95-2313. Designation of Rural Empowerment Zones and Enterprise Communities  

  • [Federal Register Volume 60, Number 24 (Monday, February 6, 1995)]
    [Rules and Regulations]
    [Pages 6945-6957]
    From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
    [FR Doc No: 95-2313]
    
    
    
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    Federal Register / Vol. 60, No. 24 / Monday, February 6, 1995 / Rules 
    and Regulations
    [[Page 6945]]
    
    DEPARTMENT OF AGRICULTURE
    
    Office of the Secretary
    
    7 CFR Part 25
    
    RIN 0503-AA09
    
    
    Designation of Rural Empowerment Zones and Enterprise Communities
    
    AGENCY: Office of the Secretary, USDA.
    
    ACTION: Final rule.
    
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    SUMMARY: This final rule implements 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 (Pub. L. 103-66, approved August 10, 1993) dealing with the 
    designation of rural Empowerment Zones and Enterprise Communities. This 
    rule authorizes the Secretary of Agriculture (USDA) to designate not 
    more than three (3) rural Empowerment Zones and not more than thirty 
    (30) rural Enterprise Communities based upon the effectiveness of the 
    strategic plan submitted by an applicant and nominated by a State or 
    States and local governments.
        The purpose of this program is to empower rural communities and 
    their residents to create jobs and opportunities to build for tomorrow 
    as part of a Federal-State-local and private-sector partnership. 
    Businesses will be encouraged to invest and create jobs in distressed 
    areas, and comprehensive local strategic plans are to be adopted and 
    implemented, encouraging entrepreneurship, furthering local self-
    development and assisting in the revitalization of these areas.
    
    EFFECTIVE DATE: March 8, 1995.
    
    FOR FURTHER INFORMATION CONTACT:
    Sandi Brewster-Walker, Deputy Administrator, Rural Business and 
    Cooperative Development Service, Reporters Building, Room 701, 300 7th 
    Street, SW, Washington, DC 20024, telephone 1-800-645-4712, or by 
    sending an Internet Mail message to: ezecdir.rurdev.usda.gov.
    
    SUPPLEMENTARY INFORMATION:
    
    Paperwork Reduction Act
    
        No new data collection or record keeping requiring Office of 
    Management and Budget (OMB) approval under the Paperwork Reduction Act 
    of 1980 are included in this final rule. The reporting and record 
    keeping burden associated with this rule is approved by the Office of 
    Management and Budget under OMB No. 2506-0148.
    
    I. Background
    
        The Empowerment Zones program confers upon rural distressed 
    American communities the opportunity to take effective action to create 
    jobs and opportunities. The program combines tax benefits with 
    substantial investment of Federal resources and enhanced coordination 
    among Federal agencies.
        All communities which complete the nomination process will be 
    strengthened by it; gaining by taking stock of their assets and 
    problems, by creating a vision of a better future, and by structuring a 
    plan for achieving their vision. Local partnerships among community 
    residents, businesses, financial institutions, service providers, 
    neighborhood associations and State and local governments will be 
    formed or strengthened by going through the application process. 
    Communities will be afforded an opportunity to work with these partners 
    in the creation and implementation of a community-based strategic plan.
        Communities that were not designated as Empowerment Zones or 
    Enterprise Communities are eligible for certain benefits. Under a 
    separate program directed by the Department of Housing and Urban 
    Development, Community Development Corporations (CDCs) nominated by the 
    locality, or the applicant for the Empowerment Zone or Enterprise 
    Community, will be considered eligible for designation to receive tax 
    preferred contributions from donors. HUD has committed to designating 
    eight rural CDCs for this program. Communities with innovative visions 
    for change will be considered for requested waivers of Federal program 
    regulations, flexible use of existing program funds, and cooperation in 
    meeting essential mandates, even if they did not receive a designation 
    by the Secretary as an Empowerment Zone or Enterprise Community.
        Communities that are designated as Enterprise Communities receive a 
    number of benefits. Enterprise Communities are eligible for new Tax-
    Exempt Facilities Bonds for certain private business activities. States 
    with designated Communities will receive Empowerment Zone/Enterprise 
    Community Social Service Block Grants (EZ/EC SSBG) in the amount of 
    approximately $3 million for each rural Enterprise Community to pass 
    through to each designated area for approved activities identified in 
    the strategic plans. Enterprise Communities receive special 
    consideration in competition for funding under numerous Federal 
    programs, including the new National Service and 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.
        Communities that are designated as Empowerment Zones receive all of 
    the benefits provided to Enterprise Communities, in addition to other 
    benefits. States with designated rural Empowerment Zones will receive 
    Empowerment Zone/Enterprise Community Social Service Block Grants in 
    the amount of $40 million for each rural Empowerment Zone. Employer 
    Wage Credits for Empowerment Zone residents are provided to qualified 
    employers engaged in trade, business, or human service delivery in 
    designated Empowerment Zones. Businesses are afforded an increased 
    deduction under section 179 of the Internal Revenue Code for qualified 
    investments.
        The rural part of the program will be administered by USDA as a 
    Federal-State-local-private partnership, with a minimum of red tape 
    associated with the application process. Applicants must demonstrate 
    the ability to design and implement an effective strategic plan for 
    real opportunities for growth and revitalization, that deal with local 
    problems in a comprehensive way, and must demonstrate the capacity or 
    the commitment to carry out these plans. Development of an effective 
    plan must [[Page 6946]] also involve the participation of the community 
    affected by the nomination of the rural area, and of the private 
    sector, acting in concert with the State or States and local 
    governments. The plan should be developed in accordance with four key 
    principles, which will also serve as the basis for the selection 
    criteria that will be used to evaluate the plan. These key principles 
    reflect the Secretary's intention that Empowerment Zone and Enterprise 
    Community designations should be based on potential for successful 
    economic and community revitalization as reflected in the strategic 
    planning process, participants in the plan, and the quality of the 
    plan. Poverty, unemployment, and other need factors are critical in 
    determining eligibility for Empowerment Zone or Enterprise Community 
    status, but play a less significant role in the selection process. The 
    four key principles are:
        (1) Economic opportunity, including job creation within the 
    community and throughout the region, entrepreneurial initiatives, small 
    business expansion, and training for jobs that offer upward mobility;
        (2) Sustainable community development, to advance the creation of 
    livable and vibrant communities through comprehensive approaches that 
    coordinate economic, physical, environmental, community and human 
    development;
        (3) Community-based partnerships, involving participation of all 
    segments of the community, including 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, other community institutions, and 
    individual citizens; 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.
        State and local governments and economic development corporations 
    that are state chartered may nominate distressed rural areas for 
    designation as Empowerment Zones (which will also permit their 
    consideration for designation as Enterprise Communities), or solely for 
    designation as Enterprise Communities.
        Title XIII of the Omnibus Reconciliation Act of 1993 included 
    Empowerment Zones and Enterprise Communities as a new program.
    
    II. Program Description
    
    General
    
        Pursuant to Title XIII of the Omnibus Reconciliation Act of 1993, 
    the Secretary of USDA may designate up to three rural Empowerment Zones 
    and up to thirty rural Enterprise Communities.
    
    Eligibility
    
        To be eligible for designation as a rural Empowerment Zone or 
    Enterprise Community an area must:
        (1) Have a maximum population of 30,000;
        (2) Be one of pervasive poverty, unemployment, and general 
    distress;
        (3) Not exceed one thousand square miles in total land area;
        (4) Demonstrate a poverty rate that is not less than:
        (a) 20 percent in each census tract or census block numbering area 
    (BNA);
        (b) 25 percent in 90 percent of the population census tracts and 
    BNAs within the nominated area;
        (c) 35 percent for at least 50 percent of the population census 
    tracts and BNAs within the nominated area;
        (5) Be located entirely within no more than three contiguous 
    States; if it is located in more than one State, the area must have one 
    continuous boundary; if located in only one State, the area may consist 
    of no more than three noncontiguous parcels;
        (6) If the nominated area consists of noncontiguous parcels, each 
    must independently meet the three poverty requirements;
        (7) Be located entirely within the jurisdiction of the unit or 
    units of general local government making the nomination;
        (8) Not include any portion of a census-defined central business 
    district unless the poverty rate for each population census tract is at 
    least 35 percent for an Empowerment Zone and 30 percent for an 
    Enterprise Community; and
        (9) Not include any portion of an Indian reservation.
    
    Nomination Process
    
        The law requires that areas be nominated by one or more local 
    governments and the State(s) in which a nominated rural area is 
    located. Nominations can be considered for designation only if:
        (1) The area meets the eligibility requirements set forth in these 
    rules;
        (2) The area is within the jurisdiction of the nominating local 
    government(s) and the State(s);
        (3) The local government(s) and State(s) provide assurances that 
    the required strategic plan submitted by the applicant will be 
    implemented;
        (4) All information furnished by the nominating local government(s) 
    and State(s) is determined by the Secretary of USDA to be reasonably 
    accurate;
        (5) The local government(s) and State(s) certify that no portion of 
    a nominated rural area is already in an Empowerment Zone or Enterprise 
    Community or in an area otherwise nominated for designation; and
        (6) The local government(s) and State(s) certify that they possess 
    the legal authority to make the nomination.
        The nomination must be accompanied by an application for 
    designation including a strategic plan, which:
        (1) Indicates and briefly describes the specific groups, 
    organization and individuals participating in the development of the 
    plan, and describes the history of these groups in the community;
        (2) Explains how participants were selected and provides evidence 
    that the participants, taken as a whole, are broadly representative of 
    the racial, cultural and economic diversity of the community;
        (3) Describes the role of the participants in the creation and 
    development of the plan and indicates how they will participate in its 
    implementation;
        (4) Identifies two or three topics addressed in the plan that 
    caused the most serious disagreements among participants and describes 
    how those disagreements were resolved;
        (5) Explains how the community participated in choosing the area to 
    be nominated and why the area was nominated;
        (6) Provides evidence that key participants have the capacity or 
    how they will develop the capacity to implement the plan;
        (7) Provides a brief explanation of the community's vision for 
    revitalizing the area;
        (8) Explains how the vision stimulates economic opportunity, 
    encourages self-sufficiency and promotes sustainable community 
    development;
        (9) Identifies key needs of the area and the barriers that restrict 
    the community from achieving its vision, including a description of 
    poverty and general distress, barriers to economic opportunity and 
    development and barriers to human development;
        (10) Discusses how the vision is related to the assets and 
    capacities of the area and its surroundings; and
        (11) Describes the ways in which the community's approaches to 
    economic [[Page 6947]] 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.
        The strategic plan must identify how government resources will be 
    used to support the plan. Specifically, the plan must indicate:
        (1) How Social Service Block Grant (SSBG) funds for designated 
    Zones and Communities, 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;
        (2) The level of commitment necessary to ensure that these 
    resources will be available to the area upon designation; and
        (3) The Federal resources being applied for or for which 
    applications are planned.
        The plan must identify private resources committed to its 
    implementation, including:
        (1) Private resources and support, including assistance from 
    businesses, non-profit organizations and foundations, that are 
    available to be leveraged with public resources; and
        (2) Assurances that these resources will be made available to the 
    area upon designation.
        The plan must address changes needed in Federal rules and 
    regulations necessary to implement the plan, including:
        (1) Specific paperwork or other Federal program requirements that 
    need to be altered to permit effective implementation of the strategic 
    plan; and
        (2) 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.
        The plan must demonstrate how State and local governments will 
    reinvent themselves to help implement the plan, by:
        (1) Identifying the changes that will be made in State and local 
    organizations, processes and procedures, including laws and ordinances, 
    to facilitate implementation of the plan; and
        (2) Explaining how different agencies in State and local 
    governments will work together in new responsive ways to implement the 
    strategic plan.
        The plan must provide details as to the manner in which the plan 
    will be implemented and indicate what benchmarks will be used to 
    measure progress, by:
        (1) Identifying the specific tasks necessary to implement the plan;
        (2) Describing the partnerships that will be established to carry 
    out the plan;
        (3) Explaining how the strategic plan will be regularly revised to 
    reflect new information and opportunities; and
        (4) Identifying the baselines, benchmarks and goals that will be 
    used in evaluating performance in implementing the plan.
    
    III. Differences Between Final Rule and Interim Rule
    
        This final rule makes appropriate corrections to the January 18, 
    1994 interim rule. As will be discussed in the following section of 
    this preamble, USDA 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 at 
    the nomination process, the eligibility process, the contents of the 
    strategic plans, and evaluations of the strategic plans or policies 
    associated with the use of EZ/EC funds.
        The technical changes made by this final rule are largely directed 
    to that section of the rule (Sec. 25.200(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 editorial/
    technical changes made to the interim rule by this final rule.
        1. In Sec. 25.200 (Nominations by State and local governments), 
    USDA 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 the 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, USDA 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. 25.501 provides for 
    nomination by States and local governments and Sec. 25.502 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 the paragraph by ``undertaking one 
    of the below specified options.'' 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). 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). 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 by redesignating the 
    succeeding paragraphs 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.'' 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 
    [[Page 6948]] 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).
        2. In Sec. 25.401 (Periodic Performance Reviews), USDA sets forth 
    guidelines for evaluation of progress in the implementation of 
    strategic plans. This section is expanded to include responsibilities 
    of implementation entities.
        3. Editorial corrections are as follows:
        a. In Sec. 25.300(b)(1) the second sentence is deleted; ``and;'' is 
    added.
        b. In Sec. 25.302 the numeral `3' is replaced by ``three''.
        c. In Sec. 25.401 ``important'' is replaced by ``impartial''.
        d. In Sec. 25.504 (b) the sentence ``On a case basis, the Secretary 
    will grant requests for waiver from the above definition of ``rural'' 
    upon a showing of good cause'', ``above'' is deleted and ``stated in 
    paragraph (2) of this section'', is added following the word ``rural''. 
    In the next sentence, ``the above subsection'' is deleted and ``the 
    definition in paragraph (a) of this section'' is added following the 
    word ``satisfy''.
        The designation of Rural Development Administration has been 
    changed to Rural Business and Cooperative Development Service.
    
    IV. 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 36 comments had been received. The commenters consisted of the 
    Federal agencies, labor unions, (insert ``private citizens'') State and 
    local jurisdictions, state legislators and non-profit organizations. 
    USDA received several good suggestions and recommendations from 
    commenters that will be adopted or considered in any future rulemaking. 
    Other suggestions, although of equal merit, could not be adopted given 
    the current statutory framework of the EZ/EC Program. 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 issues raised by public commenters and USDA's 
    response to these issues.
    
    Technical Corrections
    
        Comment: Five commenters highlighted inadvertent omissions in the 
    text of the interim rule regarding the use of EZ/EC SSBG funds.
        Response: Appropriate corrections were adopted in this final rule.
    
    Business Non-Relocation
    
        Comment: The AFL-CIO makes the point that public funds should not 
    be used to encourage plant relocations from one location to another and 
    that the Federal government should not be a participant in state and 
    local programs which only shift employment from one location to 
    another. The letter called for strengthening regulations by placing the 
    responsibility on the communities to show that relocations did not 
    occur and that jobs created in the community are not at the expense of 
    another location. The following recommendations were made regarding 
    enforcement of the non-relocation provision: (1) Require firms to 
    certify that they did not relocate from another area; (2) require 
    public assistance to firms be paid back if plant relocations occur; (3) 
    require employers to list annual employment at plant locations so that 
    relocations could be monitored. Commenters also recommend revocation of 
    EZ/EC designation if job relocations occur in the approved zones. The 
    final comment sought the addition of labor unions to the list among 
    segments of the community that could form community-based partnerships.
        Response: The issue of non-relocation of business received 
    consideration early in the developmental stages of the EZ/EC program. 
    The regulations include a prohibition against business relocation by 
    prohibiting any activity in the strategic plan to assist business 
    relocation to the nominated area from an area outside the nominated 
    area. According to the Empowerment Zone statute (26 U.S.C. 1391 
    (f)(2)(F)), expansion of an existing business entity is permitted if 
    (1) it will not result in a decrease in employment in any area where 
    the company currently conducts business; and (2) there is no reason to 
    believe that a new branch is being established with the intention of 
    closing down the existing business in another area. The issue of non-
    relocation can be dealt with in the monitoring and evaluation process.
        Comment: One commenter requested clarification on the issue of 
    relocation of foreign plants/entities to Empowerment Zones or 
    Enterprise Communities.
        Response: The statute does not distinguish between foreign and 
    domestic businesses in the prohibition against business relocation.
    
    Comments on Census Data Calculations
    
        Comment: One commenter recommended that where calculations are made 
    to determine eligibility, numbers should be rounded off and in a 
    direction to favor the applicant. This recommendation would allow 
    readjustment of the poverty threshold in the case of less than 10 
    census tracts and rounding off up to 5 percentage points.
        Response: USDA disagrees with the commenter. Section 25.103 b(4) 
    states: ``In making the calculations required by this section, the 
    Secretary shall round all fractional percentages of one-half percentage 
    point or more up to the next highest whole percentage point figure''. 
    There is no authority for special mathematical rounding of the number 
    of census tracts when there are less than 10 tracts (BNAs) identified.
    
    Comments on Census Tracts and Census Tract Definitions
    
        Comment: Nineteen commenters requested the use of census block data 
    in lieu of census tract data and to broaden the definition of 
    population census tracts.
        Response: USDA is unable to adopt the suggestions of the 
    commenters. The statute requires the use of the most recent decennial 
    census data available. The regulations which govern designation of 
    Empowerment Zones and Enterprise Communities (part 25, subpart A, 
    Sec. 25.101(a)) indicate that the data employed to determine 
    eligibility is based on the 1990 Census and from information published 
    by the Bureau of the Census and the Bureau of Labor Statistics. Census 
    tracts or block numbering areas are used to satisfy these requirements. 
    The census data is reported in terms of census tracts or block number 
    areas and not for other graphical units.
        Comment: Three commenters indicated that the statutory requirement 
    to limit the area of nominated areas to 20 square miles for urban areas 
    and 1000 square miles for rural areas imposed undue difficulties for 
    many areas of the West and Southwest.
        Response: USDA is unable to adopt the suggestions of the 
    commenters. The statute requires the size limitation and 
    [[Page 6949]] does not permit exclusions as suggested by the 
    commenters.
    
    Comments on the Definition of Rural Area
    
        Comment: Several comments involved the definition of a `rural 
    area'. The current definition of rural in the regulation excludes 
    communities where predominantly rural populations reside within 
    Metropolitan Areas (MA) or where more than 50 percent of the population 
    resides within a designated Metropolitan Area. Metropolitan Area does 
    not have an exact definition in the Bureau of the Census Dictionary of 
    Geographical Terms. Tracts within MA's are restricted from applying 
    unless they are contiguous to and part of a multicounty application.
        Response: No rule changes are required. Statute Section 
    1393(a)(2)(B) and Sec. 25.504(b) of part 25 give the Secretary 
    sufficient discretionary power to define a rural area.
    
    General Comments on the Rule
    
        Comment: Apparent conflict between the EZ/EC rules and the Cash 
    Management Act of 1990. Concern was expressed that while, under the 
    Cash Management Act, States drawing Federal monies must make 
    expenditures within three days of receipt or pay interest, EZ/EC SSBG 
    funds are transferred to the states to be passed on to the implementing 
    entities and that the State has two years to obligate these funds to 
    the implementing entities.
        Response: Department of Health and Human Services has advised that 
    the Cash Management Act does not apply to SSBG funds.
        Comment: The Governor of Texas and the Texas Department of Commerce 
    requested that the application deadline be extended to six months from 
    the issue date of the Interim Rule to allow time to prepare 
    comprehensive applications.
        Response: USDA disagrees with the commenters. Extension of the 
    deadline would penalize States that have allocated funds and technical 
    assistance in order to meet the June 30, 1994 deadline.
        Comment: One commenter stated that the interim rule as a whole did 
    not adequately address the needs of extremely low-income persons.
        Response: USDA 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 is required to 
    include 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. 25.200.)
        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.
        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: USDA 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: One commenter raised the concern of possible channeling of 
    EDA assistance from Economic Development Districts, which may not 
    qualify the EZ/EC designation, to designated EZ/EC areas.
        Response: The intent of the legislation is to provide assistance to 
    distressed communities by encouraging creation of jobs and 
    opportunities for local development as part of a Federal-State-local 
    and private-sector partnership. Although this effort addresses `local' 
    issues within each community, the context of revitalization applies 
    nationally. Therefore diversion of programmed assistance from one 
    distressed area to the designated EZ/EC communities is not consistent 
    with the purpose of the EZ/EC program.
        Comment: One commenter stated that labor union should be added to 
    the list among the segments of the community that could form Community-
    based Partnerships.
        Response: While labor unions were not named specifically, they are 
    included under the regulation. Subpart C (Nomination Procedure) 
    Sec. 25.200 Paragraph (c)(3) states that ``Community based 
    partnerships, involve the participation of all segments of the 
    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 individual 
    citizens.'' The organizations listed are examples of the kinds of 
    partnerships that could be formed by communities.
        Comment: One commenter addressed issues related to the use of 
    certain statistics in the determination of applicant eligibility for 
    the EZ/EC program.
        Response: These suggestions will be considered in any future 
    rulemaking needed for a new round of designation.
        Comment: Two commenters stated that the rule should allow 
    designated communities to use funds and other resources identified in 
    the strategic plans for properties directly adjacent to the boundaries 
    of the designated census tracts.
        Response: The regulation is clear on the use of EZ/EC SSBG funds 
    for approved EZ/EC activities identified in the community strategic 
    plans. A issue of this type can be addressed during the approval 
    process.
    
    V. Other Matters
    
    National Environmental Policy Act
    
        This document has been reviewed in accordance with 7 CFR part 1940, 
    subpart G, ``Environmental Program.'' It is the determination of USDA 
    that this action does not constitute a major Federal action 
    significantly affecting the quality of the human environment and in 
    accordance the National Environmental Policy Act of 1969, Pub. L. 91-
    190, an Environmental Impact Statement is not required.
    
    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. 
    The economic analysis required by Executive Order 12866 will be 
    retained in the public file with the Department's Rule 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. 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 [[Page 6950]] 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 the policies 
    contained in this rule will not have substantial direct effects on 
    States or their political subdivisions, or the relationship between the 
    Federal Government and the States, or on the distribution of power and 
    responsibilities among the various levels of government. The purpose of 
    this rule is to provide a cooperative atmosphere between the Federal 
    Government and the States and local governments, and to reduce any 
    regulatory burden imposed by the Federal Government that impedes the 
    ability of State and local governments to solve pressing economic, 
    social, and physical problems in their communities.
    
    List of Subjects in 7 CFR Part 25
    
        Community development, Economic development, Empowerment zones, 
    Enterprise communities, Housing, Indians, Intergovernmental relations, 
    Reporting and recordkeeping requirements.
    
        In accordance with the reasons set out in the preamble, title 7, 
    subtitle A, part 25 of the Code of Federal Regulations is revised to 
    read as follows:
        1. Title 7, subtitle A is amended by revising part 25 to read as 
    follows:
    
    PART 25--RURAL EMPOWERMENT ZONES AND ENTERPRISE COMMUNITIES
    
    Sec.
    
    Subpart A--General Provisions
    
    25.1  Applicability and scope.
    25.2  Objective and purpose.
    25.3  Definitions.
    25.4  Secretarial review and designation.
    25.5  Waivers.
    
    Subpart B--Area Requirements
    
    25.100  Eligibility requirements and data usage.
    25.101  Data utilized for eligibility determinations.
    25.102  Tests of pervasive poverty, unemployment and general 
    distress.
    25.103  Poverty rate.
    
    Subpart C--Nomination Procedure
    
    25.200  Nominations by State and local governments.
    25.201  Evaluating the strategic plan.
    25.202  Submission of nominations for designation.
    
    Subpart D--Designation Process
    
    25.300  USDA action and review of nominations for designation.
    25.301  Selection factors for designation of nominated rural areas.
    25.302  Number of Rural Empowerment Zones and Enterprise 
    Communities.
    
    Subpart E--Post-Designation Requirements
    
    25.400  Reporting.
    25.401  Periodic performance reviews.
    25.402  Validation of designation.
    25.403  Revocation of designation.
    
    Subpart F--Special Rules
    
    25.500  Indian reservations.
    25.501  Governments.
    25.502  Nominations by economic development corporations.
    25.503  Use of census data.
    25.504  Rural areas.
    
        Authority: 5 U.S.C. 301; 26 U.S.C. 1391 et seq.
    
    Subpart A--General Provisions
    
    
    Sec. 25.1  Applicability and scope.
    
        (a) Applicability. This part establishes policies and procedures 
    applicable to rural Empowerment Zones and Enterprise Communities, 
    authorized under the Omnibus Budget Reconciliation Act of 1993, title 
    XIII, subchapter C, part I (Pub. L. 103-66, approved August 10, 1993), 
    which amended the Internal Revenue Code by adding a new subchapter U, 
    relating to the designation and treatment of Empowerment Zones and 
    Enterprise Communities.
        (b) Scope. This part contains provisions relating to area 
    requirements, the nomination process for rural Empowerment Zones and 
    rural Enterprise Communities, and the designation of these Zones and 
    Communities by USDA. Provisions dealing with the nominations and 
    designation of urban Empowerment Zones and Enterprise Communities are 
    promulgated by the United States Department of Housing and Urban 
    Development (HUD). USDA and HUD will consult in all cases in which 
    nominated areas possess both rural and urban characteristics and will 
    utilize a flexible approach in determining the appropriate designation.
    
    
    Sec. 25.2  Objective and purpose.
    
        The purpose of this part is to provide for the establishment of 
    Empowerment Zones and Enterprise Communities in rural areas, to 
    stimulate the creation of new jobs, particularly for the disadvantaged 
    and long-term unemployed, and to promote revitalization of economically 
    distressed areas, primarily by providing or encouraging:
        (a) Coordination of economic, human, community, and physical 
    development plans and related activities at the local level;
        (b) Local partnerships fully involving affected communities and 
    local institutions and organizations in developing and implementing a 
    strategic plan for any nominated rural Empowerment Zone or Enterprise 
    Community;
        (c) Tax incentives and credits; and
        (d) Empowerment Zone/Enterprise Community Social Service Block 
    Grant (EZ/EC SSBG) funds.
    
    
    Sec. 25.3  Definitions.
    
        As used in this part--
        Applicant means the lead entity that has prepared and will 
    implement the community's strategic plan, pursuant to the provisions of 
    Sec. 25.200(c) of this part, for comprehensive economic, human, 
    community, and physical development within the area; such an entity may 
    include, but is not limited to, state governments, local governments, 
    regional planning agencies, non-profit organizations, community-based 
    organizations, or a partnership of community members and other 
    entities.
        Designation means the process by which the Secretary designates 
    rural areas as Empowerment Zones or Enterprise Communities eligible for 
    tax incentives and credits established by subchapter U of the Internal 
    Revenue Code (26 U.S.C. 1391 et seq.), EZ/EC SSBGS as established by 
    the Department of Health and Human Services (HHS), and for 
    consideration for programs of Federal assistance.
        Empowerment Zone means a rural area so designated by the Secretary 
    pursuant to this part. Up to three such zones may be designated.
        Enterprise Community means a rural area so designated by the 
    Secretary pursuant to this part. Up to 30 such communities may be 
    designated.
        EZ/EC SSBG Funds means grants made by the Secretary of HHS to 
    States containing Empowerment Zones and Enterprise Communities whose 
    strategic plans are qualified plans as defined in section 13761 of the 
    Omnibus Budget Reconciliation Act of 1993.
        Indian reservation means a reservation as defined in section 3(d) 
    of the Indian Financing Act of 1974 (25 U.S.C. 1452(d)) or section 
    4(10) of the Indian Child Welfare Act of 1978 (25 U.S.C. 1903(10)).
        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 [[Page 6951]] subdivisions which is 
    recognized by the Secretary.
        Nominated area means an area which is 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 (BNA).
        Poverty means the number of persons listed as being in poverty in 
    the 1990 Census.
        Revocation of designation means the process by which the Secretary 
    may revoke the designation of an area as an Empowerment Zone or 
    Enterprise Community pursuant to Sec. 25.403 of this part.
        Rural area means any area defined pursuant to Sec. 25.504 of this 
    part.
        Secretary means the Secretary of Agriculture.
        State means any State in the United States.
        Strategic plan means a strategy developed by the applicant, with 
    the participation and commitment of local governments, State 
    government(s), private sector, community members and others, pursuant 
    to the provisions of Sec. 25.200(c) of this part. The plan must include 
    written commitments from the local governments and State(s) that they 
    will adhere to the strategy.
        USDA means the U.S. Department of Agriculture.
    
    
    Sec. 25.4  Secretarial review and designation.
    
        (a) Designation. The Secretary will review applications for the 
    designation of nominated rural areas to determine the effectiveness of 
    the strategic plans submitted by applicants in accordance with 
    Sec. 25.200 of this part. The Secretary will designate up to three 
    rural Empowerment Zones and up to 30 rural Enterprise Communities.
        (b) Period of designation. The designation of a rural 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 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 revokes or modifies the designation, in 
    accordance with Sec. 25.402 or Sec. 25.403 of this part.
    
    
    Sec. 25.5  Waivers.
    
        The Secretary may waive any provision of this part in any 
    particular case subject only to statutory limitations, for good cause, 
    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. 25.100  Eligibility requirements and data usage.
    
        Eligibility Criteria. A nominated rural area may be eligible for 
    designation pursuant to this part only if the area:
        (a) Has a maximum population of 30,000;
        (b) Is one of pervasive poverty, unemployment, and general 
    distress, as described in Sec. 25.102 of this part;
        (c) Does not exceed one thousand square miles in total land area;
        (d) Be located entirely within no more than three contiguous 
    States; if it is located in more than one State, the area must have one 
    continuous boundary; if located in only one State, the area may consist 
    of up to three noncontiguous parcels;
        (e) Is located entirely within the jurisdiction of the unit or 
    units of general local government making the nomination;
        (f) Does not include any portion of a central business district, as 
    this term is used in the most recent Census of Retail Trade, unless the 
    individual poverty rate of each population census tract in the district 
    is not less than 35 percent for an Empowerment Zone and 30 percent for 
    an Enterprise Community; and
        (g) Does not include any area within an Indian reservation.
    
    
    Sec. 25.101  Data utilized for eligibility determinations.
    
        (a) Source of data. The data to be employed in determining 
    eligibility pursuant to the criteria described in Sec. 25.102 of this 
    part shall be based on the 1990 Census, and from information published 
    by the Bureau of Census and the Bureau of Labor Statistics. The data 
    shall be comparable in point or period of time and methodology 
    employed.
        (b) Use of statistics on boundaries. The boundary of a rural 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. 25.102  Tests of pervasive poverty, unemployment and general 
    distress.
    
        (a) Pervasive poverty. Conditions of poverty must be reasonably 
    distributed throughout the entire nominated area. The degree of poverty 
    shall be demonstrated by citing available statistics on low-income 
    population and levels of public assistance. Poverty is demonstrated by 
    poverty data from the 1990 census.
        (b) Unemployment. The degree of unemployment shall be demonstrated 
    by the provision of information on the number of persons unemployed, 
    underemployed (those with only a seasonal or part-time job) or 
    discouraged workers (those capable of working but who have dropped out 
    of the labor market--hence are not counted as unemployed), increase in 
    unemployment rate, job loss, plant or military base closing, or other 
    relevant unemployment indicators having a direct effect on the 
    nominated area.
        (c) General distress. General distress shall be evidenced by 
    describing adverse conditions within the nominated area other than 
    those of pervasive poverty and unemployment. Below average or decline 
    in per capita income, earnings per worker, per capita property tax 
    base, average years of school completed; outmitigration and population 
    decline from 1980-1990, and a high or rising incidence of crime, 
    narcotics use, abandoned housing, deteriorated infrastructure, school 
    dropouts and illiteracy are examples of appropriate indicators of 
    general distress. The data and methods used to produce such indicators 
    that are used to describe general distress must all be stated.
    
    
    Sec. 25.103  Poverty rate.
    
        (a) General. Eligibility of an area on the basis of poverty shall 
    be established in accordance with the following criteria:
        (1) In each census tract within a nominated area, the poverty rate 
    shall be not less than 20 percent; and
        (2) For at least 90 percent of the population census tracts within 
    the nominated 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 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 that meets the standards of 
    paragraphs (a)(1) and (a)(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 with a population of less than 2,000 shall be treated as 
    having a poverty rate that meets the requirements [[Page 6952]] of 
    paragraphs (a)(1) and (a)(2) of this section if more than 75 percent of 
    the tract is zone for commercial or industrial use.
        (3) Adjustment of poverty rates for Enterprise Communities. For 
    Enterprise Communities only, the Secretary has the discretion to 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 
    census tracts in the nominated 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 percentage point or more up to the next highest whole 
    percentage point figure.
        (c) Noncontiguous areas. There can be no more than 3 noncontiguous 
    areas if the nominated area is located within one state; noncontiguous 
    areas are not allowed in the multistate area. Each such parcel must 
    separately meet the poverty criteria set forth in this section.
        (d) Areas not within census tracts. In the case of an area that 
    does not have population census tracts, the block numbering area shall 
    be used for purposes of determining poverty rates.
    
    Subpart C--Nomination Procedure
    
    
    Sec. 25.200  Nominations by State and local governments.
    
        (a) Nomination criteria. One or more local governments and the 
    State or States in which an area is located must nominate such area for 
    designation as an Empowerment Zone or Enterprise Community, if:
        (1) The rural area meets the requirements for eligibility described 
    in Sec. 25.100 and Sec. 25.103 of this part;
        (2) The rural area is entirely within the jurisdiction of the 
    nominating State or States and local government(s); such governments 
    must have the authority to nominate the area for designation and 
    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 under this Act or in an area otherwise nominated 
    to be designated under this section.
        (b) Nomination for designation. No rural area may be considered for 
    designation pursuant to subpart D of this part unless the application 
    for designation:
        (1) Demonstrates that the nominated rural area satisfies the 
    eligibility criteria set forth at Sec. 25.100 of this part;
        (2) Includes a strategic plan, as described in paragraph (c) of 
    this section; and
        (3) Includes such other information as may be required by USDA 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 that will be utilized to evaluate the plan. 
    These key principles are:
        (1) Economic opportunity, including job creation within the 
    community and throughout the region, entrepreneurial initiatives, small 
    business expansion, and training for jobs that offer upward mobility;
        (2) Sustainable community development, to advance the creation of 
    livable and vibrant communities through comprehensive approaches that 
    coordinate economic, physical, environmental, community and human 
    development;
        (3) Community-based partnerships, involving the participation of 
    all segments of the community, including 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 individual citizens; 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 its production, 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, are broadly representative of 
    the entire community;
        (3) Describe the role of the participants in the creation and 
    development of the plan and indicate how they will participate in its 
    implementation;
        (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 community development;
        (9) Identify key community goals and the barriers that restrict the 
    community from achieving such goals, 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 as well as to the surrounding community;
        (11) Describe the ways in which the community's approaches to 
    economic development, social/human services, transportation, housing, 
    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 EZ/EC SSBG funds for the designated 
    Empowerment Zone or Enterprise Community 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 government(s), that the EZ/EC SSBG funds will 
    be used to supplement, not replace, other Federal or non-Federal funds 
    available for financing services or activities which can be used to 
    achieve or maintain the goals outlined in paragraph (d)(12)(ii) of this 
    section;
        (B) a description of the entities that will administer the EZ/EC 
    SSBG funds; [[Page 6953]] 
        (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 through undertaking one of the below specified program 
    options. 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 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 of the following program options:
        (1) Providing assistance to non-profit organizations and/or 
    community and junior colleges that provide disadvantaged individuals 
    with opportunities for short-term training courses in entrepreneurial, 
    self employment, and other skills that promote 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 amelioration of the neglect, abuse, 
    or exploitation of children and/or adults unable to protect themselves; 
    and, where appropriate, the goal of preservation or rehabilitation 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 Zones 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 or Enterprise 
    Communities. Similarly, grantees 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 applicant intends to use the EZ/EC SSBG funds for 
    program options not included in paragraph (d)(12) of this section, the 
    strategic plan must indicate how the proposed activities meet the goals 
    set forth in paragraph (d)(12) (ii)(B) of this section, and the reasons 
    the any approved program options were not pursued.
        (v) To the extent that the EZ/EC SSBG funds are used for the 
    program options included in paragraph (d)(12) (ii)(B) of this section, 
    the applicant may use EZ/EC SSBG funds for the following activities, in 
    addition to those activities permitted by Sec. 2005 of the Social 
    Security Act (42 USC 1397d):
        (A) To purchase or improve land or facilities;
        (B) To make cash payments to individuals for subsistence or room 
    and board;
        (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 to 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 the EZ/EC SSBG funds 
    will be invested and used for the 10 year period of designation. The 
    EZ/EC SSBG funds may be used to promote economic independence for low-
    income residents, such as capitalizing revolving or micro-enterprise 
    loan funds for the benefit of residents. The EZ/EC SSBG funds may also 
    be used to create jobs and promote economic opportunity for low-income 
    families and individuals through matching grants, loans, or investments 
    in community development financial institutions.
        (viii) The strategic plan must indicate how all the EZ/EC SSBG 
    funds will be used or invested for the period of designation of the 
    Empowerment Zone or Enterprise Community.
        (ix) The strategic plan must provide for periodic reporting of 
    information by the relevant State.
        (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;
        (16) Identify private resources and support, including assistance 
    from businesses, non-profit organizations, and foundations, which are 
    available to be leverage with public resources; and provide assurances 
    that these resources will be made available to the area upon 
    designation.
        (17) Identify changes requested in 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;
        (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 necessary to implement the plan;
        (22) Described 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 baselines, benchmarks and goals that will be used in 
    evaluating performance in implementing the plan. [[Page 6954]] 
        (e) Prohibition against business relocation. The strategic plan may 
    not include any action to assist any establishment in relocating from 
    an area outside the nominated area to the nominated 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 conducts business 
    operations.
        (f) Implementation of strategic plan. The strategic plan may be 
    implemented by the State government(s), local governments, regional 
    planning agencies, non-profit organizations, community-based 
    organizations, and/or other nongovernmental entities. Activities 
    included in the plan may be funded from any source, Federal, State, 
    local, or private, which agrees to provide assistance to the nominated 
    area.
        (g) Elements of the strategic plan. A strategic plan may include, 
    but is not limited to, activities that address:
        (1) Economic problems, through measures designed to create 
    employment opportunities; support business startup 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 areas;
        (3) Community needs, such as the expansion of housing stock and 
    homeownership opportunities, efforts to reduce homelessness, to promote 
    fair housing and equal opportunity, to reduce and prevent crime and 
    improve security in the area; and
        (4) Physical improvements, such as the provision or improvement of 
    public infrastructure, or the provision or improvement of recreational, 
    transportation, or other public services within the affected area.
    
    
    Sec. 25.201  Evaluating the strategic plan.
    
        The strategic plan will be evaluated for effectiveness as part of 
    the designation process for nominated rural areas described in 
    Sec. 25.301 of this part. On the basis of this evaluation, USDA may 
    request additional information pertaining to the plan and the proposed 
    area and may, as part of that request, suggest modifications to the 
    plan, proposed area, or term that would enhance its effectiveness. The 
    effectiveness of the strategic plan will be determined in accordance 
    with the four key principles set forth in Sec. 25.200(c) of this part. 
    USDA 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 will 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 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 economies; and
        (6) The extent to which lending and investment opportunities will 
    increase within the zone or community through 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 localities 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 vitality of life of the 
    community;
        (4) Sustainable development. The extent to which economic 
    development will be achieved in a manner consistent that protects pubic 
    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 
    organizations, non-profit organizations, for-profit enterprises, local 
    governments and families will work cooperatively to provide all 
    individuals with he 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; and
        (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, 
    handicap or age in its employment practices, including recruitment, 
    recruitment advertising, employment, layoff, termination, upgrading, 
    demotion, transfer, rates of pay or the forms of compensation, or use 
    of facilities. Applicants must comply with the provisions of Title VI 
    of the Civil Rights Act of 1964, section 504 of the Rehabilitation Act 
    of 1973, and the Age Discrimination Act of 1975, as implemented by 
    USDA.
        (c) Community-based partnerships----(1) Community partners. The 
    extent to which residents of the strategic plan and their commitment to 
    implementing it. The extent to which community-based organizations in 
    the nominated area have participated in the development of 
    [[Page 6955]] 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:
        (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(s) and local governments are committed to providing support to 
    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.
        (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; and
        (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. 25.202  Submission of nominations for designation.
    
        (a) General. A separate nomination for designation as an 
    Empowerment Zone and/or Enterprise Community must be submitted for each 
    rural area for which such designation is requested. The nomination 
    shall be submitted in a form to be prescribed by USDA in the Notice 
    Inviting Applications published in the Fedeal 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 area satisfies the boundary tests of 
    Sec. 25.100(d) of this part;
        (2) The nominated area is one of pervasive poverty, unemployment, 
    and general distress, as described by Sec. 25.102 of this part;
        (3) The nominated area satisfies the poverty rate criteria set 
    forth in Sec. 25.103 of this part;
        (4) The nominated rural 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 a Empowerment Zone and/or Enterprise Community;
        (5) Each nominating governmental entity has the authority to:
        (i) Nominate the rural area for designation as an Empowerment Zone 
    and/or Enterprise Community;
        (ii) Make the State and local commitments required by 
    Sec. 25.200(d) of this part; and
        (iii) Provide written assurances satisfactory to the Secretary that 
    these commitments will be met;
        (6) Provide assurances the amounts provided to the State for the 
    area under section 2007 of Title XX of the Social Security Act will not 
    be used to supplant Federal or non-Federal funds for sevices 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 USDA to aid in the 
    evaluation of progress in implementing the strategic plan and reporting 
    on the use of EZ/EC SSBG funds; and
        (8) Provide assurances that the nominating State(s) agrees to 
    distribute the EZ/EC SSBG 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 area shall accompany the nomination request.
    
    Subpart D--Designation Process
    
    
    Sec. 25.300  USDA action and review of nominations for designation.
    
        (a) Establishment of submission procedures. USDA will establish a 
    time period and procedure for the submission of application 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. USDA will accept for processing 
    those applications as Empowerment Zones or Enterprise Communities which 
    USDA determines have met the criteria required under this part. USDA 
    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 is that the application as an Empowerment 
    Zone or Enterprise Community must be received by USDA on or before the 
    close of business on the date established by the Notice Inviting 
    Applications published in the Federal Register. The applications must 
    be complete and must be accompanied by a strategic plan, as required by 
    Sec. 25.200(c) of this part and the certifications required by 
    Sec. 25.202(b) of this part.
        (c) Evaluation of applications. In the process of reviewing each 
    application accepted for processing, USDA 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 
    rural areas, and/or period during which designation is in effect. 
    Subject to the limitations imposed by Sec. 25.100 of this part, USDA 
    may request additional information pertaining to the plan and proposed 
    area and may, as a part of that request, suggest modifications to the 
    plan that would enhance its effectiveness.
        (e) Publication of designations. Final determination of the 
    boundaries of areas and the term for which the designations will remain 
    in effect will be made by the Secretary. Announcements of those 
    nominated areas designated as Empowerment Zones of Enterprise 
    Communities will be made by publication of a Notice in the Federal 
    Register.
    
    
    Sec. 25.301  Selection factors for designation of nominated rural 
    areas.
    
        In choosing among nominated rural areas eligible for designation, 
    the Secretary shall consider:
        (a) The effectiveness of the Strategic plan, in accordance with the 
    key principles set out in Sec. 25.201 of this part.
        (b) The effectiveness of the assurances made pursuant to 
    Sec. 25.200(a)(2) of this part that the strategic plan will be 
    implemented.
        (c) The extent to which an application proposes activities that are 
    creative and innovative. [[Page 6956]] 
        (d) Such other factors as established by the Secretary, which 
    include the degree of need demonstrated by the nominated area for 
    assistance under this part and the diversity within and among the 
    nominated areas. If other factors are established by USDA, a Federal 
    Register Notice will be published identifying such factors, along with 
    an extension of the application due date if necessary.
    
    
    Sec. 25.302  Number of Rural Empowerment Zones and Enterprise 
    Communities.
    
        The Secretary may designate up to three rural Empowerment Zones and 
    up to thirty rural Enterprise Communities.
    
    Subpart E--Post-Designation Requirements
    
    
    Sec. 25.400  Reporting.
    
        USDA will require periodic reports for the Empowerment Zones and 
    Enterprise Communities and other applicants 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 USDA shall 
    request from time to time shall be submitted promptly. On the basis of 
    this information and of on-site reviews, USDA will prepare and issue 
    periodic reports on the effectiveness of the Empowerment Zones/
    Enterprise Communities Program.
    
    
    Sec. 25.401  Periodic performance reviews.
    
        USDA will regularly evaluate the progress in implementing the 
    strategic plan in each designated Empowerment Zone and Enterprise 
    Community on the basis of performance reviews to be conducted on site 
    and using other information submitted. USDA may also commission 
    evaluations of the Empowerment Zone program as a whole by an impartial 
    third party. Where not prevented by State law, nominating State 
    governments must provide the timely release of data requested by USDA 
    for the purposes of monitoring and assisting the success of Empowerment 
    Zones and Enterprise Communities. The implementing entity for 
    Empowerment Zones/Enterprises Communities will be responsible for EZ/EC 
    program activities and fiscal management of the EZ/EC funds. They must 
    demonstrate continual involvement of all segments of the community, 
    including low income/disadvantaged residents, in the implementation of 
    the Strategic Plan.
    
    
    Sec. 25.402  Validation of designation.
    
        (a) Reevaluation of designations. On the basis of the performance 
    review described in Sec. 25.401 of this part, and subject to the 
    provisions relating to the revocation of designation appearing at 
    Sec. 25.403 of this part, USDA will make findings as to the continuing 
    eligibility for 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 a rural Zone or 
    community's success in carrying out its strategic plan, and subject to 
    the provisions relating to revocation of designation appearing at 
    Sec. 25.403 of this part and the requirements as to the number, maximum 
    population and other characteristics of rural Empowerment Zones set 
    forth in Sec. 25.100 of this part, the Secretary may modify 
    designations by reclassifying rural Empowerment Zones as Enterprise 
    Communities or Enterprise Communities as Empowerment Zones.
    
    
    Sec. 25.403  Revocation of designation.
    
        (a) Basis for revocation. The Secretary may revoke the designation 
    of a rural area as an Empowerment Zone or Enterprise Community if the 
    Secretary determines on the basis of the periodic monitoring and 
    assessments described in Sec. 25.401 of this part, that the applicant 
    or the State(s) or local government(s) in which the rural area is 
    located:
        (1) Has modified the boundaries of the area;
        (2) Has failed to make satisfactory progress in achieving the 
    benchmarks set forth in the strategic plan; or
        (3) Has not complied substantially with the strategic plan.
        (b) Warning letter. Before revoking the designation of a rural area 
    as an Empowerment Zone or Enterprise Community, the Secretary will 
    issue a letter of warning to the applicant and the nominating State(s) 
    and local government(s):
        (1) Advising that the Secretary has determined that the applicant 
    and/or 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 
    satisfactory progress in achieving the benchmarks set forth in the 
    strategic plan prepared pursuant to Sec. 25.200(d) of this part; 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 rural 
    area as an Empowerment Zone or Enterprise Community.
        (d) Notice to affected Federal agencies. USDA will notify all 
    affected Federal agencies providing assistance in a rural Empowerment 
    Zone or Enterprise Community of its determination to revoke any 
    designation pursuant to this section or to modify a designation 
    pursuant to Sec. 25.402 of this part.
    
    Subpart F--Special Rules
    
    
    Sec. 25.500  Indian reservations.
    
        No rural Empowerment Zone or Enterprise Community may include any 
    area within an Indian reservation.
    
    
    Sec. 25.501  Governments.
    
        If more than one State or local government seeks to nominate an 
    area under this part, any reference to or requirement of this part 
    shall apply to all such governments.
    
    
    Sec. 25.502  Nominations by economic development corporations.
    
        Any rural area nominated by an economic development corporation 
    chartered by a State and qualified to do business in the State in which 
    it is located, shall be treated as nominated by a State and local 
    governments.
    
    
    Sec. 25.503  Use of census data.
    
        Population and poverty rate data shall be determined by the 1990 
    Census Data.
    
    
    Sec. 25.504  Rural areas.
    
        (a) What constitutes ``rural''. A rural area may consist of any 
    area that lies outside the boundaries of a Metropolitan Area, as 
    designated by the Office of Management and Budget, or, as an area that 
    is primarily rural and has at least 50 percent of the population of the 
    nominated area residing outside of a Metropolitan Area.
        (b) Exceptions to the definition. On a case by case basis, the 
    Secretary will grant requests for waiver from the definition of 
    ``rural'' stated in paragraph (a) of this section upon a showing of 
    good cause. Applicants seeking to apply for a rural designation who do 
    not satisfy the definition in paragraph (a) of [[Page 6957]] this 
    section must submit a request for waiver in writing to the Rural 
    Business and Cooperative Development Service, Empowerment Zone Office, 
    Department of Agriculture, AG Box 3202, 14th Street and Independence 
    Avenue, SW, Washington, DC 20250-3200. Requests must include:
        (1) The name, address and daytime phone number of the contact 
    person for the applicant seeking the waiver; and
        (2) Sufficient information regarding the area that would support 
    the infrequent exception from the definition.
        (c) The waiver process. The Secretary, in consultation with the 
    Department of Commerce, will have discretion to permit rural 
    applications for communities that do not meet the above rural criteria.
    
    
    Sec. 25.550
    
        Dated: January 25, 1995.
    Richard E. Rominger,
    Acting Secretary.
    [FR Doc. 95-2313 Filed 2-3-95; 8:45 am]
    BILLING CODE 3410-01-M
    
    

Document Information

Effective Date:
3/8/1995
Published:
02/06/1995
Department:
Agriculture Department
Entry Type:
Rule
Action:
Final rule.
Document Number:
95-2313
Dates:
March 8, 1995.
Pages:
6945-6957 (13 pages)
RINs:
0503-AA09
PDF File:
95-2313.pdf
CFR: (31)
7 CFR 25.101(a))
7 CFR 25.200(a)(2)
7 CFR 25.202(b)
7 CFR 25.200(c)
7 CFR 25.100(d)
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