THE WHITE HOUSE

Office of the Press Secretary

For Immediate Release                                        May 4, 1993
                        EMPOWERMENT ZONES

Across the country, communities are reeling from a decade of declining opportunity and rising social and economic isolation. The Clinton Administration is introducing the Economic Empowerment Act of 1993 as the first piece of a larger community empowerment agenda to bring on a new era of opportunity, responsibility and community for all Americans.

The Empowerment Zone proposal represents a new approach to the problems of distressed communities. It moves beyond the old debate that the answer to every problem is top-down bureaucracy on the one hand or trickle-down economics on the other.

The traditional enterprise zone approach assumed that tax breaks alone can revitalize communities without changing the way government does business. The Clinton proposal gives local communities the incentives, deregulation and flexibility they need to work with the private sector to develop comprehensive economic strategies to generate business, create jobs, make their streets safe, and empower people to get ahead.

1. BOTTOM-UP, COMMUNITY-BASED STRATEGY: Empowerment Zones will be awarded through a competitive, challenge grant process that gives communities new opportunity, but demands more responsibility from them in return. No applicant will be eligible for a single dollar of federal enterprise support unless it submits a comprehensive strategic plan that brings together the community, the private sector and local government and demonstrates how the community will reform the delivery of government services. The challenge grant process is designed to empower local communities to be as innovative as possible.
2. ONE-STOP WAIVER AUTHORITY: An Enterprise Board -- made up of relevant Cabinet Secretaries -- will provide communities a single point of contact, and have broad waiver authority to help communities use existing federal programs and resources more effectively and efficiently to carry out their strategic plans.
3. 10 EMPOWERMENT ZONES AND 100 ENTERPRISE COMMUNITIES: A total of 110 zones will be chosen through the empowerment challenge grant process. All 110 will be eligible for empowerment tax incentives and receive special priority for many innovative federal programs including Community Development Banks, Community Policing, and education reform. The 10 Empowerment Zones will qualify for additional tax incentives, including substantial Employment and Training Credits for businesses that employ people who live within the zones.
4. INDEPENDENT EVALUATION AND SUNSET: The Act provides for independent evaluation of what works and what doesn't before expanding to include other communities. The entire Act will sunset after 10 years.

SUMMARY OF ZONE INCENTIVES AND INVESTMENTS:

In addition to enhanced flexibility to coordinate strategic plans, the 10 Empowerment Zones and the 100 Enterprise Communities will receive or be eligible for five basic forms of incentives and investments: a) Capital incentives to spur private sector investment; b) Empowerment incentives; c) Employer wage credits that empower both businesses within the zone and businesses outside of the zone that hire zone residents; d) Investment programs, such as community policing and enterprise schools; and e) Zone Priority Investments: A host of federal programs will give recipients of the 110 zones priority status for grant applications for investments that may be essential to a comprehensive empowerment strategy. Starred incentives (*) are available only for the 10 Empowerment Zones.

CAPITAL INCENTIVES

• Tax-exempt private activity bonds for investments in tangible property in zone
• Expansion of Low Income Housing Tax Credit
• Increased Property Expensing under Section 179*
• Accelerated depreciation for tangible investments*

EMPOWERMENT INCENTIVES

• Resident Empowerment Savings Accounts -- tax credits for employer contributions; penalty-free withdrawals for education, purchase of first home, starting a small business or investing in community investment corporation or fund
• Resident Empowerment Opportunity Card
• Private activity bonds for zone businesses, community investment corporations and funds, and ESOPs owned 50% or more by zone residents*

EMPLOYMENT AND TRAINING CREDITS ("ETC") FOR ZONE RESIDENTS

• A multi-year ETC for zone employers*
• A one-year Targeted ETC for non-zone employers*

INVESTMENTS UNDER THE ACT

• Enterprise Grants
• Community Policing

ZONE PRIORITY INVESTMENTS

• Community Partnerships against Crime
• Community Development Financial Institutions and Banks
• HUD Matching Fund for CDCs
• Up to 30 Enterprise School Communities

COSTS AND PLACEMENT

COSTS

     Tax Incentives:  The President's FY1994-1998 Budget includes 
     a total $4.1 billion over five years in tax incentives.  
     Approximately 75% of the cost comes from the Employment and 
     Training wage tax credits.  

     Investments:  The Empowerment Zone Proposal aims to match 
     that amount by targeting existing investments towards 
     Empowerment Zones and Enterprise Communities.  Over the next 
     two years, $500 million currently in the budget will be 
     allocated to Enterprise Grants for empowerment zones and 
     communities.  An additional $500 million will go to community 
     policing, of which a substantial amount will be targeted 
     toward the 110 zones. 

     Innovative Programs:  In addition, the President has 
     requested that his Cabinet come forward with proposals to 
     target at least $3 billion of existing funds within the zones 
     and communities so that there can be an equal amount of 
     investments and tax incentives.  

     Several departments have already made that commitment.  For 
     example, the Department of Education has already committed 
     funding and support for local communities to create 30 
     Enterprise Schools -- 24-hour, year-round community centers -
     - within the zones.  HUD has agreed to target $200 million of 
     its Community Partnership Against Crime funds -- public 
     safety and drug prevention -- in the zones.  

PLACEMENT

     100 Enterprise Communities:  Of the 100 Enterprise 
     Communities, 65 will be in urban areas, 30 will be in rural 
     areas, and 5 will be on Indian reservations. 

     10 Empowerment Zones:  Of the 10 Empowerment Zones, 6 will be 
     reserved for urban areas, 3 will be rural areas and 1 will be 
     an Indian reservation. 

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