (a)(3) of this section;
Provided that, the Secretary may in the alternative reduce the 35
percent threshold by 10 percentage points for three population census
tracts.
(4) Rounding up of percentages. In making the calculations required
by this section, the Secretary shall round all fractional percentages
of one-half percent or more up to the next highest whole percentage
figure.
(c) Noncontiguous areas. A nominated urban area may not contain a
noncontiguous parcel unless such parcel separately meets the criteria
set forth at paragraphs (a)(1), (2), and (3) of this section.
(d) Areas not within census tracts. In the case of an area which
does not have population census tracts, the block numbering area shall
be used.
Subpart C--Nomination Procedure
Sec. 597.200 Nominations by State and local governments.
(a) Nomination criteria. One or more local governments and the
State or States in which an urban area is located may nominate such
area for designation as an Empowerment Zone and/or as an Enterprise
Community, if:
(1) The urban area meets the requirements for eligibility set forth
in Secs. 597.100 and 597.103;
(2) The urban area is within the jurisdiction of a State or States
and local government(s) that have the authority to nominate the urban
area for designation and that provide written assurances satisfactory
to the Secretary that the strategic plan described in paragraph (c) of
this section will be implemented;
(3) All information furnished by the nominating State(s) and local
government(s) is determined by the Secretary to be reasonably accurate;
and
(4) The State(s) and local government(s) certify that no portion of
the area nominated is already included in an Empowerment Zone or
Enterprise Community or in an area otherwise nominated to be designated
under this section.
(b) Nomination for designation. No urban area may be considered for
designation pursuant to subpart D of this part unless the nomination
for designation:
(1) Demonstrates that the nominated urban area satisfies the
eligibility criteria set forth at Sec. 597.100;
(2) Includes a strategic plan, as described in paragraph (c) of
this section; and
(3) Includes such other information as may be required by HUD in
the application or in a Notice Inviting Applications, to be published
in the Federal Register.
(c) Strategic plan. Each application for designation must be
accompanied by a strategic plan, which must be developed in accordance
with four key principles, which will also be utilized to evaluate the
plan. These principles are:
(1) Economic opportunity, including job creation within the
community and throughout the region, as well as entrepreneurial
initiatives, small business expansion and training for jobs that offer
upward mobility;
(2) Sustainable Community Development, to advance the creation of
liveable and vibrant communities through comprehensive approaches that
coordinate economic, physical, community and human development;
(3) Community-Based Partnerships, involving the participation of
all segments of the community, including [[Page 3041]] the political
and governmental leadership, community groups, health and social
service groups, environmental groups, religious organizations, the
private and non-profit sectors, centers of learning and other community
institutions; and
(4) Strategic vision for change, which identifies what the
community will become and a strategic map for revitalization. The
vision should build on assets and coordinate a response to community
needs in a comprehensive fashion. It should also set goals and
performance benchmarks for measuring progress and establish a framework
for evaluating and adjusting the revitalization plan.
(d) Elements of strategic plan. The strategic plan should:
(1) Indicate and briefly describe the specific groups,
organizations, and individuals participating in the production of the
plan and describe the history of these groups in the community;
(2) Explain how participants were selected and provide evidence
that the participants, taken as a whole, broadly represent the racial,
cultural and economic diversity of the community;
(3) Describe the role of the participants in the creation,
development and future implementation of the plan;
(4) Identify two or three topics addressed in the plan that caused
the most serious disagreements among participants and describe how
those disagreements were resolved;
(5) Explain how the community participated in choosing the area to
be nominated and why the area was nominated;
(6) Provide evidence that key participants have the capacity to
implement the plan;
(7) Provide a brief explanation of the community's vision for
revitalizing the area;
(8) Explain how the vision creates economic opportunity, encourages
self-sufficiency and promotes sustainable community development;
(9) Identify key needs of the area and the current barriers to
achieving the vision for it, including a description of poverty and
general distress, barriers to economic opportunity and development and
barriers to human development;
(10) Discuss how the vision is related to the assets and needs of
the area and its surroundings;
(11) Describe the ways in which the community's approaches to
economic development, social/human services, transportation, housing,
sustainable community development, public safety, drug abuse
prevention, and educational and environmental concerns will be
addressed in a coordinated fashion; and explain how these linkages
support the community's vision;
(12) Indicate how all Social Services Block Grant funds for
designated Empowerment Zones and Enterprise Communities (EZ/EC SSBG
funds) will be utilized.
(i) In doing so, the strategic plan shall provide the following
information:
(A) A commitment by the applicant, as well as by the nominating
State-chartered economic development corporation or State government(s)
and local governments, that the EZ/EC SSBG funds will be used to
supplement, not replace, other Federal or non-Federal funds available
for financing for services or activities which can be used to achieve
or maintain the goals outlined in paragraph (d)(12) of this section;
(B) A description of the entities that will administer the EZ/EC
SSBG funds;
(C) A certification by such entities that they will provide
periodic reports on the use of the EZ/EC SSBG funds; and
(D) A detailed description of all the activities to be financed
with the EZ/EC SSBG funds and how all such funds will be allocated.
(ii) The EZ/EC SSBG funds must be used to achieve or maintain the
following goals. The goals may be achieved by undertaking one or more
of the following program options:
(A) The goal of economic self-support to prevent, reduce or
eliminate dependencies, through one or more of the following program
options:
(1) Funding community and economic development services focused on
disadvantaged adults and youths, including skills training,
transportation services and job, housing, business, and financial
management counseling;
(2) Supporting programs that promote home ownership, education or
other routes to economic independence for low-income families, youths,
and other individuals;
(3) Assisting in the provision of emergency and transitional
shelter for disadvantaged families, youths, and other individuals;
(B) The goal of self-sufficiency, including reduction or prevention
of dependencies, through one or more of the following program options:
(1) Providing assistance to non-profit organizations and/or
community and junior colleges that provide disadvantaged adults and
youths with opportunities for short-term training courses in
entrepreneurial and self employment skills and other training that
promotes individual self-sufficiency, and the interest of the
community;
(2) Funding programs to provide training and employment for
disadvantaged adults and youths in construction, rehabilitation or
improvement of affordable housing, public infrastructure and community
facilities; and
(C) The goal of prevention or remedying the neglect, abuse or
exploitation of children and/or adults unable to protect their own
interest; and the goal of preservation, rehabilitation, or reuniting of
families, through one or more of the following program options:
(1) Providing support for residential or non-residential drug and
alcohol prevention and treatment programs that offer comprehensive
services for pregnant women, and mothers and their children;
(2) Establishing programs that provide activities after school
hours, including keeping school buildings open during evenings and
weekends for mentor and study programs.
(iii) Designated Empowerment Zone and Enterprise Communities may
work to achieve or maintain the goals outlined in paragraphs
(d)(12)(ii) (A) and (B) of this section by using EZ/EC SSBG funds to
capitalize revolving or micro-enterprise loan funds which benefit low-
income residents of the designated Empowerment Zones and Enterprise
Communities. Similarly, the Zones and Communities may work to achieve
or maintain the goals outlined in paragraphs (d)(12)(ii) (A) and (B) of
this section by using the EZ/EC SSBG funds to create jobs and promote
economic opportunity for low-income families and individuals through
matching grants, loans, or investments in community development
financial institutions.
(iv) If the EZ/EC SSBG funds are to be used for program options not
included in paragraph (d)(12)(ii) of this section, the strategic plan
must indicate how the proposed activities meet the goals set forth in
paragraph (d)(12)(ii) of this section and the reasons the approved
program options were not pursued.
(v) To the extent that the EZ/EC SSBG funds are to be used for the
program options included in paragraph (d)(12)(ii) of this section, they
may be used for the following activities, in addition to those
activities permitted by Section 2005 of the Social Security Act (42
U.S.C. 1379d):
(A) To purchase or improve land or facilities;
(B) To make cash payments to individuals for subsistence or room
and board; [[Page 3042]]
(C) To make wage payments to individuals as a social service;
(D) To make cash payments for medical care; and
(E) To provide social services to institutionalized persons.
(vi) The State must obligate the EZ/EC SSBG funds in accordance
with the strategic plan within 2 years from the date of payment to the
State, or remit the unobligated funds to the Secretary of Health and
Human Services (HHS).
(vii) The strategic plan must indicate how all the EZ/EC SSBG funds
will be invested and used for the period of designation of the
Empowerment Zone or Enterprise Community.
(viii) The strategic plan must provide for periodic reporting of
information by the State in which the Empowerment Zone or Enterprise
Community is located.
(13) Indicate how tax benefits for designated Zones and
Communities, State and local resources, existing Federal resources
available to the locality and additional Federal resources believed
necessary to implement the strategic plan will be utilized within the
Empowerment Zone or Enterprise Community;
(14) Indicate a level of commitment necessary to ensure that these
resources will be available to the area upon designation;
(15) Identify the Federal resources applied for or for which
applications are planned; if a strategic plan indicates how Community
Development Block Grant (CDBG), HOME, Emergency Shelter Grant, and
Housing Opportunities for People with AIDS (HOPWA) funds will be
expended (for the entire locality including the nominated area), the
strategic plan will be considered by the Office of Community Planning
and Development at HUD toward satisfying the consolidated planning
requirements that will soon be issued for these programs;
(16) Identify private resources and support, including assistance
from business, non-profit organizations and foundations, which are
available to be leveraged with public resources; and provide assurances
that these resources will be made available to the area upon
designation;
(17) Identify changes necessary to Federal rules and regulations
necessary to implement the plan, including specific paperwork or other
Federal program requirements that must be altered to permit effective
implementation of the strategic plan; and
(18) Identify specific regulatory and other impediments to
implementing the strategic plan for which waivers are requested, with
appropriate citations and an indication whether waivers can be
accomplished administratively or require statutory changes;
(19) Demonstrate how State and local governments will reinvent
themselves to help implement the plan, by identifying changes that will
be made in State and local organizations, processes and procedures,
including laws and ordinances;
(20) Explain how different agencies in State and local governments
will work together in new responsive ways to implement the strategic
plan;
(21) Identify the specific tasks and timetable necessary to
implement the plan;
(22) Describe the partnerships that will be established to carry
out the plan;
(23) Explain how the plan will be regularly revised to reflect new
information and opportunities; and
(24) Identify benchmarks and goals that should be used in
evaluating performance in implementing the plan.
(e) Prohibition against business relocation. The strategic plan may
not include any action to assist any establishment in relocating from
one area outside the nominated urban area to the nominated urban area,
except that assistance for the expansion of an existing business entity
through the establishment of a new branch, affiliate, or subsidiary is
permitted if:
(1) The establishment of a new branch, affiliate, or subsidiary
will not result in a decrease in employment in the area of original
location or in any other area where the existing business entity
conducts business operations; and
(2) There is no reason to believe that the new branch, affiliate,
or subsidiary is being established with the intention of closing down
the operations of the existing business entity in the area of its
original location or in any other area where the existing business
entity conducts business operations.
(f) Implementation of strategic plan. The strategic plan may be
implemented by the local government(s) and/or by the State(s)
nominating an urban area for designation and/or by nongovernmental
entities identified in the strategic plan. Activities included in the
plan may be funded from any source, Federal, State, local, or private,
which provides assistance in the nominated area.
(g) Activities included in strategic plan. A strategic plan may
include, but is not limited to, activities which address:
(1) Economic problems, through measures designed to create job
training and employment opportunities; support for business start-up or
expansion; or development of community institutions;
(2) Human concerns, through the provision of social services, such
as rehabilitation and treatment programs or the provision of training,
education, or other services within the affected area;
(3) Community needs, such as the expansion of housing stock and
homeownership opportunities, efforts to reduce homelessness, efforts to
promote fair housing and equal opportunity, efforts to reduce and
prevent crime and improve security in the area; and
(4) Physical improvements, such as the provision or improvement of
recreational areas, transportation or other public services within the
affected area, and improvements to the infrastructure and environmental
protection.
Sec. 597.201 Evaluating the strategic plan.
The strategic plan will be evaluated for effectiveness as part of
the designation process for nominated urban areas described in
Sec. 597.301. On the basis of this evaluation, HUD may negotiate
reasonable modifications of the strategic plan or of the boundaries of
a nominated urban area or the period for which such designation shall
remain in full effect. The effectiveness of the strategic plan will be
determined in accordance with the four key principles set forth in
Sec. 597.200(c). HUD will review each plan submitted in terms of the
four equally weighted key principles, and of such other elements of
these key principles as are appropriate to address the opportunities
and problems of each nominated area which may include:
(a) Economic opportunity. (1) The extent to which businesses, jobs,
and entrepreneurship increase within the Zone or Community;
(2) The extent to which residents will achieve a real economic
stake in the Zone or Community;
(3) The extent to which residents will be employed in the process
of implementing the plan and in all phases of economic and community
development;
(4) The extent to which residents will be linked with employers and
jobs throughout the entire region or metropolitan area, and the way in
which residents will receive training, assistance, and family support
to become economically self-sufficient;
(5) The extent to which economic revitalization in the Zone or
Community interrelates with the broader regional or metropolitan
economies; and
(6) The extent to which lending and investment opportunities will
increase within the Zone or Community through [[Page 3043]] the
establishment of mechanisms to encourage community investment and to
create new economic growth.
(b) Sustainable Community Development. (1) Consolidated planning.
The extent to which the plan is part of a larger strategic community
development plan for the nominating locality and is consistent with
broader regional development strategies;
(2) Public safety. The extent to which strategies such as community
policing will be used to guarantee the basic safety and security of
persons and property within the Zone or Community;
(3) Amenities and design. The extent to which the plan considers
issues of design and amenities that will foster a sustainable
community, such as open spaces, recreational areas, cultural
institutions, transportation, energy, land and water uses, waste
management, environmental protection, and the quality of life in the
community;
(4) Sustainable development. The extent to which economic
development will be achieved in a manner that protects public health
and the environment;
(5) Supporting families. The extent to which the strengths of
families will be supported so that parents can succeed at work, provide
nurture in the home, and contribute to the life of the community;
(6) Youth development. The extent to which the development of
children, youth, and young adults into economically productive and
socially responsible adults will be promoted, and the extent to which
young people will be provided with the opportunity to take
responsibility for learning the skills, discipline, attitude, and
initiative to make work rewarding;
(7) Education goals. The extent to which schools, religious
institutions, non-profit organizations, for-profit enterprises, local
governments and families will work cooperatively to provide all
individuals with the fundamental skills and knowledge they need to
become active participants and contributors to their community, and to
succeed in an increasingly competitive global economy;
(8) Affordable Housing. The extent to which a housing component,
providing for adequate safe housing and ensuring that all residents
will have equal access to that housing is contained in the strategic
plan;
(9) Drug Abuse. The extent to which the plan addresses levels of
drug abuse and drug related activity through the expansion of drug
treatment services, drug law enforcement initiatives and community
based drug abuse education programs;
(10) Equal opportunity. The extent to which the plan offers an
opportunity for diverse residents to participate in the rewards and
responsibilities of work and service. The extent to which the plan
ensures that no business within a nominated Zone or Community will
directly or through contractual or other arrangements subject a person
to discrimination on the basis of race, color, national origin, gender
or disability in its employment practices, including recruitment,
recruitment advertising, employment, layoff, termination, upgrading,
demotion, transfer, rates of pay or other forms of compensation, or use
of facilities.
(c) Community-Based Partnerships. (1) Community partners. The
extent to which residents of the nominated area have participated in
the development of the strategic plan and their commitment to
implementing it, and the extent to which community-based organizations
in the nominated area have participated in the development of the plan
and their record of success measured by their achievements and support
for undertakings within the nominated area; and the extent to which the
plan integrates the local educational, social, civic, environmental and
health organizations and reflects the prominent place that these
institutions play in the life of a revitalized community;
(2) Private and non-profit organizations as partners. The extent to
which partnership arrangements include commitments from private and
non-profit organizations, including corporations, utilities, banks and
other financial institutions, and educational institutions supporting
implementation of the strategic plan;
(3) State and local government partners. The extent to which State
and local governments are committed to providing support to implement
the strategic plan, including their commitment to ``reinventing'' their
roles and coordinating programs to implement the strategic plan; and
(4) Permanent implementation and evaluation structure. The extent
to which a responsible and accountable implementation structure or
process has been created to ensure that the plan is successfully
carried out and that improvements are made throughout the period of the
Zone or Community's designation and the extent to which the partners
agree to be bound by their commitments.
(d) Strategic vision for change. (1) Goals and Coordinated
strategy. The extent to which the strategic plan reflects a projection
for the community's revitalization which links economic, human,
physical, community development and other activities in a mutually
reinforcing, synergistic way to achieve ultimate goals;
(2) Creativity and innovation. The extent to which the activities
proposed in the plan are creative, innovative and promising and will
promote the civic spirit necessary to revitalize the nominated area;
(3) Building on assets. The extent to which the vision for
revitalization realistically addresses the needs of the nominated area
in a way that takes advantage of its assets;
(4) Benchmarks and learning. The extent to which the plan includes
performance benchmarks for measuring progress in its implementation,
including an on-going process for adjustments, corrections and building
on what works.
Sec. 597.202 Submission of nominations for designation.
(a) General. A nomination for designation as an Empowerment Zone
and/or Enterprise Community must be submitted for each urban area for
which such designation is requested. The nomination shall be submitted
in a form to be prescribed by HUD in the application and in the Notice
Inviting Applications published in the Federal Register, and must
contain complete and accurate information.
(b) Certifications. Certifications must be submitted by the
State(s) and local government(s) requesting designation stating that:
(1) The nominated urban area satisfies the boundary tests of
Sec. 597.100(d);
(2) The nominated urban area is one of pervasive poverty,
unemployment and general distress, as prescribed by Sec. 597.102;
(3) The nominated urban area satisfies the poverty rate tests set
forth in Sec. 597.103;
(4) The nominated urban area contains no portion of an area that is
either already designated as an Empowerment Zone and/or Enterprise
Community, or is otherwise included in any other area nominated for
designation as an Empowerment Zone and/or Enterprise Community;
(5) Each nominating governmental entity has the authority to:
(i) Nominate the urban area for designation as an Empowerment Zone
and/or Enterprise Community;
(ii) Make the State and local commitments required by
Sec. 597.200(d); and
(iii) Provide written assurances satisfactory to the Secretary that
these commitments will be met.
(6) Provide assurances that the amounts provided to the State for
the [[Page 3044]] area under Section 2007 of Title XX of the Social
Security Act will not be used to supplant Federal or non-Federal funds
for services and activities which promote the purposes of Section 2007;
(7) Provide that the nominating governments or corporations agree
to make available all information requested by HUD to aid in the
evaluation of progress in implementing the strategic plan and reporting
on the use of Empowerment Zone/Enterprise Community Social Service
Block Grant funds; and
(8) Provide assurances that the nominating State(s) agrees to
distribute the Empowerment Zone/Enterprise Community Social Service
Block Grant funds in accordance with the strategic plan submitted for
the designated Zone or Community.
(c) Maps and area description. Maps and a general description of
the nominated urban area shall accompany the nomination request.
Subpart D--Designation Process
Sec. 597.300 HUD action and review of nominations for designation.
(a) Establishment of submission procedures. HUD will establish a
time period and procedures for the submission of nominations for
designation as Empowerment Zones or Enterprise Communities, including
submission deadlines and addresses, in a Notice Inviting Applications,
to be published in the Federal Register.
(b) Acceptance for processing. (1) HUD will accept for processing
those nominations for designation as Empowerment Zones or Enterprise
Communities which HUD determines have met the criteria required by this
Part. HUD will notify the State(s) and local government(s) whether or
not the nomination has been accepted for processing. The criteria for
acceptance for processing are as follows:
(2) The nomination for designation as an Empowerment Zone or
Enterprise Community must be received by HUD on or before the time on
the date established by the Notice Inviting Applications published in
the Federal Register. The nomination for designation as an Empowerment
Zone or Enterprise Community must be complete and must be accompanied
by a strategic plan, as required by Sec. 597.200(c), and the
certifications required by Sec. 597.202(b).
(c) Evaluation of nominations. In the process of reviewing each
nomination accepted for processing, HUD may undertake a site visit(s)
to any nominated area to aid in the process of evaluation.
(d) Modification of the strategic plan, boundaries of nominated
urban areas, and/or period during which designation is in effect.
Subject to the limitations imposed by Sec. 597.100, HUD may negotiate
reasonable modifications of the strategic plan, the proposed boundaries
of a nominated urban area, or the term for which a designation is to
remain in full effect, to ensure maximum efficiency and fairness in the
provision of assistance to such areas.
(e) Publication of designations. Announcements of those nominated
urban areas designated as Empowerment Zones or Enterprise Communities
will be made by publication of a Notice in the Federal Register.
Sec. 597.301 Selection factors for designation of nominated urban
areas.
(a) Selection factors. In choosing among nominated urban areas
eligible for designation, the Secretary shall consider:
(1) The effectiveness of the strategic plan in accordance with the
key principles and evaluative criteria set out in Sec. 597.201;
(2) The effectiveness of the assurances made pursuant to
Sec. 597.200(a)(2) that the strategic plan will be implemented;
(3) The extent to which an application proposes activities that are
creative and innovative in comparison to other applications; and
(4) Such other factors established by HUD. Such factors include,
but are not limited to, the degree of need demonstrated by the
nominated area for assistance under this part. If other factors are
established by HUD, a Federal Register notice will be published
identifying such factors, along with an extension of the application
due date if necessary.
(b) Geographic diversity. HUD, in its discretion, may choose to
select for designation a lower rated approvable application over a
higher rated application in order to increase the level of geographic
diversity of designations approved under this part.
Sec. 597.302 Number of Empowerment Zones and Enterprise Communities
designated.
(a) Empowerment Zones. HUD will designate up to six of the
nominated urban areas as Empowerment Zones, provided: that if six such
zones are so designated, no less than one shall be designated in an
urban area the most populous city of which has a population of 500,000
or less and no less than one shall be a nominated urban area which
includes areas in two States and which has a population of 50,000 or
less.
(b) Enterprise Communities. HUD will designate up to 65 of the
nominated urban areas not designated Empowerment Zones under paragraph
(a) of this section as Enterprise Communities.
Subpart E--Post-Designation Requirements
Sec. 597.400 Reporting.
HUD will require periodic reports for the Empowerment Zones and
Enterprise Communities designated pursuant to this part. These reports
will identify the community, local government and State actions which
have been taken in accordance with the strategic plan. In addition to
these reports, such other information relating to designated
Empowerment Zones and Enterprise Communities as HUD shall request from
time to time, including information documenting nondiscrimination in
hiring and employment by businesses within the designated Empowerment
Zone or Enterprise Community, shall be submitted promptly.
Sec. 597.401 Periodic performance reviews.
HUD will regularly evaluate the progress of the strategic plan in
each designated Empowerment Zone and Enterprise Community on the basis
of performance reviews to be conducted on site and other information
submitted. HUD will also commission evaluations of the Empowerment Zone
program as a whole by an impartial third party, at such intervals as
HUD may establish.
Sec. 597.402 Validation of designation.
(a) Reevaluation of designations. On the basis of the performance
reviews described in Sec. 597.401, and subject to the provisions
relating to the revocation of designation appearing at Sec. 597.403,
HUD will make findings on the continuing eligibility for and the
validity of the designation of any Empowerment Zone or Enterprise
Community. Determinations of whether any designated Empowerment Zone or
Enterprise Community remains in good standing shall be promptly
communicated to all Federal agencies providing assistance or
administering programs under which assistance can be made available in
such Zone or Community.
(b) Modification of designation. Based on an urban area's success
in carrying out its strategic plan, and subject to the provisions
relating to revocation of designation appearing at Sec. 597.403 and the
requirements as to the number, maximum population and other
characteristics of urban Empowerment Zones set forth in Sec. 597.3, the
Secretary may modify designations by reclassifying urban Empowerment
[[Page 3045]] Zones as Enterprise Communities or Enterprise Communities
as Empowerment Zones.
Sec. 597.403 Revocation of designation.
(a) Basis for revocation. The Secretary may revoke the designation
of an urban area as an Empowerment Zone or Enterprise Community if the
Secretary determines, on the basis of the periodic performance review
described at Sec. 597.401, that the State(s) or local government(s) in
which the urban area is located:
(1) Has modified the boundaries of the area;
(2) Has failed to make progress in achieving the benchmarks set
forth in the strategic plan; or
(3) Has not complied substantially with the strategic plan.
(b) Letter of warning. Before revoking the designation of an urban
area as an Empowerment Zone or Enterprise Community, the Secretary will
issue a letter of warning to the nominating State(s) and local
government(s):
(1) Advising that the Secretary has determined that the nominating
local government(s) and/or State(s) has:
(i) Modified the boundaries of the area; or
(ii) Is not complying substantially with, or has failed to make
progress in achieving the benchmarks set forth in the strategic plan
prepared pursuant to Sec. 597.200(c); and
(2) Requesting a reply from all involved parties within 90 days of
the receipt of this letter of warning.
(c) Notice of revocation. After allowing 90 days from the date of
receipt of the letter of warning for response, and after making a
determination pursuant to paragraph (a) of this section, the Secretary
may issue a final notice of revocation of the designation of the urban
area as an Empowerment Zone or Enterprise Community.
(d) Notice to affected Federal agencies. HUD will notify all
affected Federal agencies providing assistance in an urban Empowerment
Zone or Enterprise Community of its determination to revoke any
designation pursuant to this section or to modify a designation
pursuant to Sec. 597.402(b).
Subpart F--Special Rules
Sec. 597.500 Indian Reservations.
No urban Empowerment Zone or Enterprise Community may include any
area within an Indian reservation.
Sec. 597.501 Governments.
If more than one State or local government seeks to nominate an
urban area under this part, any reference to or requirement of this
part shall apply to all such governments.
Sec. 597.502 Nominations by economic development corporations or the
District of Columbia.
Any urban area nominated by an Economic Development Corporation
chartered by the State in which it is located or by the District of
Columbia shall be treated as nominated by a State and local government.
Sec. 597.503 Use of census data.
Population and poverty rate data shall be determined by the most
recent decennial census data available.
Dated: December 2, 1994.
Andrew Cuomo,
Assistant Secretary for Community Planning and Development.
[FR Doc. 95-734 Filed 1-11-95; 8:45 am]
BILLING CODE 4210-29-P
