Backgrounder: Rural EZ/EC Program

Backgrounder: Rural EZ/EC Program

Round I Designations

The Community Empowerment Program was enacted into law in August 1993. In January 1994, the opening of competition for Round I designations was announced. To be eligible, communities had to have high rates of poverty. Their applications consisted of comprehensive strategic plans that were developed with the active participation of low-income community residents.

In December 1994, three rural Empowerment Zones (EZ) and 30 rural Enterprise Communities (EC) were named. Urban EZs and ECs were named at the same time. Rural EZs received grants of $40 million and rural ECs received special EZ/EC grants of just under $3 million from the Social Services Block Grants (SSBG) program administered by the Department of Health and Human Services. Urban EZs received $100 million; urban ECs received the same amount as rural ECs.

Round I Accomplishments

Round I rural EZs and ECs have made considerable progress in implementing their 10-year strategic plans since December 1994. Using a Web-based information system, rural communities established performance benchmarks against which their progress is measured and reported. By 1998, already their record of achievement was already impressive, including almost 10,000 jobs created or saved, 14,000 workers trained, 25,000 youth served, and 102 water or waste treatment systems under construction. A progress report detailing these accomplishments is available on the EZ/EC Web site at http://www.ezec.gov/Communit/progress98.pdf.

Even those communities that could not be designated in Round I were winners, as a result of USDA's Champion Communities program. Many Champions continued to implement their strategic plans with the assistance of USDA, which provided project-specific funding, technical assistance, and information to support their efforts. Since 1994, USDA Rural Development has funded nearly $260 million in specific projects in Champion Communities for such things as water and waste disposal systems, other essential community facilities, business development, and housing.

Round II

Round II was enacted into law by the Taxpayer Relief Act of 1997. That act established 15 new urban and 5 new rural Empowerment Zones. The eligibility requirements for Round II were somewhat changed from Round I. A simpler method of determining poverty was adopted. Indian reservation lands were made eligible for Round II (they had been excluded by statute from Round I), and one new rural Zone could be designated based on population "emigration." The act did not appropriate grant funds as had been available to Round I EZs and ECs, but did make available a package of tax benefits that was somewhat less generous than the Round I package. The Administration sought full funding for the Round II Zones at the same level as Round I. Based on that proposal, competition for Round II designations was announced on April 16, 1998, with an application deadline of October 9. In October, Congress appropriated first year grants of $2 million to each of the 5 rural Zones and authorized an additional 20 rural Enterprise Communities and provided them with $250,000 in first year funding. Subsequent annual appropriations to the communities have been similar.

USDA received 169 applications prior to the October 9 deadline. Of these, 9 were declared ineligible. The remaining 160 applications were reviewed by an inter-departmental team of experts. The reviews considered the openness of the strategic planning process, the comprehensiveness of the strategic plan, the effectiveness of the performance benchmarks, the extent to which community residents will be an active part of plan implementation, and the geographic diversity of the applicants. On the whole, the strategic plans received were of exceptionally high quality. The applicants included 19 Round I Enterprise Communities that sought to be upgraded to Empowerment Zone status. In addition, they included 58 Round I Champion Communities and at least 28 communities that included Indian reservation lands either wholly or partially.

The statute authorizing Round II ECs was not specific regarding the date or process by which they were to be designated. However, because of the great expense to communities and the government of conducting another national competition when a large number of high quality strategic plans were already on hand, a top management decision was made to select all 25 Round II EZs and ECs at this time, rather than delay implementation of their strategic plans for another 9-12 months.

The five new rural EZs have a combined total of 83,849 residents. The average poverty rate in the four poverty-based EZs is over 37 percent. Shannon County, SD, which is included in the Oglala Sioux Empowerment Zone, is the poorest county in the United States. Lake Aggasiz, ND, qualified on the basis of population "emigration," which was approximately 25 percent during 1980-95. The five rural EZs range in area from 449 square miles (Southernmost Illinois Empowerment Zone) to 1,000 square miles (Oglala Sioux Empowerment Zone). By comparison, the state of Rhode Island has an area of 1,054 square miles. Their population ranges from 3,396 (Griggs-Steele Empowerment Zone) to 23,900 (Southwest Georgia United Empowerment Zone).

Altogether, the 25 Round II EZs and ECs have an average poverty rate of just under 35 percent. They average 15,349 residents, with Metlakatla, AK, being the smallest (1,469 residents) and Middle Rio Grande, TX, the most populous (29,724). The 25 communities average 560 square miles in size, with 8 having more than 900 square miles. The smallest is Lewiston, ME, which has 1 square mile. In addition to the Griggs-Steele Empowerment Zone, one EC (Wichita County, KS) based its eligibility on emigration rather than poverty.

One Round I Enterprise Community (Southwest Georgia United Empowerment Zone) was upgraded to Round II Empowerment Zone status. Two of the new rural EZs and 9 of the new ECs were Round I Champion Communities. Two of the new EZs (Oglala Sioux Empowerment Zone, SD, and Desert Community Empowerment Zone, CA) include Indian reservation lands. Eight of the new ECs also include reservation lands.

Round II EZ/EC grants are administered by USDA Rural Development and are available to the designated communities later in 1999, as soon as the federal budget process is complete.

USDA also offered Champion Community status to all Round II applicant communities who agreed to enter into an agreement with USDA to implement their strategic plans in accord with the principles of the Community Empowerment program and report regularly on progress in achieving their performance benchmarks.

Round III

The Consolidated Appropriations Act of 2001 was signed on December 2, 2000 and includes provisions relating to the Empowerment Zone and Enterprise Community Program. Among the provisions was the creation of two rural Round III Empowerment Zones. On January 11, 2002, USDA Secretary Veneman announced the Aroostook County Empowerment Zone (Maine) and the FUTURO Empowerment Zone (Texas) as the two new Round III Zones. Aroostook County is a Round I Champion Community while FUTURO is a Round I Champion Community and a Round II Enterprise Community.

The eligibility requirements for Round III were the same as the Round II requirements. The act did not appropriate grant funds as had been available to the previous EZs and ECs, but did make available a package of tax benefits similar to Round II.

Fifty-five applications were received prior to the October 1, 2001 deadline. They were reviewed by a departmental team of experts. The Round III reviews also considered the openness of the strategic planning process, the comprehensiveness of the strategic plan, the effectiveness of the performance benchmarks, the extent to which community residents will be an active part of plan implementation, the inclusiveness of diverse partnerships and the extent to which the applicant sought leveraging opportunities. The applicants included 12 Round I and II Enterprise Communities that sought to be upgraded to Empowerment Zone status. In addition, they included 24 Round I and II Champion Communities and at least 10 communities that included Indian reservation lands either wholly or partially.

USDA will also offer Champion Community status to all new Round III applicant communities who agree to enter into an agreement with USDA to implement their strategic plans in accord with the principles of the Community Empowerment program and report regularly on progress in achieving their performance benchmarks.

For more information please contact:

Office of Community Development
Stop 3203
1400 Independence Ave., SW
Washington, D.C. 20250-3203

Phone: 202-619-7980 or 1-800-645-4712
E-mail: ocd@ocdx.usda.gov

The U.S. Department of Agriculture prohibits discrimination in its programs on the basis of race, color, national origin, sex, religion, age, disability, political beliefs, and marital or familial status. (Not all prohibited bases apply to all programs.) Persons with disabilities who require alternative means for communication of program information should contact the USDA Office of Communications at (202) 720-7807 (TDD). To file a complaint, write: Secretary of Agriculture, U.S. Department of Agriculture, Washington, D.C. 20250, or call (202) 720-7327 (voice) or (202) 720- 1127 (TDD). USDA is an equal employment opportunity employer.

March 9, 2004

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