EDA DEFENSE ADJUSTMENT PROGRAM HELPS LOCAL ECONOMIES RETOOL

Defense adjustment projects funded by the Economic Development Administration (EDA) help communities affected by base closures or downsizing, or by the reduction of defense contracts, to rebuild healthy economies. Since 1987, approximately 2.5 million defense-dependent jobs have been lost from the U.S. economy as a result of defense downsizing.

CUPR’s Robert W. Burchell led a study team that evaluated 187 defense adjustment projects in thirty-six states across the country. The research team, which included the New Jersey Institute of Technology, the Washington, D.C.-based National Association of Regional Councils, and Columbia, Princeton, and Cincinnati universities, conducted the study between November 1996 and September 1997.

Following the research design discussed in the Summer 1997 issue of CUPReport for a parallel CUPR evaluation of EDA public works projects, the study team conducted field seminars in thirteen states for EDA grantees. The seminars, held in November and December of 1996, enabled the research team to meet EDA grantees and advise them of the types of information that would be needed to complete a meaningful evaluation.

CUPR contacted grantees at all defense adjustment projects that received approval for EDA funding between FY1992 and FY1995. In January 1997, researchers visited the sites of forty-two randomly selected projects in EDA’s five regions across the country to learn more about grantees’ experiences and to validate the information they had provided.

EDA AND DEFENSE ADJUSTMENT

Defense adjustment projects include defense construction, capacity building, and revolving loan funds (RLFs). Defense construction projects include buildings, industrial parks, roads, water and sewer infrastructure, and marine/tourism-related activities. Capacity building projects increase the planning, organizational, and technical skills necessary for economic development. Revolving loan fund projects carry below-market interest rates and are used by grantees for business start-up, retention, or expansion.

Defense adjustment projects often contain more than one component. A capacity-building project may involve an RLF, for example; a defense construction project may seek to enhance capacity and may encompass an RLF as well.

EDA’s Defense Adjustment Program is relatively young; direct appropriated funding for EDA to undertake its own economic adjustment activities did not begin until 1994. From 1992 to 1994, the Office of Economic Adjustment (OEA) at the Department of Defense transferred funds to EDA for that purpose.

"When military bases close, the most significant opportunity for economic recovery generally involves reuse of the installation for civilian purposes," explains Dr. Burchell. "Whereas OEA assistance in an area usually precedes EDA’s and consists primarily of planning, EDA is the only federal agency that provides flexible, discretionary funding for communities to implement reuse plans." If it is OEA’s role to help the community plan its next step, it is EDA’s role to move it along the charted path, Burchell notes.

MEASURING PROJECT SUCCESS

When charged by EDA with evaluating its defense adjustment projects on specified performance measures, the study team recognized the challenges it faced. Whereas the public works study evaluated outcomes of projects funded in the early 1980s that were completed and operating for at least six years when evaluated by the CUPR team—sufficient time for measurable results to have been achieved—defense adjustment projects are still in their infancy.

EDA’s performance measures seek to quantify the direct, permanent jobs created and private-sector investment leveraged as a result of its funding. Other criteria assess whether a project is completed as planned, within the projected time frame, and within budget.

RESULTS OF THE EVOLVING PROGRAM

In January 1998, Dr. Burchell presented study findings to members of Congress, the Department of Defense, and EDA in Washington. He reported that 97 percent of the defense construction projects are proceeding to completion, as are 98 percent of the capacity-building efforts and all of the RLF projects. Seventy-six percent of capacity-building projects were complete at the time of the study; the figures were 56 percent for defense construction and 43 percent for RLFs.

For every $1 million of EDA funding, defense construction produced 124 direct, permanent jobs; capacity-building projects added 63 jobs; and RLFs contributed more than 300 jobs. Of the completed projects, defense construction created nearly 31,000 direct, permanent jobs at a cost to EDA of $8,052 per job. Capacity-building projects that provide technical assistance added almost 2,000 jobs to the economy at an EDA cost of $13,633 per job. RLFs contributed nearly 8,000 jobs, for an EDA expenditure of $3,312 per job created.

"EDA’s defense adjustment projects are just beginning to take hold," Burchell notes. "Figures on job creation are snapshots at an early point in time. The direct and multiplier effects of EDA’s defense strategies can be expected to increase substantially over time as its projects mature."

For more information on articles in CUPReport, please contact Arlene Pashman, CUPReport Editor.