Topic:
ECONOMIC DEVELOPMENT; ECONOMIC AND COMMUNITY DEVELOPMENT DEPARTMENT; FEDERAL ASSISTANCE PROGRAMS; MUNICIPALITIES; REGIONAL PLANNING; STATISTICAL INFORMATION; LEGISLATION;
Location:
ECONOMIC DEVELOPMENT; REGIONAL PLANNING;

OLR Research Report


June 5, 2006

 

2006-R-0317

REGIONAL ECONOMIC DEVELOPMENT DISTRICTS

By: Natalie Wagner, Legislative Fellow

You asked us to:

1. a summarize sSB 267 (2006 Session) and compare it to sSB 1106 (2005 Session);

2. explain how sSB 267 could affect the five-year State Plan of Conservation and Development (Plan of C&D) and existing regional planning organizations;

3. identify the towns that could be included in a federally designated regional economic development district (REDD) and the parties that can serve on a REDD's board;

4. determine the amount of federal Economic Development Administration (EDA) funds Connecticut received, and

5. determine the number of REDDs in New England, New Jersey, and New York and whether they received EDA funding.

SUMMARY

The 2005 and 2006 legislature considered but did not enact bills allowing regional planning, economic development, and nonprofit agencies to qualify for federal economic development funds. The bills do this by allowing these agencies to propose REDDs and comprehensive

economic development strategies (CEDSs) for state approval, which is needed to qualify for the federal funds. sSB 1106 (2005) died in the Senate, and sSB 267 (2006) died in the Appropriations Committee.

sSB 267 allows a broad range of agencies to propose REDDs and CEDSs, requires district boundaries to conform to those of the state's labor market areas, and specifies the process for reviewing and approving CEDSs. While the bill is mainly intended to help regional organizations obtain federal economic development funds, it also qualifies them for state economic development funds.

sSB 267 affects state economic development policy in other ways. It requires the economic and community development commissioner to prepare a statewide CEDS. The commissioner must review and approve regional strategies, consider them when he prepares the statewide strategy, and justify any inconsistencies between the two. Lastly, the Office of Policy and Management (OPM) secretary must consider the statewide strategy when he prepares the State Plan of C&D.

sSB 1106 is an earlier version of sSB 267, but with several key differences. It allows a narrower range of agencies to propose districts, requires district boundaries to conform to those of the state's planning regions, and requires consistency between regional CEDSs and regional plans of development. Its also requires regional planning organizations to incorporate a district's CEDS in their regional plans of development. Attachment 1 is a table comparing the bills.

Both bills might encourage towns and regional entities to propose districts as a way to obtain more economic development dollars. They might also encourage them to become more involved in the process for revising the State Plan of C&D, since it influences where the state spends or allocates those dollars.

The criteria for designating REDDs might also encourage towns and regions to become involved in regional economic development. The federal criteria and the state's relatively small size appear to allow any part of the state to be included in a REDD. The bills' designation criteria allow a district to encompass one or more already designated regions. But these criteria could also cause tension or confusion between different groups if they seek to include the same area in a proposed REDD.

Federal law requires that an organization be established or designated to develop and implement a REDD's comprehensive strategy. The organization can be an agency formed under an interlocal agreement, a regional planning organization formed under state law, or a nonprofit organization.

Federal law requires the organization's governing board to broadly reflect the region's economic interests. But it must include representatives from two groups. At least 35% must be chamber of commerce executive directors or representatives of workforce development boards, colleges and universities, and labor groups. And at least 51% must be local chief elected officials or municipal employees (13 CFR 304.1).

Connecticut received $7,350,000 in EDA funding in FY 2004, the most recent year for which consistent data is available.

Twenty-eight REDDs have been designated in New Jersey, New York, and the New England states (none in Connecticut and Rhode Island); 25 received federal economic development funds.

sSB 267 SUMMARY

sSB 267 allows regional planning, economic development, and nonprofit agencies to propose REDDs, prepare strategies to develop them, and apply for state and federal economic development funds. A proposed strategy must be approved by the DECD commissioner and OPM secretary. The bill specifies criteria for drawing district boundaries and procedures for preparing, reviewing, and approving strategies.

A state and federally approved REDD may submit a state-approved CEDS to the U.S. Department of Commerce (DOC) for approval, which qualifies it for federal and state economic development funds. DOC approval also qualifies the REDD for additional federal dollars if it completes a federally funded project that achieves its goals.

The bill requires consistency between the REDD strategies and regional and state development strategies and plans. The commissioner must prepare a statewide CEDS that is consistent, to the extent practicable, with local and REDD economic development strategies. The secretary must consider the statewide strategy the next time he revises the Plan of C&D. Regional planning agencies must consider district strategies in their regional plans of development.

Attachment 2 is the OLR analysis of sSB 267.

COMPARISON WITH SSB 1106

Overview

sSB 267 is a revised version of sSB 1106. Both bills allow regional entities to propose districts; require state and regional planning organizations to review district strategies; address the relationship between district, regional, and state strategies; and qualify district projects for state economic development funds. sSB 267 allows more types of entities to form districts, changes the procedure for reviewing CEDSs, and changes the relationship between CEDSs and regional and state plans and strategies.

REDD Formation

Both bills authorize regional planning organizations (RPOs) and regional economic development commissions to propose districts and create boards to manage them. But sSB 267 also extends this authorization to federally tax-exempt nonprofit corporations and any other organization with a federally approved CEDS.

The bills have different criteria for drawing district boundaries. sSB 267 requires them to be contiguous, to the extent practical, with those of the nine state-designated Labor Market Areas; sSB 1106 requires them to be contiguous, to the extent practical, with the 15 state-designated planning regions.

CEDS Review and Approval Process

Both bills require the organization proposing the REDD to submit its draft CEDS to the RPOs operating in the proposed district, but the scope of review under sSB 267 is narrower. That bill gives an RPO up to 90 days to review and comment on a strategy. sSB 1106, on the other hand, gives the RPO up to 45 days to review and approve the strategy or recommend changes consistent its regional plan of development.

Both bills require the REDD to submit its proposed strategy to the DECD commissioner for approval after the RPO acts on it. But under sSB 267, the REDD must also submit its strategy to the OPM secretary for this purpose. Both bills give these agencies up to 45 days to approve the strategies or recommend modifications. If they do not notify a REDD's board within 45 days, the CEDS is tacitly approved. If they recommend changes, the board must incorporate them in the strategy and resubmit it. The commissioner and the secretary again have up to 45 days to review and approve the revised strategy. After their approval, both bills permit the REDD board to ask DOC to approve the district and the CEDS.

Both bills require the board to update CEDS every five years and resubmit it for approval. sSB 267 additionally requires the board to submit annual progress reports to the commissioner and secretary.

Consistency

Both bills address the issue of consistency between the district and state economic development strategies, but provide different standards for establishing consistency. sSB 1106 requires REDD strategies to be consistent with the statewide strategy. sSB 267 instead requires the statewide strategy to be consistent, to the extent practicable, with local and REDD strategies.

Both bills also use the Plan of C&D as a means to establish consistency. sSB 1106 requires the plan to incorporate the statewide strategy while sSB 267 requires the statewide strategy to be consistent, to the extent practicable with local and district economic development plans. It also requires the commissioner to justify any inconsistencies between the regional and state CEDSs.

State and Federal Funding

Both bills qualify REDDs for state economic development planning and project funds. sSB 1106 specifically qualifies them for up to $50,000 in planning grants, while sSB 267 specifies no maximum amount. Under both bills, projects specified in CEDSs qualify for funds under two state major economic development programs regardless of whether the projects meet the programs' criteria. sSB 1106 requires REDDs to apply for federal funding while sSB 267 allows them to.

POTENTIAL REDDs

Designation Criteria

sSB 267 requires proposed REDDs to meet federal and state designation criteria. The federal criteria require a proposed REDD to:

1. contain at least one economically distressed area,

2. encompass a sufficiently large area and have enough people and resources to foster economic development of more than one economically distressed area, and

3. have a CEDS that is approved by DOC, a majority of the counties in the proposed district, and the state or states within which the district is located.

An area meets the federal economic distress criteria if:

1. its per capita income is 80% or less of the national average,

2. its unemployment rate for the most recent 24-month period exceeded the nation's by at least 1%, or

3. the DOC secretary finds that it faces or will face special needs arising from severe unemployment or short- or long-term economic changes (13 CFR 302. 1).

The proposed REDD qualifies for state designation if its boundaries are contiguous, to the extent practicable, with those of one or more of the state's nine Labor Market Areas (LMAs): Bridgeport-Stamford, Danbury, Enfield, Hartford, New Haven, Norwich-New London, Torrington, Waterbury, and Willimantic-Danielson. Attachment 3 lists the LMAs and their constituent towns.

Potential REDDs

Given the mix of objective and subjective criteria and the state's relatively small size, it appears that any area in Connecticut could be included in a REDD. Although only five LMAs contain towns that meet the per capita income or unemployment rate criteria, neither the federal or state criteria restrict a REDD's size to one geographically designated area. Table 1 lists these LMAs and identifies the towns that meet the federal economic distressed criteria.

Table 1: Connecticut LMAs with Towns Meeting Federal Economic Distress Criteria

LMA

Economically Distressed Towns

Applicable Economic Distressed Criteria

Bridgeport-Stamford

Bridgeport

Per capita income 80% of less of national average

(i.e., income criterion)

Hartford

Hartford

Income criteria and unemployment rate exceeding national average by at least 1 % for the most recent 24 month period

(i.e., unemployment criterion)

New Britain

Unemployment criterion

New Haven

New Haven

Income criterion

Waterbury

Waterbury

Unemployment criterion

Willimantic

Windham

Income criterion

sSB 267 requires a REDD's boundaries to be contiguous, to the extent practicable, with those of the LMA's, but does not preclude the REDD from encompassing more than one LMA. In addition, federal law and sSB 267 do not preclude a REDD from expanding its boundaries to include more areas. For this reason, it is possible for a REDD to include some or all of the towns in other LMAs. In addition, a LMA without an economically distressed area could still qualify as a REDD if DOC determines, for example, that a major plant closing will trigger severe unemployment or short- or long-term economic changes.

HOW sSB 267 AFFECTS STATE PLAN OF C&D

The State Plan of C&D attempts to balance open space preservation and other environmental quality goals against transportation, affordable housing, and economic development goals. The plan provides no formula for striking this balance, but its guidelines favor locating or funding projects in areas that already have sewers, roads, and other supporting infrastructure.

sSB 267 affects the State Plan of C&D in different ways. It requires CEDSs to address goals that are similar to those of the plan's. Besides promoting economic development, a CEDS must enhance and protect the environment, balance resources by managing development, and foster effective transportation access. Some of the bill's provisions require the regional CEDSs to be consistent with the plan; others require the plan to consider DECD's statewide strategy, which itself must be consistent with the regional strategies. These latter provisions seem to be at odds with the law requiring state agency agencies to consider the Plan of C&D when preparing plans under federal or state law (CGS 16a-31(e)).

The bill's procedural requirements could also increase the extent to which OPM, DECD, REDDs, and other entities are aware of how their plans and strategies differ. Those differences could disqualify REDD projects for state funding. For that reason, the bill might encourage REDDs to negotiate changes to the Plan of C&D when OPM revises it. (The next scheduled revision is 2010.)

Among other steps, the revision process involves consultations with appropriate state, regional, and local agencies and public hearings (CGS 16a-27 to 30).

sSB 267's IMPACT ON EXISTING REGIONAL STRUCTURES

Funding

sSB 267 allows most regional planning and economic development organizations to designate REDDs and qualify for state funds. They currently qualify for funds to plan and implement a limited range of projects under programs open to towns, local nonprofit development corporations, and other specified entities. The bill allows them to obtain funds for a broader range of projects as long as they were included in the district's CEDS. In other words, apartments, stores, business offices, small recreational facilities, and similar projects that do not usually qualify for economic development funds would qualify under the bill.

Planning

Finally, the bill's CEDS requirement might encourage towns to coordinate their economic development policies and plans and promote projects that benefit more than one town.

The bill's criteria for designating districts could create confusion and tension between regional organizations. This could happen because RPOs and economic development agencies already operate within designated regions that are not aligned with labor market areas, which form the basis for designating REDDs under sSB 267. Consequently, the bill could lead to situations where a proposed REDD includes towns outside of the organization's normal region.

CURRENT FUNDING

Connecticut towns and regional planning entities received about $7.3 million in federal EDA funding in Federal FY 04 (October 1, 2003 to September 30, 2004), the most recent year for which consistent data is available. Table 2 shows how EDA allocated the funds.

Table 2: Distribution of FY 2004 EDA Funding

Grantee

Location

Category

Funding

South Central Connecticut Regional

Economic Development Corporation

Multi city

Sub state Planning

$25,000

Bristol

Bristol

Public Works

$1,200,000

Plainfield

Plainfield

Public Works

$1,500,000

Connecticut Center for Advanced Technology, Inc.

Multi City

Defense Conversion

$4,275,000

North Haven

North Haven

Economic Adjustment Implementation

$75,000

Waterbury

Waterbury

Econ Adjustment Implementation

$200,000

MetroHartford Alliance

Multi City

Econ Adjustment Strategy Planning

$75,000

Source: Economic Development Administration 2004 Annual Report.

REDDS IN OTHER STATES

Table 3 shows the number of REDDs in the New England states and New Jersey and New York.

Table 3: REDDs in the New England States and New Jersey and New York

State

Number of REDDS

Received EDA Funding

Maine

5

Yes

New Hampshire

2

Yes

Vermont

2

1

Massachusetts

7

Yes

Rhode Island

None

N/A

New York

11

9

New Jersey

1

Yes

Source: Stephen Grady, Economic Development Representative, US Department of Commerce, Economic Development Administration

Attachment 1: Comparison of sSB 1106 and sSB 267

Variable

1106 (2005)

267 (2006)

Organizations that can form districts

Regional planning agencies

Regional economic development commissions

Regional councils of government

Regional councils of elected officials

Same as 1106 and any other organization with a federally approved regional economic development plan

District submitted to DOC after it approves district's economic development strategy

District designation criteria

Contiguous with 15 state-designated planning regions

Meet federal economic distress criteria

Contiguous with nine state-designated labor market areas

Meet federal economic distressed criteria

Regional Economic Development Strategy

Purpose

Contents

Same

Regional planning organization and strategy

Submission

45-day review

Approve and recommend changes consistent with regional plans

District must incorporate recommendations and resubmit strategy for another 45-day review

Submission

90-day review

Findings and recommendations

DECD and strategy

Submission

45-day review

Approve and recommended changes consistent with federal and state economic development laws and regulations

District must incorporate recommendations and resubmit strategy for another 45-day review

Submission to DECD and OPM

45-day review

Approve and make recommendations regarding consistency with State Plan of C&D and statewide economic development strategy

DOC and strategy

Reviews and approves strategy under federal law

Same

Strategy Revision

Every five years

Same

Reports

RPAs

Must incorporate district strategy in regional plans of development

No provision

Variable

1106 (2005)

267 (2006)

DECD

Must prepare statewide economic development strategy

Strategy must coordinate statewide and regional economic development planning and policies

Must prepare statewide strategy

Strategy must consider local and district plans and insure strategy is consistent with them

Identify and justify inconsistencies between strategies

OPM

Must incorporate statewide strategy in five-year State Plan of C&D

Must consider statewide strategy when revising State Plan of C&D

Funding

DECD can make up to $50,000 planning grants

Projects in CEDS qualify for MAA and UA funds

DECD grants for developing, amending, and implementing CEDS

Projects in CEDS qualify for MAA and UA funds

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