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Author(s): CUPR ( Burchell ), Rutgers University and NJIT ( Pignataro ), NJIT and NCIS ( Griffis ), Columbia University and NARC ( Epling ), Princeton University and CDCPS ( Haughwout ), NARC and UCSP ( Varady, Looye ), University of Cincinnati
SUMMARY OF FINDINGS
• Direct appropriated funding to EDA for the Defense Adjustment Program began in FY 1994. From 1992 to 1994, EDA received transfers of funds for defense projects from the Department of Defense's Office of Economic Adjustment (OEA). The program, therefore, is relatively young, and as of 1997, the defense construction, capacity building (planning and technical assistance), and revolving loan fund (RLF) projects analyzed here were just taking hold. While their relative recency does not allow for an evaluation of these projects at full maturity, their accomplishments at this early phase can certainly be quantified. • As indicated above, the Defense Adjustment projects, even if completed, have had only a short time to mature. With time, the permanent jobs that they create will increase and the cost per job created will decrease. The present evaluation provides a snapshot view of the projects' effects during an early phase of their existence. • A concurrent EDA study of the Public Works Program and other similar studies have shown that the effects (both direct and indirect) of these projects will increase substantially over time.
STUDY PROCEDURES • The study was undertaken from November 1996 through September 1997 by research teams from five universities and a major professional organization. All principals of the research teams have extensive experience in both economic development and infrastructure studies. Each prmcipal spent significant time in the field researching individual projects and talking to grantees. Each principal and affiliated staff participated in some aspect of research analysis and in writing the final report. All concur with the findings presented below. • The research team contacted by mail and telephone 190 grantees of defense adjustment projects. To help the grantees better understand the purpose and types of information necessary to undertake the evaluation, all grantees were invited to attend seminars conducted by the research team at 13 locations nationally. Forty-two project sites were visited to conduct in-depth discussions with grantees to learn more about their individual projects' impacts and to validate the information that they were providing. • The evaluation is undertaken using performance measures developed by EDA specifically to assess the productivity of defense adjustment projects. Performance measures for defense construction and revolving loan fund projects primarily involve numbers and types of jobs created or retained and amounts of private-sector funds leveraged. For capacity-building projects, the performance measure is a grantee self-rating of the quality and impact of the EDA capacity-building effort.
PROJECT TYPE AND CONTEXT • From a universe of 190 EDA defense adjustment projects that were approved from FY 1992 through FY 1995, all 190 were contacted. • The 187 grant-funded projects analyzed in this study1 include 162 single-element projects, twenty double-element projects, and five triple-element projects. These sum to 217 total project elements funded via the 187 EDA grants. Since 1987, approximately 2.5 million defense-dependent jobs have been lost due to defense downsizing. EDA's Defense Adjustment Program is a direct response to base closures, base downsizing, and/or reduced defense contracting. Cutbacks are often sudden and severe for their host communities. In addition, projects are in locations where minority populations and percents of the population below the poverty level are 20 percent higher than state and national averages. These are also locations where per capita income is 25 percent lower than averages at state and national levels.
PROJECT COMPLETION • Of those 190 defense adjustment projects contacted by the research team, 98.5 percent (187) were initiated as planned. • Of those undertaken, about 97 and 98 percent of defense construction and capacity-building projects, respectively, moved to completion; 100 percent of the RLFs moved to completion.
CONTEXT OF PROJECTS AT TIME OF APPLICATION (Medians) (187 Initiated Projects)
Median Ratio Ratio • Of those undertaken and completed, 80 and 81 percent of the defense construction and RLFs, respectively, were completed on time. About 56% of the capacity-building projects were completed on time. • Of those undertaken and completed, about 90 percent of defense construction projects came in at or under budget; the figures for capacity building and RLFs are 97% and 100%, respectively.
PROJECT IMPACTS Project-Related Direct Impacts: Defense Constructiono On average, completed defense construction projects (49) have produced 30,870 permanent jobs to date, or 124 jobs per $1 million of EDA funding. These jobs were produced at an EDA cost of $8,052 per job and a total cost (all sources of funding) of $12,045 per job. • Defense construction projects produced 18.0 FTE4 construction jobs per $1 million of EDA funding. • Completed defense construction projects (43)5 leveraged $722 million 2 RLFs, by their nature, cannot come in over budget. They lend what they have. • As projects age and mature, project accomplishments will likely increase over time. in private-sector investment, or $2.2 million per $1 million of EDA funding.
DEFENSE CONSTRUCTION AND CAPACITY-BUILDING PROJECTS-
PERMANENT JOBS: (Medians)
Capacity Building • Capacity-building projects, by their definition and design, are not intended to create jobs directly, but to increase the planning, organizational, and technical skills needed for local economic development. Nevertheless, some jobs result as an indirect by-product of those project goals. Completed capacity-building (technical assistance) projects (31) have produced 63 permanent jobs per $1 million of EDA funding at an EDA cost of $13,633 per job and a total cost of $19,393 per job. • Permanent jobs coming from capacity-building technical assistance projects reflect developments such as stalled businesses being matched with new markets, workers being more employable due to training, and businesses generating more money because they have been made more efficient. • Forty-three of forty-nine defense construction projects have private-sector investment. Six projects are public sector and have no private-sector investment. • Direct job creation is an incidental benefit of capacity-building projects, which generally support subsequent projects having direct job • Completed capacity-building (technical assistance) projects have produced 13.7 FTE professional consultant jobs for every $1 million of EDA funding. • Completed capacity-building projects have, in addition, produced adjustment strategies, heightened community involvement and planning, created workable implementation strategies, and undertaken market/feasibility studies. EDA capacity-building efforts have been rated by grantees as seen in the following table:
GRANTEE RATING OF CAPACITY-BUILDING PROJECTS (Means) *Thesc include all types of capacity-building projects, not just technical assistance.
Grantee Observations: • Across the board, grantees report that the products they are delivering with EDA oversight are both well done and have a significant impact. • Capacity building empowers local areas to respond in a proactive and forward-moving way to the adverse impacts on their economies.
Grantees further report the following: • Capacity-building projects are responsible for significant networking among various forms and levels of economic development agencies. This enables greater use and leveraging of public and nonprofit funds. • Capacity-building projects comprise technology transfer efforts wherein sophisticated methods of enhanced productivity are used to measure business adjustment to new technology.
Revolving Loan Funds • With regard to revolving loan funds (RLFs), 304 jobs have been created per $1 million of EDA funding for 16 completed projects (fully loaned); for those projects in process (21), there are 247~ jobs created. EDA cost per job is S3,3 12 for completed RLF projects and $4,079 for projects that are in process. • Completed RLF projects have leveraged $115 million in private-sector investment, or $2.5 million per $1 million of EDA funding. In-process RLF projects have leveraged $42 million in private-sector investment, or $2.8 million per $1 million of EDA funding. • Other statistics for RLFs include combined default and write-off rates for completed projects of 13% and for RLF projects in process of 1.9%8. For both completed and in-process projects, jobs produced per business assisted are about 22 and 24, respectively. In 50% of the cases the RLF involves a business expansion (as opposed to start-up or retention), and in 67% of the cases it involves the funding of manufacturing firms (as opposed to commercial or service firms).
PROJECT IMPACTS (GENERAL) • Due to the recency of defense adjustment projects, their results are just beginning to become evident. Most will likely contribute significant additional employment growth in the long term. • Defense construction, as well as RLF projects, are nonetheless producing permanent jobs at relatively low costs; ~ In-process RLF projects can be analyzed in the
same fashion as completed projects because they behave similarly
from the time of their first loan onward. • Defense adjustment projects are longer-term, more intricate and complex, and thus take longer to complete than traditional EDA-funded public works projects. Accordingly, they are somewhat less likely to be on schedule or to come in under budget than EDA public works projects. Nonetheless, 80-90 percent of defense adjustment projects are on schedule, and 90-100 percent are at or under budget. • EDA defense adjustment projects are in place in numerous localities nationally; tangible progress is in evidence at 97% of the sites.
CONCLUSIONS • As reported by grantees, EDA defense adjustment projects are one of the few avenues of flexible assistance available to communities faced with base closures. • EDA funding is critical to most of these
types of activities and is usually the primary source of initial
funding. |
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