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Office of the Press Secretary

                         BACKGROUND BRIEFING

January 17, 1994

The Briefing Room

4:08 P.M. EST

SENIOR ADMINISTRATION OFFICIAL: Looks like the number of briefers outnumber the number of briefees.

Q Do you want to ask us questions?

SENIOR ADMINISTRATION OFFICIAL: I propose to be relatively brief and turn it over to my colleagues. And we will be available to answer any questions. As you know, we have several handouts that have made available to you that include a summary overview of the program, the list of substantial additional investments that are going to be made available to communities that enter this process, and thirdly, a summary of the application process itself.

We also have made available the four glossy covered items, an application guide, the actual application itself, a substantial -- more substantial list of the available federal resources and the cooperation that will be provided by each of the Secretaries plus several national private sector endeavors; and lastly, a guidebook that the AIA and the APA and the Urban Institute have done in conjunction with both the Departments of Agriculture and Housing and Urban Development.

I'd just like to make a few points, briefly. This is truly an initiative that starts in the communities. It's a challenge that's going to go all across America to communities and ask them -- we're going to listen for a change.

We are, however, going to be coinvestors in this process, so we do have some investment criteria. They're four in number. The first one is economic opportunity, and that means jobs. The second one is building communities that work. It includes a number of components. As you know, the President and Vice President mentioned two today -- safe streets and good schools. My colleagues will discuss with you several of the other components of that. Thirdly, we want to see how many and how effective community-based partnerships can be created in each local community.

I think the President's point and the Vice President's point today was, government isn't going to do this, this is going to be an endeavor that's going to involve the private sector, the residents of the community, state and local government.

The last of the four criteria is a strategic vision. We don't need to hear a laundry list of problems. We need to see and hear what it is the community wants to become over the next 10 years -- what their vision is so they're going to become a whole community, an effective community that leads to economic self-sufficiency for their residents.

If the communities answer this call and focus on these four criteria in their own work, then in response we're saying that all our federal agencies, under the direction of the Community Enterprise Board that's chaired by the Vice President -- and I think any of you who had the opportunity this morning to hear him know that he's not only going to be a passionate advocate about this, but an effective leader -- one who can break any logjams. We're going to cooperate; we're going to respond; we are going to be driven by what the consumers, who are the residents, and the local community partnerships out there, what they tell us. If this happens, we hope to have many, many laboratories for change, so we will all learn what works and what doesn't.

There is a June 30th deadline for the applications. During that period of time, all of the agencies, led by HUD and Agriculture, with the full cooperation of Health and Human Services, who's been actively involved in the human service sector part of this whole initiative, will be out there for the next six weeks in a series of workshops.

And our point in being out there for the next six weeks, I think, is to continue the call that the President and the Vice President made today. And that is a challenge to the private sector to become involved. We think that we have provided not only tax incentives for private investment, but we're going to make available substantial private capital, not only through the Small Business Administration and their 12 regional, one-stop shops, but also through the President's initiative with the bank regulators to reform the Community Reinvestment Act that will lead mainstream banks and thrifts to invest in these initiatives.

The GSCs, and in particular Fannie Mae, as the President and the Vice President mentioned this morning, are committed to community partnership where they will literally put billions of dollars in home mortgages and rehabilitation funds to rebuild neighborhoods all across the country.

So we're going to be in there as coinvestors. The four selection criteria are our investment criteria. We think we've got incentives and private investment that will be available. And we're going to be calling upon the private sector in each metropolitan area and in each region of rural America to come together and come up with a plan that's going to make these communities work and become full participants in the national economy.

With that, I'd like to introduce my colleague.

SENIOR ADMINISTRATION OFFICIAL: Thank you. And my colleague went through the details of the proposal. So whatever questions you have.

I'd like to make one point if I can. You didn't get a chance to hear the President and the Vice President this afternoon, but they probably said with as much eloquence and intelligence as I've heard anyone address what this proposal's all about and what the areas are all about that we're trying to assist.

If there's one point that strikes me in this effort is that normally you've heard people come to this microphone in this town and tell you what they believe is needed for a community to restore itself, to revitalize itself. They came and they said, we're the federal government and this is what we believe has to be done. This is a federal government that comes and says, we don't know what needs to be done, but we know that we don't know; and we know that the local community is charged with the responsibility to develop that plan. Let the local community design a program that works for them to address their problems. We, the federal government, will then assist and help that plan materialize and realize. We have tax

incentives. We have additional spending -- $1 billion in Title XX funds. We will take this assemblage of federal programs and work those programs to make them fit that community's problems and that community's solutions.

But let the thrust come from the local community truly, and let the federal government then respond as a partner in that effort. That's what this is all about. It says we want a plan that ultimately comes up with economic opportunity, economic prosperity, but recognizes that you don't get there just by providing someone a job, that you need more of a comprehensive -- holistic is the word they like to use -- plan for redevelopment; that you have to work not only with the businesses, but also with the physicalinfrastructure of the community and also with the people in that community, because they've been in distressed communities for a lot of years and that's not going to turn over right away.

So we have to work with the businesses, yes, but also with the physical infrastructure, also with the people. Let the community drive that plan. The federal government will then invest, as my colleague says, as a partner in that plan for revitalization.

With that, my colleague, who is from agriculture -- agriculture, as you know, is in charge of the rural zones, I'm from HUD, which is in charge of the urban zones.

SENIOR ADMINISTRATION OFFICIAL: Thank you very much. For too many years, too many distressed rural communities have not been a part of America's future. It's more important today than ever for those communities to be full partners given the global competition we're involved in. And this empowerment zone program will provide opportunities for thousands of people in rural America, ones that we don't think about that much, that you don't hear about, read about or see on T.V. that much unless it's an emergency or a catastrophe.

Thousands of young people who, years ago, like myself, dreamed of just a day when you get old enough to get on a bus and leave rural America to go to the city to get a job, won't have to do that because in these communities and zones, there will be new opportunities, diversified opportunities for jobs for them. Not just in agriculture -- agriculture is still an important part of rural America -- but other things are important. Recreation, tourism, service jobs, manufacturing, high wage jobs -- that's what this program is all about for rural America. And I'd be happy to answer any questions you have about the rural aspect of this program.

Thank you very much.

Q There was a reference, I think, by Vice President Gore, to this being the first-round of empowerment zones. In fact, I think these are the only nine authorized. Is the President planning to ask Congress to authorize more zones so there can be more awards than nine in future years?

SENIOR ADMINISTRATION OFFICIAL: Three comments. One, there are 104 communities that are going to be designated. The benefits that are going to be made available to the enterprise communities are substantial. We're going to be substantial coinvestors in those communities as well.

Second, under the legislation, we have the discretion to designate these 104 communities in 1995 as well as 1994. We will not know the quality of the applications that will be coming in, obviously, until June 30. If they are of a substantial quality, we could, in fact, designate all 104. I think there is also the prospect that we may not be designating all 104 and may, therefore, have a second round to designate the remaining communities in 1995.

Thirdly, I don't think there's any question that this is a program, if it spurs the kind of private sector involvement across the country that I think it will, that there will be, perhaps, with success, a change in the view of how important all of these communities are, not only as a matter of rebuilding themselves, but as a part of a national economy that needs to keep humming. There may be the potential in future years to do more. But there is nothing on the front burner to do that right now. I think that depends on the events yet to be seen.

Q What's the difference between an empowerment zone and an enterprise community?

SENIOR ADMINISTRATION OFFICIAL: The empowerment zones have three additional benefits. First of all, they have a wage credit which will lower the cost of doing business within the zones to the tune of about $3,000 per worker who is a resident of that zone. Secondly, there is an increase in the expensing provision for capital expansions in any business from $17,500 to $37,500. And thirdly, the size of the grant under Title XX is for rural zones, $40 million, and for urban zones, $100 million, rather than $3 million.

But if you will take the opportunity, and I know this is not easy in this -- one of the four guidebooks -- we have a guidebook called Federal Programs which also includes some of the national private sector initiatives that I mentioned, you'll see that there are a range of programs in investments that are available to all communities. But those are the three distinctions between the two.

Q When is this program going to come on stream in terms of the judgments being made?

SENIOR ADMINISTRATION OFFICIAL: As the Vice President mentioned this morning, probably late summer or early fall. And as I mentioned in my previous answer, if we do not designate all 104 communities in this round, will have the discretion to have another round next summer. But we'll get a substantial number started this late summer and fall.

Q Is there a breakdown of the line between urban and rural?

SENIOR ADMINISTRATION OFFICIAL: Six urban and three rural. And there are 30 of the rural enterprise communities and 65 urban enterprise communities.

Q There's no specific reference in this to working along, across racial lines. But as you know, many communities -- relations do not work very well together. Is there sort of implicit understanding that that's one of the things you're looking for is some cross-racial working together?

SENIOR ADMINISTRATION OFFICIAL: Absolutely. And in fact, if you noticed, our challenge goes out to the private sector. We're talking about the private sector throughout the region. And the Vice President, when he talked about jobs, he talked about two complimentary components to that. One is building business and jobs within the communities and the second one is making sure that the metropolitan labor market, that those informal job networks that exist throughout local labor markets are made fully available to persons who reside within the zones and communities.

If you look at the relative unemployment rates, for example, in some of the distressed rural areas and some of the inner cities, you'll see very high unemployment rates. I mean on the order to the tune of 50 percent. The region, which is the entire labor market, I mean, many of them are with the economy humming along, may

get close to full employment. And as the President said, we don't have a person to waste. So we have an obligation not only to connect up these labor markets, we have an absolute expectation to keep the national economy humming and all the regional economies humming so that we're going to have an opportunity for the first time to have private employers throughout the region take advantage of these human resources.

And we have the training programs involved here. We have the education programs involved here. And we're going to challenge each metropolitan area to come up with a way to create those new job networks that will connect people up with jobs. This is, in fact, if you look at our guidebook, it talks about building communities together. We're going to lift ourselves up together. That's what this is all about.

Q How much confidence do you have that the business community will actually respond in a serious way to these proposals?

SENIOR ADMINISTRATION OFFICIAL: Well, I've been around the country, and I know some of the other people have, at a number of seminars, pre-planning meetings, discussions about this. And I'll give you one example. I appeared in one in the Detroit metropolitan area which, I think in terms of a tradition of racial fragmentation and in terms of the inner city having some of the greatest poverty in the country, I was substantially encouraged.

I worked on a panel that day with many of the major private sector players. And it was amazing how all of them said to keep our region going, we need to have a strong Detroit. And with the election of a mayor like Mayor Archer, it's just amazing the outpouring of people who have said that they want to help in this process, that they want to become the types of partners with the communities that we've described here. And I'll go so far -- there's an example, I mean, I don't know if you know that local community, but Oakland County, which is the wealthiest, one of the wealthiest suburbs in the country and perhaps one of the whitest, has a -- their executive director or the equivalent of their mayor for the county government who is a, I think, locally known as a very conservative Republican, he's pledged his personal support and everything that that county can do to help Mayor Archer in building these kind of community partnership. And I've gotten that same reaction wherever I have been across the country. I think that we have an opportunity. I think that this is a real chance for us to issue the challenge, and I think you'll be surprised by the extent of the response.

Q If I could follow up, but in a place like Detroit, do you think that that would not exist without this federal program? Do you think that spirit would not exist?

SENIOR ADMINISTRATION OFFICIAL: When I went to this meeting, I was there with Mayor Archer and his Chief of Staff. And they said to me, this is a platform that allows us to go out to the communities, throughout the suburbs, the business community and talk about how we're in this together.

He told me personally how this was a platform that he could use, and we talked about the range of federal investments that we have through the SBA, through the Community Reinvestment Act Reform, through community development banks which Wayne County is working on right now, through the Fannie Mae and the other programs that HUD is coming up with to allow leveraging with the private sector, and he said this is a platform that I can use to build the kind of connections that will make this thing work.

SENIOR ADMINISTRATION OFFICIAL: What my colleague said is exactly on target, and I may have misunderstood the question. But this is not a program that is dependent upon the charity of business.

The goodwill, the mutuality, the generosity of the private sector, working together with the public sector, is obviously a part of everything we do and everything we need to do. But this is a program that does not rely upon charity, it says we want a comprehensive plan to revitalize urban areas, rural areas, distressed communities.

We understand that there may be an additional cost to business to do performance activities within this community. We, therefore, offer tax incentives to help attract business to that community -- wage credits, expensing credits. But they will get additional tax benefits if they locate in this zone that they would not get if they didn't locate in this zone. So there is a very real economic interest for businesses to locate in these areas, which goes beyond their altruistic motivations.

What we're saying is, that's fine, we think that's a worthwhile public expenditure of funds because we want to attract businesses back to these communities, because that will be the engine of revitalization for the community. Then, we put the physical components -- the roads, the infrastructure, back in place. We put the human support mechanisms back in place -- the day care, the job training, etc. And that will now have a comprehensive redevelopment effort. But the essence on the business side are the tax incentives that they will get.

Q What is the price tag for the federal government and for business investment?

SENIOR ADMINISTRATION OFFICIAL: The tax incentives are approximately $2.5 billion -- at least that's the CBO estimate of the scoring over five years -- plus the $1 billion in the Title XX grants. In addition, through the cooperation of the various agencies in response to the President's executive directive creating the community enterprise, up to an additional $3 billion will be made available in a variety of infrastructure, human service and other investments in these communities.

Let me talk a little bit about the private investment, because in terms of how to measure that, a lot of it depends on how big the response is to our challenge. But what we've done to kind of seed that challenge is, we have some things that are investments that will be made available through the private sector. When I talk about the SBA and their regional capital shops, they'll stimulate approximately $3 billion in private investment, in expanding businesses in distressed communities all across America.

But we've worked this --

Q Over five years?

SENIOR ADMINISTRATION OFFICIAL: Over five years. All these figures are over five years. Essentially, those are going to work through the intermediaries that know how to make investments. Secondly, I mentioned the Community Reinvestment Act. That's going to encourage banks and thrifts who know how to make sound investments, and they'll be rewarded for partnering up and making investments in businesses that are going to work in distressed communities.

The Community Development Banking Bill that the President has works in exactly the same way. It's going to create the kind of community intermediaries that can make investments that'll build communities and build business. So that on the national level, when you add all those things together, plus the Fannie Mae, we are talking about a substantial private sector investment that we have encouraged out there, and what we're asking is, what's going to happen -- each of the regions to respond to those investment dollars that we've made available.

Q What is the ballpark figure for that investment?

SENIOR ADMINISTRATION OFFICIAL: For the private sector? Well, I think it's a little difficult to know until we know how many applicants there are going to be. This is the challenge that we've made available to everybody to participate in. If we have 1,000 communities across the country that choose to participate in this with each of their surrounding region, we'll have substantially more investments created than if we have only 10. And we're going to be around the country over the next six weeks with the secretaries and at every one of these workshops with somebody from the White House, talking about this program and how everybody has a self-interest in reinvesting in these communities.

Q Let me ask about the 104 -- what is the --

SENIOR ADMINISTRATION OFFICIAL: We won't know until we get the application back to see how much they have committed in private sector investments.

Q Do you have an estimate for it?

SENIOR ADMINISTRATION OFFICIAL: I don't have an estimate. I'll give you one example, to go back to Detroit, though. You had Mike Ilitch's representative here from Little Cesar's who has built his downtown world headquarters in downtown Detroit, and he has renovated the theatre district there, and there is talk that again on this cooperative basis, between the Republican governor and the new Democratic mayor of Detroit, and Mike Ilitch to build a new Tigers Stadium that will include retail and a number of housing developments. And if that's the kind of a response we're going to get all across the country, with the state coming up and the private sector coming together, you can see how we're talking about major, major investment dollars.

Q What's to prevent a business from moving from one impoverished community -- a small business that's doing okay but not doing great, where there is no empowerment zone, where there are no tax incentives, to another community where there are those incentives, leaving the community that doesn't have the empowerment zone out in the cold? What's to prevent that kind of -- I don't want to call it shell game, but --

SENIOR ADMINISTRATION OFFICIAL: Right. The legislation itself -- and you'll see in the application materials themselves -- part of the strategic plan is how you're going to avoid getting into that stealing game. We're not interested in a zero-sum game here, we're interested in economic growth. So there is a prohibition against exactly that kind of thing from happening.

And I think if you think about how communities grow, there are going to be spin-off benefits from those areas that are nearby economic growth. So I don't think this is a situation where you're going to see one community (inaudible) another, this is -- as I say, this is something where if we get in it together, we will have growth, and it will help surrounding communities as well.

SENIOR ADMINISTRATION OFFICIAL: One other comment on that. Every year in this country, in every community, there are more jobs added from existing businesses that expand than new ones that locate. Now, most citizens wouldn't think that's the case because if a company moves into a town, it makes the front page with, say, 50 or 75 new jobs. But if you add five and you add seven and you add nine and you add three, that never makes the page. But that's where most of the jobs come from in the existing communities.

SENIOR ADMINISTRATION OFFICIAL: Just to follow up on the question you asked before, we said the community is the one that comes up with the plan of action that they think is most appropriate. The federal government then assists. How does it assist? The tax incentives you heard about to attract businesses back -- $1 billion in a social services block grant, which is a very flexible program that allows them to use the money to assist people reach economic independence, and then in the guide book that my colleague was mentioning and the President spoke to, you have scores of federal programs that will be made available for that community to apply for and you have the Community Enterprise Board, secretaries headed by the Vice President, who will work their best to make those programs fit that community's plan.

What is happening now is you have very specific federal programs that go out by formula with all sorts of regulations that are so tight, so strict, that the communities have trouble accessing them. We are saying to the community you come up with a plan, we'll give you the tax incentives, we'll give you the social service block grant, and we'll also work to get these programs to fit your community, something that I don't think has been done heretofore and is an amount of money and access that could actually be freed up, which would be unparalleled.

Q Is there a cap on the amount a particular project can get in a tax incentive or in a grant?

SENIOR ADMINISTRATION OFFICIAL: No, there is no cap on the tax incentives. The private sector will build what it' s going to build; they'll file their tax returns. All that has happened is CBO has made an estimate. With respect to the block grant, that is capped at the dollar amounts that I described.

Q But is there a cap for an individual grant, I mean as opposed to the --

SENIOR ADMINISTRATION OFFICIAL: The Title XX block grant, as I mentioned, is $3 million for enterprise communities, $40 million for rural enterprise zones, and $100 million for the urban zones.

THE PRESS: Thank you.