Bill Clinton photo

Background Briefing by Senior Administration Officials

May 04, 1993

The Briefing Room

1:26 P.M. EDT

MS. MYERS: We're about to start a BACKGROUND BRIEFING on enterprise and empowerment zones. It is a background briefing. It will feature {Names deleted]

So go ahead.

SENIOR ADMINISTRATION OFFICIAL: We just wanted to be able to provide some background on the President's proposal. This is [names deleted]

The proposal that we announced today was one that the President called for during the campaign and that we developed with an interagency working group and with significant consultation with mayors and businesspeople and community leaders. The overwhelming message that we heard was that -- people saying that they understood that there might be limits to the degree of new federal spending that would be available, but that the most significant improvements that they could get was through the additional ability to coordinate -- come up with a comprehensive and coordinated plan. And that if the federal government could help give them that type of flexibility and coordination, that that would be very important for them coming up with an empowerment strategy for themselves.

The way that we have devised this proposal is that every community would have to come forth with a comprehensive plan showing that it was working with the private sector and state and local government. They would then make their grant -- they would make their application. They, having done their part in coming up with a coordinated strategy at the federal government, they would make that to one single enterprise board who would be able to give them complete or as much waiver authority as possible so that they could have the flexibility to carry out their program.

A hundred enterprise communities would be chosen and 10 empowerment zone proposals. The main difference between the two was that on the empowerment zones -- well, I should say, while the core of the proposal was to allow this coordination and bottom-up planning and to allow these communities to have priorities in seeking new federal investments so that they could put together a comprehensive plan that included both some tax incentives and better use of existing funds for a specific strategy for their community -- we also include in our budget, in the budget that the President presented on February 17th, $4.1 billion in tax expenditures for the empowerment zone proposal.

Of that, the majority of that will go to the 10 empowerment zones. And the reason why is that one of the frequent criticisms that's been made is that these things tend to dilute incentives and then no one ever gets to find out whether any of these empowerment incentives can actually help a community. So we chose a two-tier approach that will allow 110 communities to participate in going through the challenge grant process and being part of a coordinated strategy in which they would be eligible for a variety of new funding from federal programs, but that the 10 enterprise -- empowerment zones would be where the majority of the tax incentives were focused.

One of the main criticisms in the past of such proposals has been the tax incentives don't actually benefit the people who live there. This proposal is very well structured to ensure that that does not take case. Of the $4.1 billion in tax incentives, 75 to 80 percent are in wage tax credits for zone residents. In doing that, we had two different types of employment tax credits. One is for the people -- for the businesses within the zone or within the community, and they would be given the tax credit of up to 25 percent of the first $20,000 of qualified salaries for zone residents that they hire. So every dollar would be going to benefit both a company within the zone and to help hire those people who live within the zone.

But we also wanted to be able to empower those people from the zone to be able to go to new -- to have opportunities elsewhere outside the zone. So the second part was a targeted credit that would allow the -- an employer outside the zone to get a tax credit for hiring a zone resident. And in this way, we are seeking to both target towards improving the particular place, but also to give the people within that place the ability to seek opportunity wherever they can.

On the handout that we have, on the second page it has a summary of the specific incentives. Before going to any specific questions, I wanted my colleague to speak a little bit, I think, on the notion of the importance of coordinating. Because the thing that we heard and that my colleague, I guess, very much lived in his past life where he ran a very, very successful organization called HELP in New York that helped -- had a comprehensive approach for homeless families was that -- what we heard from mayors and people in the community is that all of the things that come down from the federal government are targeted towards a specific program, a specific problem. Everything comes down in one categorical or programmatic element. It's either for preschool or it's for drugs. And that -- but for people who are at the community, that's not the way they see their problems and their challenges. In order to empower themselves, they feel that they have -- their communities needs a specific strategy where they can have flexibility to come up with -- finetune, in a sense, an empowerment strategy to their particular needs.

And so what we're trying to do is get away from just the specific -- from being too restrictive in the specific programs and giving those communities more flexibility to have more of a horizontal or coordinated approach.

The other problem is that everybody tends to do this separately. The state has a solution, the city has a solution, the private sector works on a solution with nonprofits, the federal government has a solution. This leads to waste and lack of coordination. So what we do is we say that anybody who wants to apply has to first show that they have a coordinated plan so that all of those dollars, whether they're coming from the private sector, from local government, or federal government are all being used together for one coordinated plan. Then when they have shown that they can put forth that type of plan, it is only then that they receive waivers and additional funding and tax incentive opportunities. So it very much fits the notion of increased flexibility once you have shown accountability for coming forth with a strategic plan.

But I thought my colleague could say a few words on that and then we could answer whatever specific questions you have.

SENIOR ADMINISTRATION OFFICIAL: Thank you. I think my colleague didn't leave me a few words to say. He said it very well.

The -- you have a specific proposal, the empowerment zone proposal. But I think there are principles that apply in this proposal that apply right across the board. And many of them are radically different than the way federal government has done business in the past.

The first principle is economic opportunity has to be brought back to depressed areas. This, by the way, is both urban and on the rural side. It's not a city program, it's not an urban program. It's a program for depressed communities. So the first point is you have to get jobs in. Economic opportunity is the ladder that generations have used to better themselves. We have to get economic opportunity working again.

The second point, as my colleague made quite aptly, was that economic opportunity alone is often not enough. Tax incentives as a vehicle to get businesses into depressed communities sometimes isn't enough, because the tax incentive isn't enough to seduce a business to go into a depressed area. Because the other costs of business -- the lack of transportation, the lack of a work force, security problems -- outweigh the tax incentives that you can give the business. So you need a comprehensive strategy to get not just that business in, but also to get the individuals who live in that zone -- that area -- back on the ladder of opportunity. And the combination of resources is what an individual would need or a community would need or the local government would need.

We have a federal structure that says HUD does housing, that says HHS does health service needs, that says Labor does job training needs. But that structure is not the way the problem presents itself on the community level. Any one individual or family in a depressed area needs all of those services. You need a job, which means you need job training before you can get the job, which means you need day care to leave your child somewhere when you go to the job, which means you needed housing to get a good night's sleep so you can show up for work. That involves right now scores of different agencies, dozens of programs, and literally hundreds of regulations which are often inconsistent or contradictory. You have to do certain -- meet certain obligations and restrictions and regulations to get housing by HUD. But then you're also AFDC eligible, and that's a different set of regulations. But you also want to get job training, and that's yet a different set. So what this proposal says is we understand that there is a fundamental disconnect between the need and the structure.

We also understand, as a third point, that the people who know best are the people in the community. You cannot dictate from Washington. Let the community come together with the local government, come up with one comprehensive plan that coordinates all those needs -- that has economic development, and transportation, and housing, and health services, coordinates the needs, coordinates the efforts between the city, state, local, federal governments, puts all the money towards one end. And then the federal government will fund that plan on a single source basis, which makes all the difference in the world.

These zones, as you look at the numbers, they have additional monies, additional grants to the zones. My own opinion is what is even more valuable than the grants they will win, will be the freedom from the federal regulations and restrictions. In other words, these areas now get hundreds of millions of dollars in federal aid currently -- community development monies, home monies, Chapter I monies, Head Start monies. But the monies are constrained by the regulations. What this will say is we'll give you one check, we'll break down the fire walls between the programs if it's the same purpose, and that money therefore will be more valuable, frankly, than the current funding.

Those are the main tenets of the proposal that are in the plan that you have before you.

Q: Do you mean, sir, that when you administer this, that you'll have less employees or less people dipping into the salary pool? Is that how you're going to save the money, or what?

SENIOR ADMINISTRATION OFFICIAL: You will have -- we're not talking about saving money necessarily in the short run. We're talking about better utilizing the existing funds.

Q: Well, does this mean that you'll have less administrative cost?

SENIOR ADMINISTRATION OFFICIAL: Precisely. What it's saying is if we can combine the programs, reduce the regulations, reduce the bureaucracy that one must traverse between the need and funding, you will indirectly be getting more of the money to the source, because you'll be cutting down the levels of bureaucracy, all of which charge an administrative fee.

You have a program in Washington that has to get to a community, a person in a depressed community. That money may go to the state, it may then go to the city, it may then go to a local community group, and each one of those levels has an administrative cost to running that program. We would be reducing that.

Q: Would you also be reducing the administrative costs inside the federal government in Washington? Now, in HHS one time we found there were 12 different agencies working on homelessness -- 12 different ones in the same department. You often have that.

SENIOR ADMINISTRATION OFFICIAL: Well, I think that a lot of that is being taken care of a lot just through the way that we are conducting this process. Right now we have a joint process in which the Domestic Policy Council, which includes the agencies like HHS and the Justice Department are working with all the councils on the National Economic Council. So, for example, this proposal was put together over the last couple of months with Treasury and HUD and Agriculture and Commerce and the White House working together. And we are starting to note duplications in programs, and that's one of the things we want to improve. That's one of the things the Vice President will be working on; and very specifically, that's one of the things that Secretary Reich is working on in the training proposal where there's been a tremendous fragmentation of training proposals for each specific problem where they are trying to get back and have a more coordinated approach. That's a little outside our subject matter today, though.

Q: Will the legislation designate -- which cities or communities are the empowerment zones or the enterprise communities? And if not, will you let Congress designate that or would it be an application process, first come, first served?

SENIOR ADMINISTRATION OFFICIAL: No, it's not -- it would be a challenge grant process, and we would respond to those who met various criteria. There would be some -- obviously some criteria that you would have to be an economically depressed area. But it would also be based on the performance of your grant application. Did it involve significant coordination? Did it involve a strong private sector commitment? So it would be a challenge grant process. So nobody would be designated, you would have to be chosen through a challenge grant process.

Q: To follow on that, does that include Indian reservations as well -- the six that are --


Q: They'd have to do it the same way.


Q: Who chooses the --

SENIOR ADMINISTRATION OFFICIAL: There would be an enterprise board that would consist of all of the relevant secretaries. And the reason why bringing -- this is where the coordination helps in several ways. One, you'd bring them together to review the applications, but also so you -- you could have a situation where you had everybody reviewed and chosen and then they had to go to each single department and seek a waiver from each single program. This way, when they would get approval and be selected, you would have all the parties at the table who would be necessary to give that locality the waiver authority they needed to put together their plan. Once they are designated, they would be run by -- the urban ones would be run by HUD, and the rural ones by the Department of Agriculture.

Q: Just to follow up on that, first of all, how fast -- assuming this is passed in the budget -- when would the first 10 empowerment zones be named? How fast do you see this thing getting --

SENIOR ADMINISTRATION OFFICIAL: I think it's as soon as we could fairly give those communities a chance to come forth with a strategy. I don't think we would want to rush so quickly that people couldn't get together. Part of the goal of something like this -- when we were putting this together, a comment that came frequently is that anybody who had been through a challenge grant process like this found -- and I know Bob Rubin felt this way when he had helped the City of New York do that when he was in the private sector -- was that simply the act of going through this process tended to do considerable good. I've been through it before from the state level myself. If you're in a state, you are -- when we had to do it with community service, the state had put in one application, we did have to talk to people doing things on indian reservations and in the cities and in the rural areas that brings people together. It can take a little while, but the benefits of you -- you realize what everybody's doing and are able to put a coordinated process that avoids duplication.

Q: One more follow-up, in terms of the hot houses, the specialty -- the 10 special zones? Who applies? Is it a state, a county, a city? Who applies on their behalf?

SENIOR ADMINISTRATION OFFICIAL: It would be a local government body that would have to put forth a plan involving the other relevant parties.

Q: Could a fraction of a city --

Q: A neighborhood?

Q: Yes, could a neighborhood be a zone?

SENIOR ADMINISTRATION OFFICIAL: Could it be a zone, yes. You would need the local governmental subdivision to apply.

Q: So D.C. could apply to make the eastern part of the District --


Q: one of its empowerment zones.


Q: How about the 100 communities? It's the same --


Q: Where would the $500 million for the enterprise grants come from -- half billion for the community leasing -- those are already in the budget?

SENIOR ADMINISTRATION OFFICIAL: That's right. They're currently budget, but the 1993 money has been appropriated, but never authorized. The $500 million has been neither authorized nor appropriated. So that, in a sense, is new money that is not being used, but it is within the baseline, it is within the current baseline. And $250 million a year or $500 million of that would be going to the enterprise block grants. That would apply -- and the enterprise block grants would give the most flexibility, because that would be money that would be specifically used for these localities to put together a plan. The $500 million goes to community policing. Much of that would be channeled back into the 110 zones. In other words, even though it's going to community policing, Attorney General Reno is very much involved in this process. And the notion is that these 110 areas would be priority areas for the community policing money.

Q: We're talking about $500 million from the Justice Department budget for the community policing program and $500 million from HUD's budget for the -- for that first half billion?

SENIOR ADMINISTRATION OFFICIAL: They are both currently within the HUD baseline.

Q: '93 already? How much?

SENIOR ADMINISTRATION OFFICIAL: There's $500 million of which $250 million would be for community policing. But that would be money that would be for Fiscal Year '94. The money was initially appropriated for '93, but never authorized.

Q: Do I understand, you're going to have a billion dollars to divide amongst 100 projects and $4.1 billion to divide amongst 10?


Q: Maybe it would help to just go through the numbers here so what we understand it, because then you have another $3 billion that I'm wondering where that's coming from.

SENIOR ADMINISTRATION OFFICIAL: Sure. We'll go through it, and my colleagues, feel free to jump in. In our budget that we submitted on February 17th and then resubmitted in April, there is $4.1 billion that is on the tax -- the pay-go side, the tax expenditure side, not discretionary spending. That $4.1 billion, that has to be used for tax expenditures. The majority -- the 75 percent or 80 percent of those tax expenditures are for wage tax credits that are within -- for the 10 empowerment zones. The other 25 percent, about $1 billion, is for a host of other tax incentives that would largely be available for all 110. There is one or two that are also just for the 10. There is an expensing provision that would allow small businesses to expense up to their first $75,000, as opposed to $10,000, which is a very, very substantial benefit, when you consider that they've usually been asking to go from $10,000 to $25,000. So this would be $75,000 within those 10 zones.

And then, there are empowerment resident savings accounts, which is a step in the direction of the individual development accounts that the President talked about during the campaign. And that would allow an employer to take 2 percent of the first $35,000 of workers' salary, up to $700, and put it into a taxfree account that the employee in the zone could save and then withdraw for certain selected investments, such as education or a first-time home. So that's the type of proposal of allowing people, even of modest means, to save, that the President spoke of and which Secretary Espy has championed for quite sometime as a member of Congress, and certainly as part of our process.

Q: And that just goes to the empowerment zone? That's the empowerment zone --

SENIOR ADMINISTRATION OFFICIAL: No, that would be available for all 110.

Q: Could you very briefly --

SENIOR ADMINISTRATION OFFICIAL: Just to finish -- so, basically you've got $4.1 billion on the tax expenditure side. Then there is a clear identifiable billion that would be on the investment side just for the following two years -- for the first two years of the program, of which $500 million would be going to community policing with most, but not all of that targeted back to the 110 areas, and another $500 million that would be exclusively for the recipients in the 110 areas.

Then, in addition to that -- let me just finish -- in addition to that, the President has asked his secretaries in the departments to come forth with various existing proposals where they would target existing funding or a portion of their new investments into the 110 areas. Now, what we have found already is -- and we're not making too big a deal of this just because not all the details have been worked out -- but we feel at least a couple billion dollars have already been committed by different secretaries from existing programs over the next five years into these areas.

And what we have found is that the secretaries and the people in the department have been excited about doing this. And you can understand why. When they have a new program or they have a demonstration project or even existing program, they understand that even a specific program is less likely to be successful unless it's in a community that has put together a comprehensive strategy for itself.

So we listed two examples on the third page of the summary sheet, which is that the Department of Education is going to select of these 110, 30 enterprise school initiatives, which is the very popular initiative of allowing schools to serve as community centers 24 hours a day, 365 days a year. So that's an example of a new initiative in which they are tying that new initiative into the empowerment zone and enterprise community proposal.

Another example is the Community Partnership Against Crime funds where HUD is saying that they will target $200 million there towards preventing -- against crime in public housing areas within the zones. And there are various other -- HUD and Agriculture particularly, but various other departments are also selecting items. And we listed some of them -- one of them would be the community development bank proposal, which we will be announcing shortly; the small business association, the school-to-work apprenticeship youth bill, youth fair chance job corps. Secretary Reich and his chief economist, Larry Katz, have been very enthusiastic about using the zones as a laboratory for some of their new -- for their new programs.

So our hope, our aim, is that at the end of this process there would be as much money targeted in existing funds to match the $4 billion that is specifically in the budget for -- as additional tax expenditures over the next five years.

Q: So the total pricetag for the whole enterprise that you're outlining today, if we add up these three numbers -- $4.1 billion, $1 billion and $3 billion -- is $8.1 billion.

Q: Over five years.

SENIOR ADMINISTRATION OFFICIAL: That is -- yes, that is what we would aspire to in the total funding targeted to this area. But I just want to make clear, because we had confusion about this, is that I'm not -- we're not saying that the $8 billion incremental above. It's $4.1 billion above. There's $1 billion that's in the baseline that's never been spent. So I guess you could say there is $5 billion of completely new spending that would be going towards these areas. And then the hope of another $3 billion that would be rechanneled from existing program and new initiatives that the President is proposing.

Q: But -- the two-year period, right? The $4.1 billion is over five years, so that's less than -- I mean, that's $4.1 billion in the five years.

SENIOR ADMINISTRATION OFFICIAL: I understand what you're saying. And that $1 billion is just for those two years. But all of the other programs that we are talking about are all for the next five years.

Q: What do you need from Congress to shuttle the money around --

SENIOR ADMINISTRATION OFFICIAL: We will have to work very closely with the authorizing committees, particularly to get the waiver authority. The President's preference is to provide communities the maximum amount of flexibility once they have come forward with a responsible, coordinated plan. But we will obviously have to work with Congress to -- different committees. Some of the programs contain within them significant discretion and significant waiver authority. There will be others that we will have to seek additional waiver authority on, and that we will be working hard with relevant chairs in Congress.

Q: Have the departments already identified what programs they might be able to target money from into these communities?

SENIOR ADMINISTRATION OFFICIAL: If you look at the bottom of page two, it's called Zone Priority Investments. And the reason we said Zone Priority Investments is not all of them would be necessarily available for all 110, but these would be programs where they are saying they would make a certain amount of money -- they would give the 110 communities a priority for that, or that they would be targeting a certain amount of money. So, yes, that is an example of some of the programs that have already been targeted. There are even additional programs where people are still trying to work out exactly how they'd like to contribute.

As I said, there has been a tremendous amount of enthusiasm within the Department. Most people doing new proposals want to be a part of this because, as I said, they see this as an opportunity to put some of their funds in communities that have their act together.

Q: So what's the difference basically -- what's the difference between this and what Jack Kemp was proposing during the Bush administration?

SENIOR ADMINISTRATION OFFICIAL: Jack Kemp's proposal was largely based on purely tax incentives. -- incentives directed towards capital. This program focuses on labor incentives. It focuses on providing people with a job. For example, the largest tax expenditure here is a wage credit for hiring zone residents. It's a maximum credit of about $5,000 per zone resident. And the employer is allowed to get the credit for both wages and training and educational expenses. So the target here is the zone residents. It's not really the business. We're not providing zero percent capital gains rate or stock expensing, things that were included in the Kemp proposal last year.


Q: The business gets a tax credit for the employee no matter where the business is located, right?


Q: Whether it's inside or outside of the zone?

SENIOR ADMINISTRATION OFFICIAL: There are two wage credits. There's a maximum $5,000 wage credit for businesses that are located in the zone. And then we also expand the targeted jobs tax credit.

Q: Let me stop you there. Do you have to hire a zone employee to get the tax credit?

SENIOR ADMINISTRATION OFFICIAL: You have to hire a zone resident in order to qualify for that credit.

Q: max credit?

SENIOR ADMINISTRATION OFFICIAL: That's right. It's 25 percent on the first $20,000 of wages.

Q: Is it only new employees, or what about my existing employees if I'm running a business in the zone?

SENIOR ADMINISTRATION OFFICIAL: It applies to both new and existing employees.

Q: And what's the second portion?

SENIOR ADMINISTRATION OFFICIAL: The second labor incentive is an expansion of the targeted jobs tax credit. So we essentially provide incentive for businesses that are located outside the zone to hire enterprise zone residents. And the maximum credit for hiring -- the maximum credit under that program is $2,400. It's 40 percent of the --

Q: How much?

SENIOR ADMINISTRATION OFFICIAL: Twenty-four hundred dollars -- 40 percent of the first $6,000 of wages. And the goal is to ensure that enterprise zone residents are employed, and there are a number of ways you can do that -- by incentives for businesses inside the zone and outside the zone.

SENIOR ADMINISTRATION OFFICIAL: Well, let me just make two points. One is a lot of what we did on the tax side was responsive to the lessons and the criticisms that people had of past programs. And one of them had been that these tax incentives did not tend to benefit the people within the zones that they were intended to help.

So we tried very hard to target all of our funds so that they would -- we'd be ensured that they would be helping not only the businesses within the zones, but the actual people who live there.

The second issue was that some people felt that if you only give incentives to businesses within the zone to hire people who live there, that you're not empowering those residents with the ability to seek opportunity anywhere, including outside their zone. So these two zones try to both make sure that we are doing something that -- that they both focus on helping people that live within the zone, but one focuses on ensuring that that money is flowing to those depressed areas, while also ensuring that the people who live there have the maximum flexibility.

I just want to go back to Wolf's question real quickly. I would say there's three major differences between ours and the Kemp proposal. One is that the centerpiece of our proposal is about changing the way government works. It is about the coordination at the local level and the federal government allowing those local governments with the flexibility to implement a specific and comprehensive plan. That is the centerpiece of our proposal, while I do not believe that has really been very central to any previous enterprise zone proposal and I don't believe the ones that Secretary Kemp proposed.

Secondly, ours takes a very comprehensive proposal to other human investments in terms of training and all the various kind of investments in people that you need to have a comprehensive economic growth strategy anywhere.

And the third is that when we did rely on tax incentives, which we do, ours are focused more on wage credits so that we're ensuring that it is helping the employees who live within the zone.

So I think those are three fairly fundamental proposals. And today, if you heard the President's conference call, I thought most of the positive remarks we got were because of the improvement in those three areas, but most particularly, the first one, in allowing for the greater flexibility.

Q: When will this be introduced?

SENIOR ADMINISTRATION OFFICIAL: The tax portion has to be sent to the House Ways and Means Committee today for reconciliation.

SENIOR ADMINISTRATION OFFICIAL: It's been sent to Ways and Means. It may have already been introduced.


Q: By the time you're done you're going to have 10 neighborhoods or communities that basically have stuffed into them every single Clinton administration urban policy idea, or at least most of them it sounds like.

SENIOR ADMINISTRATION OFFICIAL: Let me give you a slightly different perspective on that. Let me --

Q: Let me tell you what I'm getting at and then you can do that. What I'm wondering is, are these 10 super-duper zones like a test model for your urban policy? Is that what they are? And this thing is going to end in 10 years. Is it going to take 10 years to find out whether this thing was a success or not?

SENIOR ADMINISTRATION OFFICIAL: Let me go to the first part. I think there's actually three questions there. One is, is every program going to be within these -- in terms of the programs, what it's more like is that we want, when the 110 each apply for their programs, we'd like for there to be as many different options, in a sense, for them to help put together their programs. So, for example, one community might feel that the fundamental problem in their community has to deal with dealing with people who are 17 to 19 years old. If the Secretary of Labor has helped to designate some of the money for apprenticeship school or training, that could be a major -- he could come -- that community could come forth a proposal that includes that and they could get that. But that doesn't mean that everybody -- I would think of it more as a larger menu that would help communities put together their distinctive proposals than necessarily one where everything would be in.

And I think those are most -- all 110 would be eligible for those. Where we are concentrating efforts, though, is the tax expenditures in the 10 zones. And there, to an extent, yes, we are looking to see -- the feeling overwhelming was that when these are diluted too much, we never learn whether these things work or not. And that in order for us to see whether this can work together with coordinated strategy and other investments, we felt it was important to keep it concentrated. And the President noted in some of our internal discussions on this that he was surprised at how many mayors have come up to him during the campaign and recommended this. In other words, they would rather see some of the money concentrated and see some success stories and learn some lessons that could be applied elsewhere than having each of them get a very, very small piece and nobody ever getting a chance to really empower themselves and build some hope that there's something that we could do to revitalize economic communities.

You had another question.

Q: I was just wondering -- this seems like, because of this approach, that this is a test of your urban policy, you're going to have these little, kind of demonstration projects, around the country to see if this stuff works. At what point are you planning on deciding whether it worked or not? I mean, this all ends after 10 years, I'm just wondering do you have to wait for 10 years to --

SENIOR ADMINISTRATION OFFICIAL: Well, I don't know that you have to wait for 10 years. I believe in the actual bill there will be an evaluation mechanism, that there will be an independent body that reviews the progress that the communities are making. But by the nature of what we're talking about, you don't see an immediate turnaround. You're not going to go into a depressed community that has seen 12 years of neglect, that have populations that have literally been suffering for generations now, and you're going to go in and come up with some programs and two years later are going to go back and everything is going to be miraculous -- substance abuse down, prison population down, violent crime down -- it's not going to happen that way. That's not the essence of what this is about. So when you say it's a test, I don't see it that way.

My own take is -- and if you heard the conference call -- this policy was put together by listening. There are not a lot of new, exciting theories out there; there are a lot of old lessons that if you listen to the community groups and you listen to the mayors and you listen to the governors who have been doing it, they have a lot of guidance.

So the difference between the 10 zones and the 100 zones are primarily on the tax incentive side. And the spending -- but you are focusing on the tax incentives because you hear "zone," and it reminds of you of enterprise zones. I don't think that's what this proposal is really about. What really moves it, as my colleague said, is, you're doing business in a fundamentally different way between the federal government and the state and locals. What you're saying is where the real money is, the tax incentives are used to help bring -- attract business.

As we said, you're only going to get a business in if the neighborhood's on its way back. How do you get the neighborhood in its way back? You need a comprehensive plan. Where do you get the money? You don't have the money from massive infusions into these areas, and the local officials know that. They say, make the money I now have more valuable to me. Get your regulations and your restrictions out of the way. In the campaign, they talk about reinventing government. To me, that is the clearest demonstration of reinventing government -- coming up with a program and an approach that meets the need. For all 110 zones, that is the most salient point here.

When the President was on with the local mayors this morning, they didn't focus on the 10 versus 100. They didn't hear your question. Because all 110 have this restructuring and that's what they want. The big zones, the super zones, whatever you call them, have about $30 million per year on the cash side, on the spending side -- $30 million a year in South Central L.A. is not a heck of a lot of money. Or in Bedford Stuyvesant or the South Bronx is not a heck of a lot of money. Better use of the CDBG funds, which are $150 million, to New York. That's money. So the reinvent portion, the streamline, the regulations which all 110 get, that's the main plank of the proposal.

Q: How much do the 100 zones get a year?

SENIOR ADMINISTRATION OFFICIAL: Let me respond, if I might, to the evaluation question. There are two ways this is going to be evaluated, and it starts right from the beginning. The community, as part of a strategic plan, states its own clear goal of what it's trying to accomplish. And, secondly, provides benchmarks and methods for evaluation.

There will be an annual review by the enterprise board, and again this follows the whole theme of this proposal, it'll be a review of results -- progress toward reaching the agreed benchmarks, not a review of kind of compliance with a bunch of rules and regulations.

Thirdly, there will be in 1997 an independent evaluation under the auspices of the National Academy of Sciences, and they will have the baseline debt of going in and through this process of reviewing annually the benchmarks, and then by the end of 1997, we hope to have a good picture of what works and what doesn't.

Q: Do you have any job estimates, any estimates of jobs that would be created under this? There's usually such an estimate with a tax credit.

SENIOR ADMINISTRATION OFFICIAL: I don't know if we have a specific amount; partially, also, because the goal of this is not -- when you're talking about economically depressed areas, your goal is rebuilding the base. And a lot of what depressed communities face is flight. And so you are trying not just to create new jobs, but to strengthen the existing businesses and strengthen the jobs within there. But our feeling is that the job creation is going to come, as my colleague said, from bringing the community back with a strategic plan, and not from looking at the tax incentive alone and asking, does a tax incentive alone create so many new jobs.

We are trying something new, and we are trying something new. But as my colleague says, we are listening to the people who are closest to the government, listening to what their needs are. So this is something new from the federal government level and we think it's a step in the right direction.

What we've heard over and over again from people is that they are excited that the federal government has some energy and some hope for these areas. And, certainly, we're going to have to learn as we go. But it will be an -- process.

Q: small detail, perhaps, but you talked about $500 million, I believe you said, for policing?

SENIOR ADMINISTRATION OFFICIAL: Community policing in the next two years.

Q: That means that you would police plants or homes or --

SENIOR ADMINISTRATION OFFICIAL: Community policing is a --

Q: Does it take the place of local police on the community's budget, or what?

SENIOR ADMINISTRATION OFFICIAL: Community policing is an idea of which our new Drug Czar, Lee Brown, is probably one of the most successful people in the country in demonstrating. And I'm not an expert on community policing. But the general idea is that rather than police, simply just walking the beat or responding to crimes, that they involve themselves in the community, they talk to people in the community, find out what their problems are, find out that this is the dangerous area, and that this is where things are happening or that this is how they could help that community more. So it is police become more involved and listening to people in the community and helping that community itself figure out what is the best way of providing security in that area. And it's been an enormously popular idea, I think, from both Democrats and Republicans.

Q: Does that eliminate the need for a lot of local policemen, or what?

SENIOR ADMINISTRATION OFFICIAL: No, I don't think it eliminates the need. Our goal is to try to put 100,000 more police on the street over the next four years. So it's not about eliminating the need; it's really another example of changing the way government does business by being more responsive to people and listening to them and being responsive to their needs.

Q: enterprise grants, what can that be used for? Some examples?

SENIOR ADMINISTRATION OFFICIAL: The enterprise grant would be the part that would really allow the communities almost total flexibility. In other words --

Q: Just some examples of what a community might use that money for. Day care? Job training?

SENIOR ADMINISTRATION OFFICIAL: A community might use that, for example, for some of the things mentioned. Like, for example, certainly in poorer places it's difficult -- people work, they have children -- between not just zero and five for day care, but between five and 12, the community school idea is not just good for those kids, it allows parents to be able to work until 6:00 p.m. or 7:00 p.m. without not being able to supervise their kids. It could be used for -- to strengthen a community development bank proposal, to do more on the capital access side. I mean, I could give you various examples like that. It could be for strengthening job training in that area. It could be for -- I mean, an example is community development banking, it could be for funds in for technical assistance to help people in the community run a community development bank. But I think the point is -- is that that money would allow the most maximum flexibility.

Q: Can you explain how -- two questions -- how the communities will win these grants? What the criteria is that they have to meet to get the grant? And number two, wouldn't communities that are less depressed that are well off, that have a good planning infrastructure that know their ins and outs of the federal bureaucracy be given an unfair advantage under this program? In other words, they know how to fashion a grants application. They know how to put it -- you know, maybe know how to put it all together so it looks good, whereas a community that has less of that kind of institutional knowledge would not qualify and those are the communities you're trying to help, obviously, ones you want to coordinate better.

SENIOR ADMINISTRATION OFFICIAL: I think that's a good question and that's obviously going to be a -- and I'll let my colleague speak to that since he'll be the person working on the ground on that. But I think, in general, you want to give communities -- you want to give cities some flexibility to be able to choose their areas. At the same time, you want to assure that it's basically going to a depressed area. There is -- I mean, one response, of course, is democracy -- governments that don't do a good enough job of delivering and serving their people are hopefully kicked out and replaced by people who do serve better. But I'll let my colleague speak to your specific question.

SENIOR ADMINISTRATION OFFICIAL: First of all, as my colleague said, this proposal is geared towards areas that are depressed. It is not a proposal that is supposed to provide tax incentives to a well-off or affluent community. So there would be criteria that target the eligible recipients by rate of poverty, et cetera. Two, as far as your question on putting together a plan are concerned this is not -- this is a plan and a competitive grant process unlike no others. So there's no knowledge of a routine that could be of assistance.

These will also be areas that all -- now do many plans. They do a housing plan for you, otherwise they don't get housing money -- it's called the CHAS. They do a community development plan for you or they don't get the money -- the CDBG, the community development money. They do an economic development plan for EDA. They do a manpower plan to qualify for JTPA. So they're doing five or six or seven different federal plans.

What this would say to them is -- and they have a cost, by the way, for doing each one of those plans, with its own consultants and its own bureaucracy -- this would say forget the seven plans you now do to qualify for funds; we're going to do one plan. And the expert you really need aren't the expert consultants, they're the people who live in the community, because we want a plan that is truly bottom-up, where the community is vested in the plan, and they are part of it, which will go a long way towards guaranteeing its success. You look at any of the programs that have worked in depressed areas -- they're all plans that came from the community up rather than vice versa. So that's what they're doing, they're taking the seven plans and the resources that went with the seven plans and concentrating on one plan.

Q: So is there a criteria now in writing somewhere in stone that -- by which you'll judge these challenge grant applications?

SENIOR ADMINISTRATION OFFICIAL: There is specific poverty criteria of the rate of poverty by each census tracked in the area that they seek to designate as a zone with some discretion, however limited, to the enterprise board when they're reviewing those applications. So if you have an application that doesn't exactly fit the poverty criteria but meets everything else and the spirit and the intent of the act, the enterprize board would have the authority to pick that area.

SENIOR ADMINISTRATION OFFICIAL: There will be criteria that they will know about, and certainly private sector commitment will be a major one. And we wanted to leave the enterprise board some flexibility, though, in designating that criteria; though, as I said, certainly the degree of coordination and private sector commitment will be a major one. I mean, we definitely -- we want the private sectors in each community to be competing to show that they're involved enough to bring in more funds and tax incentives and to get this flexibility, which should be very good for them and their costs as well, especially to the degree that it reduces regulation, increases flexibility.

Q: Isn't the -- the fact that you have only limited funds for this mean that you'll have to designate rather small portions of big cities to be empowerment zones? I mean, South Central L.A. -- that could eat up all your funds right there. So we're talking about maybe a couple of square miles.

SENIOR ADMINISTRATION OFFICIAL: It could be up to 200,000 -- the six major urban --

Q: miles?

SENIOR ADMINISTRATION OFFICIAL: 200,000 people, I'm sorry. It could be up to 200,000 people per zone. But if your question is are we -- would it -- for a major city, would this be targeted to a portion of the city, yes. And we are dealing in a world of limited resources, and this is very much a proposal about trying to maximize the degree of investment possible.

Q: So that would mean for a city like L.A., one zone basically? Or is it -- might they qualify for more than one?

SENIOR ADMINISTRATION OFFICIAL: They would not -- the would only be eligible in one zone. I suppose it is conceivable that an area could also be an enterprise community. I don't know if we really crossed that bridge. But I have to say, this is not a cureall program. This is not a magic wand that will take care of all of our communities. However, it is -- it would be very, very significant escalation of hope and economic revitalization to have 110 depressed economic areas right now across the country coming forth with a comprehensive economic strategy. I think it's a major step in the right direction.

And it is also, I want to point out, one piece of a community development agenda. We also have a very strong lifelong learning agenda. It includes Chapter I schools and Head Start, apprenticeship, worker training. We have a community development bank and a community policing proposal. So this is one piece. And this is a piece I think will move us in the right direction and hopefully help us learn some lessons. But, yes, it will apply to portions of cities. And it will not be able to hit every single area.

Q: How large can an enterprise community be? Does that 200,000 --


Q: a question about your program and your conference call this morning. You selected, what, five, six cities to participate in that. Why those cities, and does it say anything about the favorite cities here?

SENIOR ADMINISTRATION OFFICIAL: No. No. Everybody has to go through the grant --

Q: Can I just for a minute ask why those cities, why those mayors were involved? Why not, say, the Mayor of Detroit, for an example? (Laughter.) Just to pick one at random.

SENIOR ADMINISTRATION OFFICIAL: Well, if we had picked the Mayor of Detroit, then you might have had to say why not one of the others. I think that there were --

Q: Well, was there a reason or just --


SENIOR ADMINISTRATION OFFICIAL: No. I think the only city that probably seemed natural was Los Angeles, where there has been considerable attention there and considerable communications with us, and where people like Maxine Waters have just talked a lot with this administration about the problems in their area and possible solutions. But it was just under the wisdom of the people setting up -- sending the -- I'm getting the hook.

Q: If I could follow on that -- it just sounds in concept very much like what James Rouse's Enterprise Foundation organized in a section of Baltimore called Sandtown. Did you consult with the Enterprise Foundation in setting this up? Is it modeled on that?

SENIOR ADMINISTRATION OFFICIAL: I personally -- I'll let him ask for the consultation. I have over the years admired their work and have had a close friend. So I guess what he has done is part of my just knowledge. And I don't know how much we explicitly spoke with them in that. But clearly, Mr. Rouse has been -- I mean, in a time when everybody else was stepping back, he was somebody who stepped up to the plate and did a lot. It's very exciting to think of somebody like him being able to contribute in an environment where the federal government would be as supportive as we want to be.

Q: Were there consultations with the Enterprise --

SENIOR ADMINISTRATION OFFICIAL: And I think there are projects like that with the same principles that the Enterprise Foundation brings. The Carter Project, the Atlanta Project as they call it -- basically holistic, comprehensive development, communitybased. Those principles have been proven by a number of programs.

Also, one point, to follow up on what my colleague said, on the selection. This is not to be the federal government running to the rescue to do for a local area that which they're not doing for themselves. We are looking for partnerships. We are looking for resources -- a plan, A; and B, a partnership with the private sector and with the local government where, jointly, together we can make a difference, but not where the only oar in the water is the federal oar.

END2:24 P.M. EDT

William J. Clinton, Background Briefing by Senior Administration Officials Online by Gerhard Peters and John T. Woolley, The American Presidency Project

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