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Economic Development: Opportunities Exist for Further Collaboration among EDA, HUD, and USDA

GAO-21-579 Published: Jul 30, 2021. Publicly Released: Jul 30, 2021.
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Fast Facts

States spend billions of dollars on incentives to attract and retain businesses. Some question their cost and effectiveness. Do federal funds play a part in these incentives?

In 6 large state business incentive packages we reviewed, federal economic development funds were not directly used.

However, 3 federal agencies help fund and encourage state and local economic development planning. This may include determining how to best use incentives.

The agencies could better coordinate their efforts and, for example, reduce the amount of separate paperwork required for each agency. Our recommendations address improving coordination.

 

 

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Highlights

What GAO Found

Federal economic development programs and state business incentives approach economic development in different ways. In GAO's review of six large state business incentive packages ($50 million or more) in four states, federal economic development program funds were not directly used. Reasons for limited use could include differences in purposes and goals, and limitations on how federal funds can be used. For example, the goals of economic development programs administered by the Department of Commerce's Economic Development Administration (EDA), the Department of Housing and Urban Development (HUD), and the U.S. Department of Agriculture (USDA) do not completely align with the goals of state business incentives, the latter of which include attracting and retaining individual businesses.

Although these incentive packages were not funded with federal economic development program funds, some of the businesses that received a large incentive package were highlighted in federal strategic plans as opportunities for investment and job growth in the local economy. The economic development programs of EDA, HUD, and USDA each encourage or require state and local communities to conduct strategic planning, which includes obtaining input from a range of public and private stakeholders and identifying ways to leverage other available resources, such as federal and state funding. Recognizing the similarities in what they require of grantees, in 2016, EDA and HUD entered into an interagency agreement to align planning requirements under their programs. The agencies implemented certain aspects of the agreement, such as issuing joint guidance to applicants. However, they have not implemented selected leading practices for effective interagency collaboration:

  • Updating written agreements: EDA and HUD have not regularly monitored or updated their interagency agreement to reflect changing priorities of either agency. Officials stated the agencies have prioritized other areas for coordination, such as disaster relief, instead of state and local strategic planning processes.
  • Including relevant participants: EDA and HUD have made limited efforts to involve USDA in their collaborative efforts. USDA also encourages strategic planning for local communities.
  • Monitoring progress towards outcomes: EDA and HUD's agreement identifies specific outcomes, including effectively aligning federal, state, and local resources for economic development. However, the agencies have not monitored progress or addressed any related challenges in meeting the stated outcomes of the collaboration.

By incorporating selected leading practices for effective collaboration, EDA and HUD can help grantees and local communities better manage fragmented efforts to meet federal requirements for strategic planning and more effectively align federal and state resources.

Why GAO Did This Study

States spend billions of dollars annually in business incentives to attract and retain individual businesses or industries. EDA, HUD, and USDA administer programs that support states' economic development goals and encourage strategic planning. In previous reports, we have identified concerns related to fragmentation in these agencies' efforts to collaborate on economic development programs with each other.

GAO was asked to review issues related to these state and federal economic development efforts. This report examines the use of federal economic development programs to support state business incentives and how selected federal agencies collaborate on these programs, among other issues.

GAO reviewed information on federal economic development programs and business incentives in four states (selected because the states offer incentives of $50 million or more and vary geographically). GAO interviewed federal and state agency officials and policy organizations.

Recommendations

GAO is making five recommendations related to enhancing collaboration across the three agencies, including that EDA and HUD revisit its agreement on economic development planning, determine the extent to which USDA should be included, and monitor progress towards stated outcomes. The agencies generally agreed with the recommendations.

Recommendations for Executive Action

Agency Affected Recommendation Status
Economic Development Administration The Assistant Secretary of Economic Development at EDA should, in collaboration with HUD, revisit the two agencies' interagency agreement on community and economic development planning to align their collaborative efforts based on current priorities and determine to what extent USDA should be included in the agreement. (Recommendation 1)
Closed – Implemented
This recommendation is an action identified in GAO's 2023 annual Duplication and Cost Savings report. EDA agreed with the recommendations. As of April 2023, Commerce and HUD have implemented this recommendation. Since we made this recommendation, community and economic development planning and coordination across federal, state and local agencies have become a part of larger efforts outlined in legislation passed 2021 (American Rescue Plan Act and Infrastructure Investment and Jobs Act). Officials from EDA and HUD stated that they revisited the 2016 interagency agreement in our report between HUD and EDA and stated it was limited to a specific task, which is complete. The agencies provided examples of how they can further address the recommendation through other collaborative efforts based on current priorities related to community and economic development planning at both the broad federal wide level and also more targeted efforts related to community and economic development planning. In addition, EDA, HUD and USDA provided examples of how USDA has been included in the current priorities. Officials stated many of these efforts were developed to support the priorities outlined in implementation of the 2021 Acts. Examples of these efforts include: 1) Rural Partners Network, USDA Rural Development is leading the Rural Partners Network, created in April 2022 in collaboration with 20 federal agencies and regional commissions (including HUD and EDA) through the Rural Prosperity Interagency Policy Council, co-led by the White House Domestic Policy Council and USDA. Specifically, HUD and EDA are collaborating by providing targeted staffing, tools, and resources. 2) Thriving Communities Network, a Federal Interagency network was formalized in fiscal year 2023 to help Cabinet agencies including EDA, HUD and USDA coordinate strategy, collaborate across initiatives, and target deployment of a full range of Federal place-based technical assistance and capacity building resources to urban, rural, and Tribal communities experiencing a history of economic distress and systemic disinvestment. HUD's role is through the Thriving Communities Technical Assistance program. EDA's role is through their Economic Recovery Corps, and USDA's role is through the Rural Partners Network. 3) USDA, through its Strategic Engagement Division (SED), has assigned staff as federal partner liaisons in an effort to establish an intentional method for regular contact and interaction with federal partners, including HUD and EDA. As of January 2023, 15 liaisons have been assigned within the federal government, with three each for HUD and EDA. The USDA liaisons are tasked with scheduling and attending a regularly occurring meeting with partner agency contacts, inviting additional USDA staff based on meeting topics and engaging in planning and/or projects as identified and practical. 4) Another example of collaboration between EDA and USDA includes a jointly developed document in the form of a resource matrix that was issued in May 2022 to assist with community and economic development planning efforts. The resource called, Stronger Together - Federal funding and planning strategies was designed to promote sustainable economic development in rural America. According to officials, this was the culmination of a fiscal year 2017 interagency agreement between EDA and USDA. For these interagency current priorities, HUD and EDA stated the agencies plan to document these existing collaborations and potential new areas of collaboration, as identified as leading practices in collaboration. By implementing this recommendations within the current priorities, EDA and HUD may help grantees and local communities better manage overlapping efforts to meet federal requirements for strategic planning, which can reduce administrative and planning burden for local communities while also assisting these communities to better address their economic development needs.
Economic Development Administration The Assistant Secretary of Economic Development at EDA should, in collaboration with HUD, monitor progress toward achieving outcomes of the two agencies' interagency agreement on community and economic development planning. (Recommendation 2)
Open – Partially Addressed
This recommendation is an action identified in GAO's 2023 annual Duplication and Cost Savings report. EDA agreed with the recommendation. As of April 2023, EDA and HUD has partially implemented this recommendation. Since we made this recommendation, community and economic development planning and coordination across federal, state and local agencies have become a part of larger efforts outlined in legislation passed 2021 (American Rescue Plan Act and Infrastructure Investment and Jobs Act). Officials from EDA and HUD stated that they revisited the 2016 interagency agreement in our report between HUD and EDA and stated it was limited to a specific task, which is complete. More specifics on the efforts can be found in the recommendation status updates for recommendations 1 and 3. For this recommendation on monitoring outcomes, both agencies agreed with the intent of the recommendation to further explore policies and actions that can further advance outcome driven collaboration and enhanced resource coordination among federal economic development programs. In addition, HUD plans to work with EDA to document information related to monitoring progress. For interagency current priority efforts, HUD and EDA stated the agencies plan to document these existing collaborations and potential new areas of collaboration. With the creation of the new networks and collaborations between EDA and HUD and also USDA, it will be important for the agencies to continue to consider how to incorporate leading practices in collaboration as they navigate the implementation of their programs for the current priorities, including clearly defining outcomes and ensuring accountability. To fully implement this recommendation, we will continue to follow the progress of these interagency efforts and how the agencies monitor progress.
Department of Housing and Urban Development The Principal Deputy Assistant Secretary for Community Planning and Development at HUD should, in collaboration with EDA, revisit the two agencies' interagency agreement on community and economic development planning to align their collaborative efforts based on current priorities and determine to what extent USDA should be included in the agreement. (Recommendation 3)
Closed – Implemented
This recommendation is an action identified in GAO's 2023 annual Duplication and Cost Savings report. HUD generally agreed with the recommendation. As of April 2023, Commerce and HUD have implemented this recommendation. Since we made this recommendation, community and economic development planning and coordination across federal, state and local agencies have become a part of larger efforts outlined in legislation passed 2021 (American Rescue Plan Act and Infrastructure Investment and Jobs Act). Officials from EDA and HUD stated that they revisited the 2016 interagency agreement in our report between HUD and EDA and stated it was limited to a specific task, which is complete. The agencies provided examples of how they can further address the recommendation through other collaborative efforts based on current priorities related to community and economic development planning at both the broad federal wide level and also more targeted efforts related to community and economic development planning. In addition, EDA, HUD and USDA provided examples of how USDA has been included in the current priorities. Officials stated many of these efforts were developed to support the priorities outlined in implementation of the 2021 Acts. Examples of these efforts include: 1) Rural Partners Network, USDA Rural Development is leading the Rural Partners Network, created in April 2022 in collaboration with 20 federal agencies and regional commissions (including HUD and EDA) through the Rural Prosperity Interagency Policy Council, co-led by the White House Domestic Policy Council and USDA. Specifically, HUD and EDA are collaborating by providing targeted staffing, tools, and resources. 2) Thriving Communities Network, a Federal Interagency network was formalized in fiscal year 2023 to help Cabinet agencies including EDA, HUD and USDA coordinate strategy, collaborate across initiatives, and target deployment of a full range of Federal place-based technical assistance and capacity building resources to urban, rural, and Tribal communities experiencing a history of economic distress and systemic disinvestment. HUD's role is through the Thriving Communities Technical Assistance program. EDA's role is through their Economic Recovery Corps, and USDA's role is through the Rural Partners Network. 3) USDA, through its Strategic Engagement Division (SED), has assigned staff as federal partner liaisons in an effort to establish an intentional method for regular contact and interaction with federal partners, including HUD and EDA. As of January 2023, 15 liaisons have been assigned within the federal government, with three each for HUD and EDA. The USDA liaisons are tasked with scheduling and attending a regularly occurring meeting with partner agency contacts, inviting additional USDA staff based on meeting topics and engaging in planning and/or projects as identified and practical. 4) Another example of collaboration between EDA and USDA includes a jointly developed document in the form of a resource matrix that was issued in May 2022 to assist with community and economic development planning efforts. The resource called, Stronger Together - Federal funding and planning strategies was designed to promote sustainable economic development in rural America. According to officials, this was the culmination of a fiscal year 2017 interagency agreement between EDA and USDA. For these interagency current priorities, HUD and EDA stated the agencies plan to document these existing collaborations and potential new areas of collaboration, as identified as leading practices in collaboration. By implementing this recommendations within the current priorities, EDA and HUD may help grantees and local communities better manage overlapping efforts to meet federal requirements for strategic planning, which can reduce administrative and planning burden for local communities while also assisting these communities to better address their economic development needs.
Department of Housing and Urban Development The Principal Deputy Assistant Secretary for Community Planning and Development at HUD should, in collaboration with EDA, monitor progress toward achieving outcomes of the two agencies' interagency agreement on community and economic development planning. (Recommendation 4)
Open – Partially Addressed
This recommendation is an action identified in GAO's 2023 annual Duplication and Cost Savings report. HUD generally agreed with the recommendation. As of April 2023, EDA and HUD has partially implemented this recommendation. Since we made this recommendation, community and economic development planning and coordination across federal, state and local agencies have become a part of larger efforts outlined in legislation passed 2021 (American Rescue Plan Act and Infrastructure Investment and Jobs Act). Officials from EDA and HUD stated that they revisited the 2016 interagency agreement in our report between HUD and EDA and stated it was limited to a specific task, which is complete. More specifics on the efforts can be found in the recommendation status updates for recommendations 1 and 3. For this recommendation on monitoring outcomes, both agencies agreed with the intent of the recommendation to further explore policies and actions that can further advance outcome driven collaboration and enhanced resource coordination among federal economic development programs. In addition, HUD plans to work with EDA to document information related to monitoring progress. For interagency current priority efforts, HUD and EDA stated the agencies plan to document these existing collaborations and potential new areas of collaboration. With the creation of the new networks and collaborations between EDA and HUD and also USDA, it will be important for the agencies to continue to consider how to incorporate leading practices in collaboration as they navigate the implementation of their programs for the current priorities, including clearly defining outcomes and ensuring accountability. To fully implement this recommendation, we will continue to follow the progress of these interagency efforts and how the agencies monitor progress.
Department of Agriculture The Deputy Under Secretary for Rural Development at USDA should work with EDA and HUD to identify opportunities to include USDA in the agencies' collaborative efforts on community and economic development strategic planning. (Recommendation 5)
Closed – Implemented
This recommendation is an action identified in GAO's 2023 annual Duplication and Cost Savings report. As of January 2023, USDA has implemented this recommendation. Since we made this recommendation, community and economic development planning and coordination across federal, state and local agencies have become a part of larger efforts outlined in legislation passed 2021 (American Rescue Plan Act and Infrastructure Investment and Jobs Act). USDA provided examples of formal collaboration efforts between USDA and the Economic Development Administration (EDA) and between USDA and the Department of Housing and Urban Development (HUD). More specifically, USDA Rural Development is leading the Rural Partners Network, created in April 2022 in collaboration with 20 federal agencies and regional commissions (including HUD and EDA) through the Rural Prosperity Interagency Policy Council, co-led by the White House Domestic Policy Council and USDA. Specifically, HUD and EDA are collaborating by providing targeted staffing, tools, and resources. USDA, through its Strategic Engagement Division (SED), has also assigned staff as federal partner liaisons in an effort to establish an intentional method for regular contact and interaction with federal partners, including the Department of Housing and Urban Development (HUD) and the Economic Development Administration (EDA). As of January 2023, according to USDA, 15 liaisons have been assigned within the federal government, with three each for HUD and EDA. The USDA liaisons are tasked with connection to an agency point-of-contact (POC), scheduling and attending a regularly occurring meeting with the POC, inviting additional USDA - RD staff depending upon topics under consideration and engaging in planning and/or projects as identified and practical. Another example of collaboration between EDA and USDA include a jointly developed document in the form of a resource matrix that was issued in May 2022 to assist with community and economic development planning efforts. The resource called, Stronger Together - Federal funding and planning strategies was designed to promote sustainable economic development in rural America. According to officials, this was the culmination of a fiscal year 2017 interagency agreement between EDA and USDA. In addition, USDA continues to accept EDA's planning document, the Comprehensive Economic Development Strategies plan, to satisfy USDA's strategic planning requirements. USDA and HUD officials also engage formally through working groups related to Promise Zones, a place-based initiative. By implementing this recommendation, USDA can help grantees and local communities better manage overlapping efforts to meet federal requirements for strategic planning, which can reduce administrative and planning burden for local communities while also assisting these communities to better address their economic development needs.

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Community developmentEconomic developmentEmployment growthInteragency relationsJob creationStrategic planningTax incentivesAgency evaluationsTax creditGrant programs