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74–377 PS












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JUNE 20, 2001

Printed for the use of the

Committee on Transportation and Infrastructure


DON YOUNG, Alaska, Chairman

THOMAS E. PETRI, Wisconsin, Vice-Chair
HOWARD COBLE, North Carolina
JOHN J. DUNCAN, Jr., Tennessee
STEPHEN HORN, California
JOHN L. MICA, Florida
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SUE W. KELLY, New York
JOHN R. THUNE, South Dakota
RICHARD W. POMBO, California
JIM DeMINT, South Carolina
ROBIN HAYES, North Carolina
ROB SIMMONS, Connecticut
HENRY E. BROWN, Jr., South Carolina
SAM GRAVES, Missouri
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MARK R. KENNEDY, Minnesota
BILL SHUSTER, Pennsylvania

NICK J. RAHALL II, West Virginia
ROBERT A. BORSKI, Pennsylvania
BOB CLEMENT, Tennessee
ELEANOR HOLMES NORTON, District of Columbia
BOB FILNER, California
FRANK MASCARA, Pennsylvania
GENE TAYLOR, Mississippi
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BILL PASCRELL, Jr., New Jersey
JAMES P. McGOVERN, Massachusetts
TIM HOLDEN, Pennsylvania
BRIAN BAIRD, Washington
MICHAEL M. HONDA, California
RICK LARSEN, Washington



Subcommittee on Economic Development, Public Buildings and Emergency Management

STEVEN C. LaTOURETTE, Ohio, Chairman

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SHELLEY MOORE CAPITO, West Virginia, Vice-Chair
  (Ex Officio)

ELEANOR HOLMES NORTON, District of Columbia
  (Ex Officio)



    Neff, Daniel L., Executive Director, Ohio Mid-Eastern Governments Association, on behalf of the Development District Association of Appalachia, and the National Association of Development Organizations
    Patton, Hon. Paul E., Governor of Kentucky, State Co-Chairman, Appalachian Regional Commission

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    Underwood, Hon. Cecil H., former Governor, State of West Virginia, former State Co-Chairman, Appalachian Regional Commission

    White, Hon. Jesse L., Jr., Federal Co-Chairman, Appalachian Regional Commission

    Whitt, Michael, Executive Director, Mingo County Redevelopment Authority of West Virginia


    Neff, Daniel L
    Patton, Hon. Paul E

    Underwood, Hon. Cecil H

    White, Hon. Jesse L., Jr.

    Whitt, Michael


    Appalachian Regional Commission, letter to Hon. George W. Bush, President of the United States, March 21, 2001

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    National Association of Regional Councils, statement

    Strickland, Hon. Ted, a Representative in Congress from Ohio, statement

    Wise, Hon. Robert, Governor, State of West Virginia, letter, June 19, 2001


Wednesday, June 20, 2001
House of Representatives, Subcommittee on Economic Development, Public Buildings and Emergency Management, Committee on Transportation and Infrastructure, Washington, D.C.

    The subcommittee met, pursuant to call, at 2:00 p.m., in Room 2253, Rayburn House Office Building, Hon. Steven C. LaTourette [chairman of the subcommittee] presiding.

    Mr. LATOURETTE. The subcommittee will come to order.
    I want to welcome the members of the subcommittee here this afternoon to today's hearing on the Appalachian Regional Commission. This hearing is especially important because ARC's authorization will expire as of fiscal year 2001. I look forward to a timely and successful reauthorization for this important program.
    Today's testimony will provide important information to move forward in this process. We will look not only toward ARC's future, but we will also review its recent past.
    ARC has been working very closely with us to identify issues that should be addressed in the reauthorization language. I am confident this effort will result in a very bipartisan bill, as is the history of this subcommittee and committee, that will address many of these and other important issues.
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    Among the proposals are a new telecommunications initiative, which would provide better access to technology for Appalachia; lowering the local cost share for administrative costs of local development districts that contain a distressed county; and creating an Interagency Coordinating Council on Appalachia. I am looking forward to hearing more about all of these proposals and ARC's programs from both of our panels this afternoon.
    In order to clearly envision ARC's future, we must also look to its past. Until reauthorization in 1998, ARC had not been authorized since 1982. Although it remained unauthorized, appropriators continued to fund the program. Due to the lengthy time lapse between reauthorizations, the statute was in dire need of reforms. These reforms were implemented in the 1998 Act. In addition to discussing new initiatives, we will also review ARC's progress towards these reforms. The subcommittee is committed to assisting the ARC focus on the needs of the region.
    I want to thank our distinguished panels of expert witnesses for appearing before the subcommittee to discuss this important topic. Today we will hear testimony from ARC State Co-Chairman and Governor of the State of Kentucky Paul Patton and current Federal Co-Chairman Jesse White. We are also lucky to have the distinguished gentleman from West Virginia, twice former governor and former ARC State Co-Chairman, Cecil Underwood, appearing before us today. Mr. Mike Whitt also joins us from the State of West Virginia; and from my own State of Ohio, I am pleased to have Mr. Dan Neff here today. Mr. Neff has spent a good deal of time traveling to the Nation's Capital over the past few weeks, and we appreciate his commitment to the continued economic development of Appalachia and, particularly, the great State of Ohio. You are all to be commended for your efforts to assist the people of Appalachia.
    I look forward to hearing from all of our witnesses today.
    Just a couple of housekeeping matters before I yield to our distinguished ranking member. We started a debate on a rule I think at 1 o'clock, and there is an hour of debate. We may be interrupted before we can proceed to the testimony to take that vote.
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    I was also informed that Mr. Rahall of our full committee might like to come and make an introduction today, and also Mr. Ney from Ohio may want to come and say some things about Mr. Neff before we begin with their testimony today.
    But, with that, I thank you very much for coming. We will get to you and through this as quickly as we can.
    I yield to the distinguished ranking member of the subcommittee, Mr. Costello.
    Mr. COSTELLO. Mr. Chairman, thank you.
    I welcome our guests today who will be testifying before the subcommittee and, in particular, former Governor Underwood, who represented the Appalachia Commission Governors in 1997 when we reauthorized this Act then and, of course, Governor Patton. It is a privilege and a pleasure to work with Jesse White, who does, I think, a wonderful job for the Appalachian Commission; and he was kind enough, he and his staff, to come out to southern Illinois not too long ago to meet with a number of people in trying to organize the Delta Regional Authority to give us his expert advice and some of the success stories of the Appalachian Regional Commission.
    Mr. Speaker, I think with the track record of the ARC, I think they have done a remarkable job; and their record and performance is truly commendable. I hope that this hearing will, in fact, be able to detail the successes that they have had since the Commission was created by the Congress; and I hope we, in fact, can reauthorize this Act just as soon as possible, without delay.
    With that, let me ask for unanimous consent, Mr. Chairman. As you know, we have received a letter from the Governor of West Virginia, a former member of this—in fact, a former chairman of this subcommittee and a senior member of the Committee on Transportation and Infrastructure, Governor Bob Wise, who has asked us to consider his support, of course, for the reauthorization. He is asking the subcommittee to recommend a 5-year reauthorization, and I would just ask that his letter be accepted under a unanimous consent request.
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    Mr. LATOURETTE. Without objection.
    Mr. COSTELLO. Mr. Chairman, with that, I yield back the balance of my time and look forward to hearing from our witnesses today.
    Mr. LATOURETTE. I thank you very much, Mr. Costello.
    Ms. Norton, do you have an opening statement?
    Ms. NORTON. No opening statement.
    Mr. LATOURETTE. Thank you very much.
    Today's first panel, it looks like we will get to at least part of your testimony before we go vote, includes the management of the Appalachian Regional Commission. We have the Governor of Kentucky, Paul Patton and ARC's State Co-Chairman and Federal Co-Chairman Jesse White. Thank you for being here with us today. I would ask that you—.
    Let me just pause for a minute.
    Mr. Oberstar, would you like to make an opening observation before we begin with testimony?
    Mr. OBERSTAR. Well, Mr. Chairman, thank you.
    I was at another subcommittee hearing just until this moment, and though I am not in the Appalachian region, I have been a vigorous advocate for Appalachia going back to my service on this committee as a staff member and a staff director, and I still have the pen that Lyndon Johnson used to sign into law the original Appalachia Regional Commission Act.
    One of my fondest memories are of the hearings I conducted as Chair of the Economic Development Subcommittee and the oversight subcommittee throughout the Appalachian region. I came to know and to love these simple mountain folk, as one witness described himself, and his constituents, honest, hard-working people who want only an opportunity for a better life.
    Before the Appalachian Regional Commission, the way up for most young people throughout the region was a bus ticket north to Detroit or Cleveland or Chicago. Eighty acres and a mule described much of the rural South and Appalachia. It was 45 percent of the gross national per capita income in 1965. With 20 years of progress under Appalachia and still a long way to go, we were up to—the per capita income was up to 80 percent of the national average. That has slipped a little.
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    Investing in fundamentals of economic progress, of vocational technical schools, of rural health care centers, of hospitals, roads, the backbone highway system, and water and sewer and sewage treatment systems have given the underpinnings for economic progress that has characterized the Appalachia region since enactment of the 1965 law. We must, in this consideration of reauthorization, assure that the funding levels are adequate, that we continue to provide the tools for the Commission, and that we must keep in mind that 30 years of investment in rebuilding Appalachia cannot overcome 150 years of decline.
    It is all too frequent a claim, and it still rings in my ears and in my heart, the Reagan budget submission to the Congress in 1981 proposing to, in effect, declare victory because we had invested all of these dollars, and now it is time to walk away. It is not time for us to walk away. As a Nation we are not healthy if one part of our country has not reached full health status; and Appalachia is on its way, but it needs continued support and investment and the program that the governors and the Commission have developed.
    Thank you, Mr. Chairman.
    Mr. LATOURETTE. I thank the distinguished ranking member of the full committee.
    Mr. Oberstar, as you appear on the majority side of the dais, I am wondering if we need to alert the media as to any announcement you want to make.
    Mr. OBERSTAR. No, no. I think I will go back to where I belong. Enough trouble for one day. Although I know how to use the gavel.
    Mr. LATOURETTE. I would notify our witnesses and our guests that the bells have gone on and it would be the Chair's intention to recess after I ask Mrs. Capito if she has an opening set of remarks she would like to make before we recess.
    Mrs. CAPITO. Yes, I do. Thank you.
    I represent the State of West Virginia, and as I glance across the map, the ARC map, unfortunately, the distressed counties, you can see how very vitally important the ARC designations and involvement have been in my State of West Virginia for many, many years.
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    I would like to thank the chairman for holding this hearing. It is particularly fitting to hold this hearing today, because today, June 20, is West Virginia Day, the day that West Virginia celebrates its Statehood.
    As many of you know and as I mentioned, West Virginia is the only State that is entirely within the borders of the Appalachia Regional Commission. I would like to thank all of today's witnesses for taking the time to be with us; and I would like to extend a particularly warm welcome to Governor Cecil Underwood, who will be sharing his thoughts later. Governor, it is a delight to have you here with me today on West Virginia Day. I know that you will have excellent information to contribute to our discussion.
    Mr. Chairman and fellow members, in my view, the ARC is critical to the continued economic development of my State of West Virginia. The ARC is particularly important to the congressional district that I represent. My district spans across the State from the Eastern Panhandle just out to the D.C. area all the way to the Ohio River, which includes the capital City of Charleston where I happen to reside. It is one of the largest districts east of the Mississippi.
    But my district is very diverse, both economically and geographically. While we have made progress in recent years, in much of my district we still have a long way to go. In fact, 11 of the counties of the 20 that I represent are classified by the ARC as economically distressed. In my mind, the ARC programs are essential to helping the people in these counties have a chance to share in our Nation's prosperity.
    The flexibility and diversity of ARC programs enable our local communities to tailor the ARC grants to their individual needs. ARC grants in my district range from equipping industrial parks, to helping improve the skills of the work force, to strengthening important industries such as the wood products industry. The ARC is also instrumental in meeting emergency funding requests to assist rural communities from many desperate situations.
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    One example of this assistance we just recently received in my district was when they approved an emergency fund for repair to the—get the name of this—the Wardensville Sewage Lagoon. I do not recommend it for the July 4th break.
    For the above-mentioned reasons and for the reasons that we will hear today, I believe that it is imperative for the Congress to reauthorize the Appalachian Regional Commission. A 5-year reauthorization would ensure the ARC would continue to address West Virginia's needs. It would also enable the Commission and our local communities to develop and implement long-term strategies for local economic growth.
    Mr. Chairman, again, thank you for holding today's hearing. Happy West Virginia Day. I appreciate your interest in discussing the policies that affect the Appalachian region, and I look forward to hearing the testimony of our witnesses.
    Mr. LATOURETTE. I thank the gentlewoman very much. Our erstwhile counsel has advised me that today is also the date in history where the United States adopted its official seal, so it is a big day for all of us.
    The subcommittee hearing will stand in recess until we can conclude these two votes, and we beg the indulgence of our guests.
    Mr. LATOURETTE. The committee will reconvene. I apologize for the delay. They say we have a little bit over an hour before we will be interrupted again.
    Without further ado, as I indicated before the break, we are pleased to have the leadership of the ARC with us, the Governor of Kentucky, Paul Patton, and the Federal Co-Chairman Jesse White.
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    Mr. LATOURETTE. Governor Patton, your full statement will appear in our record and we are anxious to hear from you.
    Governor PATTON. Thank you, Mr. Chairman.
    As you mentioned, I am Paul Patton, the Governor of Kentucky and State Co-Chair of the Appalachian Regional Commission and a pure-bred Appalachian. I was bred, born, raised, educated, worked and still live in hard-core Appalachia, Pike County, Kentucky, 20 miles from both the Virginia and West Virginia State borders. I consider myself an expert on Appalachia, and I appreciate the opportunity to appear before you on behalf of the Appalachian Regional Commission and the citizens of the region.
    My purpose today is to review the need for and the original purpose of the ARC, report on our progress to date, and request continued and increased support for our efforts.
    I have submitted written testimony which details our accomplishments and itemizes our request for funding and reauthorization. I wish to use my time before you to discuss the issue on a more personal basis.
    The ARC was created to address the unique region of the Nation, a region mired in poverty and unable to extricate itself from its dilemma. In the midst of unprecedented prosperity, our Nation took note of a region which had fueled our industrial prowess and yet had not benefited, a region which had, in fact, become an embarrassment to the richest Nation on earth.
    Why did this happen? The fundamental reason was that the region had become heavily populated by three successive waves of economic activity which depended on manual labor and very little intellectual capital. The first was subsistence agriculture, the second was harvesting the immense timber resources of the region, and the third was coal. The net effect was that, by about 1945, the region had become heavily populated by manual laborers, extracting natural resources to fuel a growing Nation's needs and receiving practically none of the benefits in terms of the development of basic infrastructure or indigenous wealth. We were, in fact, a colony of industrial America.
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    And then industrial America abandoned us. Railroads dieselized, electric utilities turned to oil, natural gas and nuclear energy and coal companies mechanized. The demand for manual labor plummeted.
    Many Appalachians fled to the industrial north. In my own family, all of my mother's siblings, half my father's, left the region, as did both of my sisters. Those who remained were left with inadequate roads, poor schools, almost no water or sewer infrastructure, and primitive medical services. The other facets of modern life were similarly inadequate.
    That was the situation that faced President Kennedy and then President Johnson when the concept of the Appalachian Regional Commission was developed. At the time, the choices were stark. They were: one, relocate millions of undereducated Appalachians to the industrial centers of the Nation, an option which was unacceptable to us and to our would-be neighbors; two, permit an enclave of Third World poverty to fester in the world's most prosperous Nation; or, three, form a partnership with the affected States to bring the region into the mainstream of late 20th century American economic life. Fortunately, we chose the latter, and the Appalachian Regional Commission was created.
    I am here to report to you that the ARC program has been a success to the extent that it has been able to execute its charters. The only failure of the ARC has been the failure to secure the resources to complete its mission. This Congress and this committee have the ability to recommit yourselves to the original vision of the ARC and to help this region and these people, my people, who have done so much to make this Nation what it is, to realize the American dream and to continue to contribute to our progress as a Nation.
    We have come a long way. The Appalachia of today is not the Appalachia of 1965. You know, the interstate highway system, for the most part, avoided Appalachia. The proposed 3,000 miles of modern highways originally planned for the region will, when completed, largely compensate for the absence of the interstate network. The 2,300 miles of these roads already built have broken the historic physical isolation of the region. Our challenge is to finish the job, the remaining 700 miles of the original proposal, of which 600 miles are in various stages of preconstruction and the rest are under way.
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    The same can be said for water and sewer infrastructure. We are not there yet, but we have made a lot of progress.
    In health care, vocational education, and in economic opportunity, we have made tremendous progress. We still have a long way to go. We need your continued support for perhaps another 20 or 30 years, so we can be all that we can be and help America become all it can be.
    Let me assure the committee and the people of this country that we in Kentucky, and I would submit that all Appalachian States, are making the same effort, are doing our share to bring our part of Appalachia into the mainstream of modern 21st century American life.
    Our premier effort is in education. As a result of our Kentucky Educational Reform Act of 1990, we have committed to the proposition that all Kentucky children are entitled to an adequate education; and to the extent that poor school districts, that is Appalachian school districts, are unable to finance such an education, the State will make up the difference. So there are 49 Appalachian counties of Kentucky that make up 20 percent of our population, but the State is spending in these 49 counties 35 percent of all of our funds for education, $900 million dollars a year. The State is ensuring that Appalachian Kentuckians will be treated equally with all Kentuckians when it comes to education.
    We have made, with the help of ARC, major progress in providing health care services to our people; and we are beginning to transition our economy away from natural resources and towards traditional manufacturing and intellectual productivity. In fiscal year 2001, we are investing $54 million in water and sewer infrastructure in our 49 ARC counties, of which 10 percent, or $5 million, are ARC funds. While ARC highway funds in fiscal year 2001 total $52 million, we are investing $371 million of State road funds in Appalachia, about 54 percent of all of the Kentucky- generated State growth fund money.
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    We are acquiring the infrastructure and the public services of modern America. What we need now is jobs, a diversification and expansion of our economic base to develop a sustainable economy.
    We in Kentucky are being very aggressive pursuing jobs for our Appalachian region. We are granting extraordinary tax credits for companies that will locate in Appalachia and create jobs for our people. We have committed about $50 million of our coal severance tax each year to creating more economic opportunity in the region. Added all up together, the State of Kentucky has committed over $1 billion a year to eliminating the problems that plague the Appalachian region of the commonwealth.
    I am making a personal commitment to my home region. I have and will continue to travel to the financial centers of the United States to promote the special consideration that we will give to businesses that create good jobs in Appalachian Kentucky. Just tomorrow, I will be leading a group of 23 business executives on a 2-day tour of eastern Kentucky, showing them what we call the new Appalachia, showing them the roads, the schools, the hospitals, the housing, the recreation facilities, the public infrastructure and other improvements that few people outside the region are aware of.
    Yes, we have come a long way. We still have a lot to do. We in Kentucky are doing our part, and the other States are doing their part. We need and ask for the continued help of our Federal Government.
    Thank you for your time and consideration.
    Mr. LATOURETTE. Governor, we thank you very much for your excellent statement.
    Mr. White, we would be honored to hear from you, sir.
    Mr. WHITE. Thank you very much, Mr. Chairman, for holding this hearing.
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    I want to thank you and Ranking Member Costello and our Appalachian Congressperson, Mrs. Capito, and the entire committee.
    I want to thank my good friends, Governor Patton, who has worked in economic development in Kentucky for a very long time, even before he was governor, and my good friend, Cecil Underwood, who I served with when he was State Co-Chairman for 2 years and had a lot to do with our distressed counties program.
    You can see on our map here, members of the committee, what the region looks like. You can see the distressed counties displayed in red. If you looked at that map in 1965 when we were created, you would see almost a whole map of red. We had twice as many counties distressed in 1965 as we do today. And so, as has been noted by others today, we have made a lot of progress in reducing distress, reducing poverty, reducing unemployment, and increasing per capita income.
    We have done this because in part of this unique agency that Congress created, giving us this 3,025 mile highway system, which is 82 percent complete. Congress is to be commended for sticking with the funding of that system. It has been expensive. It has been tough. We appreciate it.
    And, secondly, is our community and economic development. Then I think just perhaps as important as the money was the fact that Congress created this unique partnership that really energizes the Federal system in a unique way in Washington, whereby the Federal official and the governor share power, have to make policy together. We have equal votes on the Commission, and then we are undergirded by our 71 local development districts where the projects originate. So the structure of ARC actually energizes our Federal system, I would argue, in a very unique way.
    We have been about the business in the last 7, 8 years of trying to revitalize the agency, trying to bring it into a new era. We started with our strategic plan in 1996, which committed us to a new mission statement and five new goal areas. We have seen it in our regional initiatives and export promotion, leadership development and telecommunications, and in the last 4 years especially an $17 million initiative on entrepreneurship, trying to put in place the building blocks of home-grown and home-owned businesses, which has been an important part of our strategy.
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    We are, as has been noted, very appreciative of the reauthorization you gave us, the first one we had in over 15 years. And then, with the passage of TEA-21, our highways for the first time were funded out of the trust fund instead of the general fund. So we went from about $90 million a year from our highway system to between 4 and $450 million a year.
    So we are making substantial progress, and they say that imitation is the ultimate form of flattery, so we were very pleased that the Congress has seen fit to take the ARC model and apply it to other distressed areas like the lower Mississippi Delta, the 218 counties in that region and the Denali Commission in rural Alaska.
    I think there are a couple of reasons for our success. One is we have tried to do our job internally to give a program that the Congress could be proud of. Secondly has been the enduring bipartisan support for the Commission. I have served with eight States co-chairman. Four have been Democrats. Four have been Republicans. I served under a Democratic Congress, a Republican Congress, under a Democratic President and now a Republican President. So we have a very bipartisan support, and we appreciate that very much, and we hope that will endure.
    We are proud of our record in focusing on these distressed counties. As most of you know, we have in the last 8 years increased the amount of funds we set aside for work just in those 114 counties. When I first started as Federal co-chairman, we took 20 percent of the project money and spent it in distressed counties. We now moved that to 30 percent, and the administration is now proposing a statutory change that would make that 50 percent. So we have done a good job of targeting.
    We—about two million of our people live in these counties, and we are already spending—the States have stepped up to the plate by going beyond the 30 percent. We are actually spending about 50 percent of our nonhighway project money to benefit the 10 percent of our people who are in dire straits, and I am real proud of the Commission for that effort, and I am appreciative of Congress for being supportive of it.
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    We have developed an enhanced program for distressed counties. We are trying to provide more technical assistance, a clearinghouse for ideas, more in the area of telecommunications. We hope that the Congress in our reauthorization will give us a 5-year bill so that we can have a longer planning horizon, and we hope that you will look favorably on a new and highlighted authority for us to work in telecommunications. The Governor mentioned the Interstates had bypassed the mountains, and that will be probably a 14 to 16 billion dollar project to fix at the end of the day.
    We don't want the information highway to bypass the mountains or rural America, and so we are very concerned now that that infrastructure be there. It is going to be the infrastructure of this millennium we live in, and we want to do our part at the ARC to help ensure that that infrastructure is there and perhaps more importantly is that our people know how to use it and capitalize on it.
    Telecommunications is really the first infrastructure, when you think about it, that really requires people to know how to use it. I mean, everybody to know how to use it. Highways, you get in the car and drive. The truck drivers use the highways. The barge operators use the rivers. But everybody is going to have to use this telecommunications infrastructure, and so one of our emphases would be on the education and training piece.
    We thank you, Mr. Chairman, and all members of the committee for your support; and we look forward to a good reauthorization this year. Thank you.
    Mr. LATOURETTE. Well, I thank you very much.
    Thank you both for your attendance here today and also your excellent representations.
    I just want to make a comment. We have been joined by one of my colleagues from Ohio, Congressman Bob Ney, who also has the distinction of serving as the chairman of the House Administration Committee; and perhaps Chairman Ney, when this hearing is over, we can talk to you about the size of our room here. I don't think we need to go any further.
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    Is there an opening set of remarks you would like to make? Okay.
    Then, gentlemen, again, I thank you for your testimony.
    When we went through the reauthorization process—and you both know it has been a long time since this had been reauthorized—there were a number of critics of the program, and it is similar to some of the difficulty that I face a little higher up in Ohio and the Great Lakes. If you are not from there, you really don't understand what the needs are and what the concerns are. So my questions I think are going to be designed today to establish a record so that others can read it and we can get on with this reauthorization, which is supported in a pretty bipartisan way on this committee, at least.
    There was a report by the General Accounting Office last fall that cited overlap among a number of Federal economic development programs, saying that we have got too many programs rather than not enough. I am just wondering if, one, that is an issue for the ARC and, if it is, how you deal with that and how the coordination between the LDDs work so that you make sure that everybody is sort of pulling in the same direction but you don't have duplicity or wasted effort.
    Mr. White.
    Mr. WHITE. Well, that is an excellent question.
    The ARC was originally set up to be a supplemental funding agency. In 1965, the truth of the matter is, many of our communities were too poor to even participate in the Federal grant aids program because they couldn't come up with the match. So we were authorized to provide supplemental Federal funding, and basically we are still a supplemental agency. We hear time and time again throughout the region that ARC may only have 10 or 20 percent of the money in the project, but it is the glue money, because our money is so flexible, that the project could not be possible.
    We coordinate very closely with Department of Transportation. They really administer our highway program for us. Department of Agriculture, HUD, many other agencies actually administer our grants. We have a fairly small staff here in Washington. So we don't think we are duplicative, Mr. Chairman. We think we are supplemental, and we work very hard on coordinating with our other Federal partners.
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    Mr. LATOURETTE. I thank you for that.
    Both of you mentioned the highway program; and, Governor, I think you indicated, if I made my note right, that your State alone is going to put $371 million of highway funds into completing the highway program. I think my question would be, have either of you figured out or ciphered the cost of completing the highway system and how the ARC plans on accomplishing that. Governor?
    Governor PATTON. Let me point out that was the total amount of construction of roads in the 49 counties. Now, that wasn't on the—there is only a hundred miles or so of ARC corridor roads that aren't completed, but—although cedar roads are equally important.
    Now, what was the question?
    Mr. LATOURETTE. The question is, do you know what the cost is of completing the ARC roads and how you are going to plan to tackle that.
    Mr. WHITE. We are in the process now of doing—or starting a new cost-to-complete estimate of the remaining 18 percent of the system. The last cost-to-deplete we did was, what, 5 years ago? 1997. And the Federal piece of that was $6.2 billion. We are getting about $450 million a year through TEA-21 for that.
    It depends on the funding stream as to how long it will take to complete. We are going through some of the toughest terrain now. Some of the pieces that are left are going through mountains, and so it is pretty expensive. It is not uncommon for it to be $15 million a mile to build roads through the mountains.
    So we will have, I would say, within the next, what, 6 or 8 months—about 8 months a new cost-to-complete for you, Mr. Chairman.
    Mr. LATOURETTE. Okay. If you would be kind enough to submit that to the committee when you have it, we would appreciate that very much.
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    Mr. WHITE. Absolutely.
    Mr. LATOURETTE. The last question I have before I yield to the distinguished ranking member is that one of the initiatives we are being asked to consider in the reauthorization is a coordinating council for Federal economic development programs within the region, and I am wondering if—again, for the record, for the purpose of the subcommittee, tell us what the purpose of the council is and, I think just as big concern, whether or not the council would be responsible for allowing or prohibiting particular projects.
    Mr. WHITE. Well, I would like to get Governor Patton to chime in on this, because I think this is something you talked about before. But we would conceive it as really a council to be established by the President that would simply be a coordinating council, a discussion council, to try to sensitize Federal agencies to opportunities and to needs. I don't see it as being directive. I don't think it could supplant statutory authority in other agencies.
    One thing we have tried to do in the last 8 years is rebuild our relationships with other Federal agencies, and this would just be another step in that direction.
    Mr. LATOURETTE. Okay. Governor?
    Governor PATTON. I would say that I have done this in Kentucky when I started looking at all the resources that were available. I recognized that we had—State government had to have a dozen agencies or more that had resources to address the problems. The Federal Government had different agencies. The local government has agencies. So I established what I call the Kentucky Appalachian Commission, about 40 people there, and I chaired.
    There is about half of those are our people that control resources. About half of them are local people or Federal Government people, the Rural Development, the Kentucky Housing Authority; and we meet about three times a year for—purely for informational purposes so that all the agencies know what the grand plan is. If my housing agency is wanting to develop housing in this area, then my people that are dispensing water grants need to understand that; and if the school systems are building new schools in a region, then our transportation people need to know that.
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    So this is what I would recommend, strictly informational. Ours is. It has no authority, but it has—Congressman Rogers has a person who sits in on it. Rural Development has a person. Kentucky Housing, the economic—Kentucky Economic Development, local school districts. So this is what I would make sure, that everybody that is working on the problem has an opportunity to explain their part and paint a bigger picture.
    Mr. LATOURETTE. Okay. I thank you.
    Mr. Costello.
    Mr. COSTELLO. Mr. Chairman, thank you.
    Governor Patton, we appreciate you being here today; and we appreciate your testimony before the subcommittee.
    Mr. White, you have an impressive record of accomplishments; and I, too, hope that we have a good authorization here. I hope that we can reauthorize the Act for 5 years, as opposed to 3 years. But let me ask you, from a management standpoint, tell us the advantages from a planning standpoint of a 5 -year reauthorization versus 3.
    Mr. WHITE. I just think it enables us and perhaps more importantly our State partners and our local partners to have a little longer planning horizon about developing projects and doing plans. Economic development doesn't happen within a year frame, and the planning horizons are getting longer rather than shorter, especially when you are talking about deploying telecommunications strategies and whatnot. And it just gives us a longer—as someone said, a longer shelf life to do our planning.
    Mr. COSTELLO. You mention in your testimony the administration's willingness to support—requiring the Commission to spend at least half of its funds in distressed counties. Are you satisfied with the 30 percent of project dollars that are now used solely for distressed counties?
    Mr. WHITE. Well, what the administration is backing is 50 percent in distressed counties our areas. That is an important distinction to make. We have within ARC everything from a State—very small counties like Kentucky, where the average population in Appalachia, Kentucky, is probably 30, 40,000 people, I would guess—.
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    Governor PATTON. Less than that.
    Mr. WHITE. Less than that—to these monster counties in New York where you have got a 110, 120,000 people. So what you get in a State like New York are pretty serious pockets of distress. So this would sort of expand the targeting beyond counties to a subcounty designation and would require the Commission to set policy that 50 percent of the money would go into those distressed counties or areas. And, yes, I do support that. I think the targeting of resources to the areas of greatest need is very important.
    Mr. COSTELLO. On Page 6 of your testimony, you talk about a flexibility grant program to help jump-start the economic development process. Can you elaborate on that a little bit?
    Mr. WHITE. This is that first bullet.
    Mr. COSTELLO. Yes. The new—.
    Mr. WHITE. Yes. This is what we call our flexi-grant program. We have committed I think $1.1 million a year for 5 years. These are $10,000 or less grants, very quick turnaround time. As a matter of fact, we have structured it to where we really make a master grant to the State and the States can do the subgrants to localities. This is to meet certain emergencies, like Congressman Capito mentioned. It could be a particular planning grant. It could put one of their communities through our Appalachia Community Learning Project. It is supposed to be a sort of quick start grant program in areas of distress.
    What we find is a lot of distressed counties don't even know where to start. You know, they just have such capacity weakness at the local level that maybe this would help them hire a planning consultant or—it is really going to be left up to them to devise how to use this money to get something jump-started in their county.
    Mr. COSTELLO. Governor Patton, you talked about your past and your intention in the future to work with corporate America to entice them to operate their businesses in Appalachia. What have you heard from corporate America as to their concerns about Appalachia and is there one thing in particular that needs to be done to attract businesses to Appalachia? Is it education? Is it training? Is it roads? What would it be? Is it technology?
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    Governor PATTON. We will know a lot more about it tomorrow, because I intend to get those 23 people and find out why they aren't even looking at Appalachia, Kentucky, and probably all of Appalachia.
    I think a lot of it has to do with their stereotype. I think a lot of it has to do with the fact that people view Appalachia as it was in the 1960s, and that is the reason I am taking them physically to the region and asking them to look at it. We have great schools. The Statewide goal in Kentucky is to have one computer for each six students, and we have that. But—I am showing now some schools in Appalachia tomorrow that have one computer for three students or one computer for three and a half students. I am showing them schools that have 100 percent of the classrooms connected, not the school, the classroom.
    I brought one company into Appalachia, Kentucky, a year and a half ago when President Clinton came to eastern Kentucky and showed them this school with their computer help system. That was what they were trying to do for the world. They ended up locating two facilities in Appalachia, Kentucky, that today have 1,200 employees providing computer help service to people around the world, Appalachia young people. So it is just the reality of Appalachia today is not the reality of 40 years ago, and I think the perception of that to corporate America is erroneous.
    I have been to New York. I have been to Chicago. I have been to Detroit. I am going to L.A. next week. I am personally—there is one thing, governors can get in doors that lots of other people can't, and I ask these major executives to give me 30 minutes. I give them a video, and I give them a book, and I talk about my personal experiences in Appalachia. I haven't gotten any takers yet. I have been doing this about 8 months.
    One of our problems, we had no places to locate businesses, as Congressman Rahall knows. All the decent land that doesn't flood has already been used for houses or stores or something else. We have had to build business parks, and we now have three of them in Appalachia, Kentucky, that are complete, 400 to 600 acres of land fully developed with water, sewer and road access, something I didn't have a year ago. This is fully funded by our coseverance tax investment.
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    I now have a place to locate major businesses that I didn't have a year ago. And I have schools. I have infrastructure. So I am now selling—I have two and a half years left in office. I am going to spend a lot of those two and a half years selling, going to people that ought to be in Appalachia, Kentucky, and don't know it yet; and I am going to give them a little education about it.
    Mr. COSTELLO. Mr. Chairman, I have no further questions.
    I would like to thank the witnesses again for being here and note that we have been joined by our colleague and a senior member of the Transportation Committee and would hope that he can be recognized at this time.
    Mr. LATOURETTE. I would be happy to. Mr. Rahall, we are happy to have you with us. I know you have some observations you want to make on the second panel, but we would welcome whatever you want to say now.
    Mr. RAHALL. Yes. Thank you, Mr. Chairman.
    I want to commend Chairman LaTourette and Ranking Member Costello for holding these hearings today.
    I have no requests for this panel, just to say congratulations on the great job you have done. I am sure through your testimony today and through your travels around the country and the world that ARC has benefitted from your work.
    ARC does provide a great deal of help to our respective areas. It is not a handout as some have charged but rather a hand-up, and it has a lot more work to do. The work is not done, but it has accomplished a lot.
    Thanks to your Federal Co-Chair Jesse White and you, Governor Patton, and our next panel from whom we will hear, especially our former governor from West Virginia, Cecil Underwood, it makes our job a lot easier here on the Hill to keep ARC as we have in the past through efforts to zero out the program. We don't see those today, fortunately, but it is because of your work at the grassroots level, and that is what ARC is about, the grassroots level, bringing the projects up from that level to our attention and to the Federal people's attention. That is thanks to you all. We thank you for your work.
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    Mr. LATOURETTE. Thank you, Mr. Rahall.
    It is now my pleasure to recognize the Co-Chair—the Vice Chair of the subcommittee, Ms. Capito.
    Mrs. CAPITO. Thank you.
    I enjoyed both your presentations. Thank you very much.
    I have a question about the distressed counties. When I did look at the map from 1965—and I think I shared this with you when we spoke earlier—a lot of the concentration of the red area was in the more southern area of the—well, it was in West Virginia, Wales, but also in the Alabama, Mississippi area; and you talk in your paper about transitioning economies, which is tremendously important to my State of West Virginia, which is heavily dependent on coal and other extracted industries. What can the ARC do—or what are you doing to sort of incentivize us to transition our economy? Because that is a real need. We want out of the red.
    Mr. WHITE. West Virginia has actually erased some red. There is actually a lot there. A lot of the red is based on coal dependency. It is based on burley tobacco farming, particularly in Kentucky. It is based in the south on textiles. A lot of declining sectors characterize a lot of our economy.
    We think the—that is why we think the future has got to be in two or three areas, and they are longer term strategies.
    One is getting our people educated and trained, getting our human resource base up to national standards.
    Secondly is continuing to work on this—what we call an entrepreneurial economy, so that people have both the spirit and the wherewithal to create their own businesses and grow their own businesses. We believe in more home-grown businesses, where the control is local, the jobs are local, the wealth that is created is local.
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    The third thing I think relates to this problem—this opportunity we have with technology and the Internet. I don't think there is a magic bullet. I think it is a long-term problem of putting in place these building blocks of sustainable economic development; and they deal with technology, our human resource base and a more entrepreneurial economy.
    Mrs. CAPITO. Thank you.
    I have another question. In terms of the highway development that needs—it is still in great need, particularly there again West Virginia. We are in those high dollar areas per mileage. Is there any tying of that to the development of the technology infrastructure? In other words, when you are building a highway, are you laying the wire at the same time, or is that something that you have thought of or has been developed?
    Mr. WHITE. That has not happened at the ARC, and I don't know that we actually have statutory authority to do that or whether it would even be required, but it is something we—the Commission probably ought to take a look at. I mean, 82 percent of it is already built, but a lot of it is still not built, and we are doing right-of-way and doing developments.
    Mrs. CAPITO. Particularly into the more remote areas, where the access to the Internet and such is even more remote, because it is less economically feasible for a lot of people to go into those areas. Those are the areas I would assume that is still left untouched by the highway development. I think it would be a nice marriage of two initiatives.
    Another thing on your entrepreneurship, I think that is an excellent initiative. It seems, though, to me in my town meetings that what entrepreneurs want I am not sure that you are offering, and it is always money. It is office venture capital and those kinds of things. Do you have initiatives to help folks try to find that much-needed cash to get the jump-start? Is that your main thrust besides training?
    Mr. WHITE. Well, we are working on that area. We actually have 20 something revolving loan funds in our region that do provide debt capital to small businesses, but we are also working on the equity piece, and we were very—in fact, these two governors were very active in helping getting the new markets initiative passed, and we have provided developmental money to try to at least have a shot at two of those new market development venture capital funds, and we think we have got a pretty good shot at them.
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    In addition, we have got about eight venture capital funds. One, of course, the grandfather of them all, is Kentucky Highlands, which Governor Patton could speak to. We have about eight developmental venture capital funds in the process of being developed right now, one in Tennessee, West Virginia, Kentucky, Ohio. There has just been a $15 million venture capital fund launched in Ohio.
    These are a little different from private sector venture capital funds. I mean, they operate as venture capital funds, but the internal rate of return is usually about 12 percent. And they have what we call a double bottom line of keeping the fund alive but promoting economic development. Capital is the lifeblood of entrepreneurship. They have got to have it, and we are trying to do our best to work on it.
    Mrs. CAPITO. Thank you. I have no more questions.
    Mr. LATOURETTE. Thank you very much; and again, gentlemen, we appreciate your testimony very much. Thank you for coming.
    I now would like to call up today's second panel. The second panel consists of economic development experts from the Appalachia region.
    Our first witness is the two-time former governor of West Virginia, Cecil Underwood, who has been referenced here a number of times. Governor Underwood served as the ARC's State Co-Chairman.
    Governor Underwood, we appreciate your being with us here today, and I know that the subcommittee will greatly benefit from your experience.
    Mr. Michael Whitt, as we continue our celebration of West Virginia today, also hails from the State of West Virginia. He is the Executive Director of the Mingo County Redevelopment Authority, and Mr. Rahall I think will introduce him in just a couple of minutes.
    Also, Mr. Dan Neff from the great State of Ohio, who is the Executive Director of the Ohio Mid-Eastern Governmental Association. Mr. Neff is also a member of the National Association of Development Organizations and will be representing their interests here as well.
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    Gentlemen, I thank you all for being here. If you would approach the table. I would ask unanimous consent that your written statements appear in the record and that you summarize your testimony.
    Before we begin, as advertised a couple of times, we are joined by one of the senior members, also from—when we get Mr. Mollohan here, I think we will have a clean sweep here today. Mr. Rahall has asked for the opportunity to say some nice things about you, Mr. Underwood; and so it is my pleasure now to yield to Mr. Rahall.
    Mr. RAHALL. Thank you, Mr. Chairman.
    Indeed, I would like to welcome both Mike Whitt and Governor Underwood to the committee today. It is great to see both of you again.
    As you have said, today West Virginia Day is being celebrated both back home and here in our Nation's capital. Since this is West Virginia Day, 130 years ago we were born out of the strife of the Civil War. But today we are going to hear from all three of this panel but two from West Virginia that certainly understand the positive impact ARC programs have on the people in West Virginia and the 12 other States within the ARC.
    Governor Underwood has worked closely with ARC on economic development. He served his 2 years as the States Co-Chair. Mike is the Executive Director of the Mingo County Development Authority. Mingo County is in the Tug River Valley of West Virginia, bordering Kentucky, and it is the center of our billion dollar coal field—that is with a B—billion dollar coal field.
    The people of West Virginia have faced many boom and bust cycles of the past because of the coal industry. These are dedicated and hard-working people who are eager for economic diversification and new job opportunities, and that is why constituents I have the honor of representing appreciate Mike Whitt's outstanding work. They appreciate Governor Underwood's work in partnering with the ARC.
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    Mingo County is the cradle. Governor Patton knows very much about that. It brings visitors and tourists to the Tug River Valley. So our witnesses today are working to settle another feud that affects all of America, and that is the feud between development and protecting and sustaining our environment.
    Mike is at the center of that work, at the center of that question. Whether it is through responsible mining, we can protect our environment and provide additional economic development at the same time for our citizens. So Mike is answering that question whether we can have both with a resounding yes.
    Mike is also finding ways to bring previously mined coal sites back to productive uses for the benefit of the entire Mingo County. For instance, today Mike will tell us about the James H. Buck Harless Wood Products Industrial Park that was developed on a reclaimed strip mine site. He did this with a critical backing from ARC, but we will hear further details from Mike.
    The ARC is giving Mingo County a big boost by helping its people with another industry, and that is the aquaculture industry, and again Mike can give us further details on that. But it is a unique endeavor, and it is truly using the mine waste from our mines in a very effective manner to help our people, again by providing them with jobs.
    So, with that, I just want to mention one other area, and that is the Hatfield-McCoy Trail. I mentioned a feud a minute ago, that ARC is giving that Hatfield-McCoy Trail, as Governor Underwood knows, it was so instrumental in, has given a hundred thousand dollars to that project as well. That has boosted our travel and tourism. So we have an industrial park, an aquaculture, tourism, all thanks to ARC. And while Mingo County is still on the list of distressed counties, as I said earlier, there is much work to be done, and this is one county where we still have a lot to be done.
    Mike has a bachelor's degree in physical education and health. He has a masters degree in education administration from Marshall University in Huntington, West Virginia. He worked in the Mingo County coal mines to help pay for his tuition while he was in college. He spent a total of 12 years in the mines, even after college. He has taught school. He has coached football. He has served as president of PTA. He has served on several boards, including the Hatfield-McCoy Regional Development Coalition. You thought we were busy.
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    Anyway, Mike takes the initiative, Mr. Chairman, and is not afraid of taking on the challenge of developing and diversifying the economy of Mingo County. So it is my honor to welcome Mike today and to present him to my colleagues on the committee. Welcome, Mike. Welcome, Governor Underwood.
    Mr. LATOURETTE. Mr. Rahall, thank you very much.
    With that said, again, all three gentlemen, we welcome you. Governor, we would like to begin with you, please.

    Mr. UNDERWOOD. Chairman LaTourette and members of the committee, thank you very much for your interest in reauthorization of the Appalachian Regional Commission, and thank you for inviting me to testify today. I have a long relationship with the ARC and certainly am honored to share my views with you.
    On a very hot August afternoon in 1959, three governors met in Annapolis, Maryland, to talk about the economic blight of the mining counties of eastern United States that we had just gone through. Millard Tawes had been elected governor of Maryland the year before. Bert Combs was serving his second year as governor of Kentucky, and I was in my third year as governor of West Virginia.
    Governor Tawes said in the campaign, I promise these mining counties in western Maryland to try to do something to help them, but I don't know what to do. So we spent an afternoon brainstorming and came up with the idea that we needed both the Federal and the State government focused in a partnership to address the economic distress which the region had suffered.
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    The staff members from these three governors began to hold monthly meetings and soon broadened their efforts to staffs of other governors from the Appalachia region; and, as you know, the rest is history. President Kennedy adopted the idea, and then President Johnson saw it through completion, and Congress created the Commission in 1965. So that is the history of the beginning of ARC.
    As you have heard today, it is truly a partnership, because it is not here to build an empire. It is here to identify problems and solve them, and it takes the cooperation of the Federal Government and all the States for action to occur. The President appoints and the Senate confirms the Federal Co-Chair, and the 13 governors annually select one of their own to be the State Co-Chair.
    I certainly was honored to serve for 2 years as the State Chair. I have been honored to testify on behalf of ARC each of the last 4 years, and I am glad to be back today.
    As you have heard, since the creation, ARC has made significant impact throughout the 13 States. Working with States, with communities and with private sector groups, the Commission has been able to cut the region's poverty rate in half, reduce infant mortality by two-thirds and double the percentage of adults over 25 with a high school education. All three of these extremely important if the region is to grow and participate in the 21st century.
    They have now completed 2,331 miles of highways that link the region to the interstate system and to the eastern United States commercial area. More than 800,000 households now enjoy a benefit from the ARC investments in water and sewer infrastructure.
    In spite of this remarkable progress, many counties, particularly in central Appalachia, are unable to enjoy the Nation's current economic growth.
    During my 2 years as State Co-Chair, I dedicated special attention to economically distressed communities; and with the help of Dr. White and the staff of ARC, we worked in McDow County, Congressman, in your district, to develop local leadership, to identify potential entrepreneurial beginnings and to find in some cases private venture capital money. I invited all the companies we could identify and financial institutions that had connections with that county, invited them to make a one-time contribution to create a venture capital fund from the private sector. We weren't as completely successful with that effort as we had hoped to be, but we did get it started.
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    We found one thing to be true, that not only is there a lack of resources in these economically depressed counties, but there is a lack of leadership, because they just haven't been exposed to solving these kind of problems. And the entrepreneurial efforts of ARC and the development of local leadership I think are two of the most important things that we have been able to do.
    We held regional community meetings in several States, where elected local officials, development leaders, educators, business people and health care providers identified the greatest needs and proposed potential solutions. The committee also sought the professional advice from nationally known leadership development of groups.
    Last fall, the Commission approved an enhanced program for distressed counties that will investigate technical assistance in capacity building to promote technologies, to develop high-speed Internet access and the whole gamut of telecommunication technology.
    The region simply must be linked to the information superhighway if it is to participate in the Nation's economic mainstream. The region must not be left behind the telecommunications infrastructure, as it was when the interstate highway system was designed.
    The economically depressed counties are rural and small towns. They are not major metropolitan areas. Thus, they are ideal prospects for technology commercial investments. Small towns are free of the congestion, the pollution, the high crime rate of major metropolitan areas. They are free from traffic and noise congestion, and they offer technology-driven commerce and overhead operating costs far less than it would be in a major metropolitan area.
    Two things are needed—first of all, telecommunications and, secondly, access to higher education. Because these are people engaged in intellectual capital, and they will be very actively pursuing a continuation of their training. So I can't think of anything more important than enhancing the telecommunications basic structure. That is the roadbed on the information superhighway.
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    Today, I am happy to speak in strong support of reauthorization for 5 years. I want to express my personal appreciation to the comments that all of you have made today and to your record of support for ARC on a bipartisan basis, and I certainly appreciate the long service of Congressman Rahall. He has been very active on behalf of ARC and on behalf of transportation infrastructure. And I am delighted to see our new representative, Mrs. Capito, who served in the State Legislature taking an active role in this committee as well.
    One thing I want to mention, the past several years the ARC budget has been flat. It is a comfort to know that we didn't lose money and have to fight to regain it, but we have lost some to inflation, and we are almost—the budget before Congress this year when that is completed, we will be almost $10 million lost to inflation since 1997. Reauthorization and funding at the current level is extremely important, but if we can find a way to add some growth, I think we could expedite and accelerate the work of the Commission to meet the goals that you have already heard about.
    Again, I thank you, and I am honored to be with you today and appreciate your interest and your support.
    Mr. LATOURETTE. Governor, we thank you very much for your excellent statement.
    Mr. Whitt, we have heard a lot about you and now are anxious to hear from you.
    Mr. WHITT. Thank you very much, and thank you for the kind remarks, Congressman Rahall. Thank you, Chairman LaTourette and Ranking Member Costello, for holding this hearing today.
    My name is Mike Whitt, and I am the Executive Director of the Mingo County Redevelopment Authority located in southern West Virginia. I am here for the reauthorization of the Appalachian Regional Commission. Congressman Rahall represents Mingo County, and I am here because West Virginia is one of the 13 States covered by the ARC.
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    My job as Economic Development Director in Mingo County, West Virginia, is to create an economic opportunity through diversification of Mingo County's economy. I am here to tell you about what ARC has done for Mingo County and why I think it is a must that ARC be reauthorized.
    The example that I am going to share with you is the shining star project from my county and actually my region. It is the James H. Buck Harless Wood Products Industrial Park. It is owned by our agency.
    We purchased about 6,750 acres of reclaimed surface mine land about 3 years ago and started recruiting clients to come together to start manufacturing value-added wood products using our abundance of hardwoods that is traditionally exported out of our area.
    I am pleased to announce to you that, as of this past Monday, the hardwood flooring plant started production. By the end of this year, we are going to have 90 employees; and by the end of next year, there will be 150.
    Of the hundred acre Phase I area, we have developed 44 acres, and we are very excited about the potential of creating a thousand jobs in this park over the next 10 years by manufacturing value-added wood products. That is nontraditional in my part of the State.
    This is the first industrial park in Mingo County. Mingo County has solely been dependent on coal all my lifetime, my father's lifetime and my grandfather's lifetime. We must diversify away from the coal industry, because it is a depleting resource. It is not going to be around forever.
    The most important part of our funding package to make this $30 million industrial park possible was the million dollars that they received from ARC for a waterline and fire protection and $950,000 that we received to provide an industrial access road through the TEA-21 appropriations that you made to the department of highways.
    As you know, diversification is impossible without roads, water and sites.
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    We had a transportation system, and we had a site, but the ARC appropriated a million dollar waterline extension from the Pine Creek area of Logan County. This provided potable water and fire protection to this project, and also it provided portable water to 23 families along the way that otherwise would never have had portable water. Also, the ARC appropriated $950,000 for the design and construction of the industrial access road from 22 Mine Road into the Wood Products Industrial Park. This is adjacent to U.S. 119, Robert C. Byrd Freeway.
    I have never seen so much excitement doing in my county over a new industry. Projects like these are dreams come true. Because the ARC now has roads, we are getting waterlines extended. Throughout our county we are getting industrial parks and diversifying our county.
    A lot of you folks have never been to West Virginia, but I am sure that you represent rural areas of the States that you live. I wish you could see the excitement on our people's faces when you can offer them some hope for economic diversification.
    That is just a little bit of hope of a lot from the disappointments that they are used to seeing, such as schools closing, teachers losing their jobs, major industry jobs lost, unemployment skyrocketing. As Congressman Rahall is very familiar and Governor Underwood, our last census, we have lost another 5,000 people, 33,000 down, and we are now 28,400 and something.
    For a project like this to come to fruition, the excitement is electrifying down home. Our people are just so excited.
    I want to thank you folks for giving me the opportunity to testify and tell you how important ARC has been in Mingo County.
    Other projects that ARC has been a part in helping come to fruition are too numerous for me to mention. In particular, roads and development sites, utility extensions, education and recreation. All of these things are very integral parts of becoming a self-sustaining county.
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    I will tell you, for one, we want off of that list right there, the red one; and I can commit to you that, with reauthorization of this program, we are gong to work hard to accomplish our goal to becoming a self-sustaining county. We don't want to stick our hand out to you. We want to do our due diligence. Then we want to do our part. But then we need to reach our hand out to you folks. And I think our past has proven this to be the case. I can assure you if we can continue our progress in the next 10 years, we are going to be a self-sustaining county, and our goal is to be the most diversified county in West Virginia and hopefully one of the most diversified counties throughout the United States.
    In closing, I would like to say, of all the Federal funding agencies available, ARC has been the most important agency for Mingo County, West Virginia. We have utilized it. It has been very instrumental in economic development and quality of life issues, and I am sure you folks understand the importance of reauthorizing ARC for areas like Mingo County, West Virginia.
    Better yet, Congressman Rahall, I would like to invite you down to my county, and we will take you around and show you what the ARC has meant to us.
    With that, I will be more than happy to try to answer any questions you have in regards to my testimony or my written comments, and I appreciate the opportunity of testifying before the reauthorization to this very important agency for southern West Virginia. Thank you.
    Mr. LATOURETTE. Mr. Whitt, I appreciate that very much. Mr. Costello and I have been looking for a trip, and we may take you up on that.
    Mr. WHITT. I would love—.
    Mr. LATOURETTE. I was going to say, I have been to West Virginia a number of times, and one of the most interesting—I tried to stop one night on the—I thought it had a nice name, Fancy Gap, but by the time I got to the bottom of the mountain a half an hour later, it wasn't so fancy anymore.
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    Thank you very much for your testimony, Mr. Whitt.
    Mr. Neff, we would be honored to hear from you, sir.
    Mr. NEFF. Mr. Chairman, thank you so much for this opportunity today. Committee members, thank you for your welcome as well.
    Again, my name is Dan Neff, and I serve as Executive Director of the Ohio Mid-Eastern Governors Association, Cambridge, Ohio. We go by the fancy nickname of OMEGA. It is a fancy nickname for us. OMEGA is an Appalachian Regional Commission-supported Local Development District, of which you have heard about today, and we serve a 10-county region in eastern Ohio.
    In that role, I am representing two important partners who work with ARC, the Development District Association of Appalachia, which represents 71 local development districts in the region, and also are partners with the National Association of Development Organizations that I am sure many of you are aware of the fine work that they do in supporting the cause of regional development throughout the country.
    I have been around ARC for 17 years in various capacities. I have worked as a planner at OMEGA coming out of college, had the opportunity to go to State government with the Governor's Office of Appalachia and then Governor Voinovich, first as the program manager and then as the Governor's State Alternate to the Commission. Now I have had a chance to come back home, if you will, to OMEGA as the Executive Director.
    During that time, I have had the opportunity to see just how effective that partnership has worked over the years at the State level. It is amazing to see how the States interact with one another and to see that relationship with the Commission staff and the Federal Co-Chairman staff and how that relationship is so effective and vibrant in making sure that proper policy that is provided from you all is actually implemented in the process.
    Then at the local level, as an Executive Director at the Local Development District, I really get to see just how vital and important that grassroots end of ARC's intergovernmental partnership works and functions. That is really what I am here to talk with you about today, is how that local development process works, how we serve, in essence, as Local Development Districts, as the local governments' representatives to ARC.
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    In fact, by and large, Local Development Districts are governed by a board of directors made up of local elected officials and other appointed executives from various economic and social economic concerns. So it is a very nice cross-section of local government and local Appalachia, if you will, that serves as the starting point for the ARC process. These local partners again represent 71 Local Development Districts covering over 406 counties, and I think that they serve as a vital tool to voicing the needs of local residents in Appalachia.
    In Ohio, we have three Local Development Districts, and we are involved in a wide array of activities, as are other partners in the region. In essence, we serve as niche fillers, if you will, in helping to meet those needs that I talked about.
    In Ohio, we are involved in a number of such things as revolving loan funds, international trade assistance, work with small business development centers in providing advice to those entrepreneurs that were talked about earlier. We provide grantsmanship training and technical assistance. We work with infrastructure development projects. One of our agencies also serves as an area agency on aging.
    In my written testimony which I have attached a number of examples that will give you a better overview of just what Local Development Districts do throughout the 13-State Appalachia region and how much there is a wide array of Appalachian Regional Commission funded projects that exist in the region.
    I have often said that the curse and the blessing of the ARC is its flexibility. We allow many different types of activities that meet needs that are driven, again, from a bottom-up process locally. And yet, Governor Underwood, as you so eloquently noted, the funding is limited and we really have a difficult time trying to determine just what priorities can be, because we are trying to do so much with such limited resources.
    Of course, LDD is working partnerships with their States; and I believe Ohio, Congressman LaTourette, is a very good example on how that process works. Really, it is a very deep politicized process in which our Local Development District boards, again made up of local officials, are allowed to prioritize what they believe are the most important things for them to do. And from that point, we take that list of prioritized projects and we go to the governor's office of Appalachia, which represents now Governor Taft, in determining what the State's priorities are going to be. We work with our two other Local Development Districts to determine—hammer out a State list of priorities, if you will, and what we are going to work with with the ARC Commission staff in getting those projects funded.
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    One thing I would like to note is, again, Ohio support of the Appalachian Regional Commission and the fact that Governor Taft has taken a bold step in committing State funds to match ARC funds to the tune of over $4 million in State resources that are brought to projects, that we use the same criteria as we do in looking at Federally funded projects through ARC.
    It is also important to note, I think, that, Congressman, as you know, the House has gone through a very difficult budget process in the last few months and yet, in the new biennium, none of those matching dollars were touched. The State still believes that Appalachia is a priority and under Governor Taft's leadership are committing the resources to do those things.
    With that in mind, I would just like to say that I am pleased to represent NADO and the DDAA today and offer support for this reauthorization legislation for ARC. I believe the present legislation is solid, and it needs little modification.
    Of course, there are things that have been cited already that I think are important to note again. The $75 million telecommunications initiative, that would really help better bridge the so-called digital divide in Appalachia; and I think that there is definitely room for improvement in the Appalachia region as far as telecommunications. Obviously, we don't want to be in the same situation as we are with the highway system.
    Some other things that I would like to note include allowing Appalachia States the opportunity to administer ARC funds where no Federal basic agency is available. And, again, in Ohio I cite the example of our Office of Housing Community Partnerships in the Department of Development. These are the people that do the CDBG formula program for the State. And yet we are also having—they will administer our State-funded projects as well that I talked about earlier.
    I also encourage the Congress to consider returning LDD administrative support back to a 75 percent/25 percent ratio. Again, this doesn't call for any additional monies for Local Development Districts but just allows us to have more of our matching funds available for our projects.
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    Again citing an Ohio example, I would also encourage Congress to consider the possibility of providing fiscal incentives for States to target more of their funds to Appalachia. In that respect, that would provide financial encouragement for States to put their own dollars on the table and then be rewarded from the Federal Government for doing so.
    Then of course, as already has been noted, a 5-year period for ARC reauthorization I think is critical. It would allow us, again, to move forward in our planning and development in a much more cohesive and effective process.
    Finally, I would just like to reiterate my strong support for ARC and its model for service delivery. It is clear that the administration of the ARC program by agency staff and the Federal Government Co-Chairman's Office is not conducted in a manner that many would be consider to be typical Washington bureaucracy. They are effective. They get to the point. They want to see projects improve. And they are not looking for ways to stifle project development but instead looking for ways to get projects funded and actually implemented. And that is I think very important to note.
    Frankly, at the—I would also like to say that I think the question before Congress today is not strictly about reauthorization. It is about funding ARC at a level that allows it to compete, complete its work to bringing Appalachia to a standard of living that we as Americans can be proud of. ARC has proven that, as an intergovernmental model service delivery that works, it is a model that is worth replicating in other parts of the Nation. And I think the Delta Commission is a perfect example of that. It is gratifying to know that ARC, in essence, used the model for the development of that program.
    Frankly, I think that if the necessary resources are provided I believe that there is a day in the foreseeable future where we can literally lock the doors and turn out the lights of the ARC program, and the citizens of this Nation can say a job well done. I, for one, look forward to that day and believe that this region of this country is of vital importance to the Nation's future and can play an integral role in helping this country be a better place.
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    With that, Mr. Chairman, I thank you.
    Mr. LATOURETTE. Mr. Neff, I thank you very much.
    I thank all of you for your testimony today. It will greatly assist not only the subcommittee, which is supportive, but also our colleagues who will review the record when we ask them to be supportive as well.
    Mr. Whitt, I was impressed, for one, with your description and your enthusiasm about the James H. Buck Harless Wood Products Industrial Park and how it is moving forward. I would ask you, as you look at Mingo County and what challenges face you, what would you describe as the most pressing economic development need in your community today and what is being done to address it and how does the ARC or maybe the EDA, which we are not talking about today, but give you a hand in tackling that problem?
    Mr. WHITT. Today I would say that development sites is our most pressing need.
    If you would have asked me this a few years ago, it would have been transportation and waterline extension. But, because of ARC, we now have a four-lane highway to our county that gets us the transportation; and we have had one of the most aggressive waterline extensions, using ARC as part of the funding and also the Jobs Infrastructure Council, which this Governor was very instrumental in, of selling bonds to extend water to our citizens. I am proud to tell you that this time next year 75 percent of our people in our county will have portable water.
    So sites is our biggest issue, but we have a process in the works right now, working with land and coal companies and government agencies, of trying to develop mountain-top removal sites along with road construction, utility line construction to create some sites which would be at no cost to—no public dollars involved in that—all privately donated and done with private entities.
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    Mr. LATOURETTE. Mr. Neff, how about you? Is it the same up in Ohio? Is it site selection is the difficulty, and because of ARC and EDA and some of the other assistance from the States that perhaps the water and sewer things have gotten a little bit easier, the roads have gotten a little bit easier?
    Mr. NEFF. Well, I think, again, that is certainly a priority for us. It has been. It will continue to be. Because, quite frankly, those are the activities that provide jobs to the citizens of our communities. Really, right now, that has been one of the things that we have been most proud of, and typically it is a partnership.
    In our counties, we have got—in just the last 5 years, we have done projects in Guernsey County, Belmont County, Jefferson County; and now we are going to do something in Coshocton County that involves industrial park development, involving both the ARC and the EDA as key resources for development of such things. Obviously, there are State dollars involved, but, as Federal Co-Chairman White pointed out, of the times the ARC investment becomes the key ingredient, it is not the biggest amount, necessarily, but it is the one that brings the other pieces together.
    Mr. LATOURETTE. One of the key components of any successful economic recovery of an area is not only the infrastructure and the sites you develop, but it is the people that you have. A lot of employers up where I am from say that we have some jobs, but we don't have people to fill the jobs. One of the great successes of the ARC, at least from my observation, actually, has been the increase of high skills as a result of ARC participation and also the improvements in the health care and the delivery of health care systems in your area.
    I wonder if each of you would care to make an observation for the record as to what that has meant to the workforce in your communities.
    Mr. Neff, we will start with you; and we will go down.
    Mr. NEFF. Again, I point to the flexibility of the ARC program and how valuable that is in providing for projects that can do the very things you talk about. Training programs become key for the future. We have to have a skilled workforce, and that is even more crucial today than it was 10, 15, 20 years ago. It is going to continue to be a priority. And something that, again, we are working with our technical colleges, working with our vocational schools.
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    As far as health care goes, really the State dollars that we recently received from Governor Taft through the State general assembly has played a vital role in allowing us to get more involved in such things. On our project list this year alone, we are funding three dental clinics that are basically targeting resources that provide services primarily to children, who because of the difficulty in getting local dentists to see them, we are going to provide them with an avenue to get good dental care so that they cannot only have their teeth taken care of now but also hopefully taught good dental habits for the future.
    Mr. LATOURETTE. Okay. Mr. Whitt.
    Mr. WHITT. We have been very blessed. All of our technical training for our new industrial park has been provided for by the Southern West Virginia Community and Technical College, which is located in Mingo and Logan County. It has been very beneficial to us and has been very helpful.
    I am proud to say that our education system has made tremendous improvements over the last few years. We come from 49th up to 43rd this last year, and I am anxious to see what our ranking is this year.
    Also, we are blessed by having two health care facilities, one in Williamson and one in South Williamson, which is very unheard of in this day and time in rural West Virginia and southeastern Kentucky, but we are blessed with the health care that we do have down there.
    Mr. LATOURETTE. Thank you.
    Governor, anything you would like to add?
    Mr. UNDERWOOD. I think one of the most significant things to happen in recent times is the Workforce Investment Act that Congress adopted, what, 2 or 3 years ago.
    It does two things. The old JTPA program was provider driven; here is what we have to offer. This is consumer driven, and it creates—in our State we have seven regional councils composed of local officials, mayors, county commissioners, and the majority from private sector, the employers' sector, and they are developing with these funds that you have made available training programs that meet the needs of that area and provide the opportunity.
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    Site selection is important, but here again, as we move into the information age, we don't need large sites like we once had. We can develop in much smaller locations. And I think that is another reason that the communications infrastructure is so extremely important. But education and training, I know of several places in West Virginia now where jobs are available, but people are not trained, not educated to fill them.
    Several years ago, 1985, Senator Byrd and I and a dozen other people created a nonprofit group in West Virginia called Software Valley to promote the use of technology. One of the things we did early on was to do a survey of companies, very small to very large, who are driven by technology, asking them to identify their employment needs based on the growth at that time, where would they be by the end of the century and 5 years in the new century. That showed that there was a need for, as I remember, 20 percent more college graduates than we were at that time producing.
    Our college graduate rate has gone up dramatically. There are many more people in college now, and our high school graduation rates has increased substantially. So I think we are moving in precisely the right direction.
    Mr. LATOURETTE. Thank you very much. I am glad you mentioned the Workforce Development Act and JTPA, because that was another set of programs that was slated for destruction not too long ago; and I am glad that people like you have been successful in coming to Capitol Hill and advocating their worth and their value.
    Mr. Costello?
    Mr. COSTELLO. Mr. Chairman, I had three questions, and they have already been answered by the testimony of our witnesses, centering around education and training.
    I just want to compliment the witnesses on their testimony. We appreciate you being here.
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    I yield back the balance of my time.
    Mr. LATOURETTE. Would you like to yield to Mr. Rahall, and then I will finish up with Ms. Capito, if that is—.
    Mr. RAHALL. Thank you, Mr. Chairman, for yielding.
    Mike, I had mentioned this briefly in my introduction of you, and that is the aquaculture industry. As I recall, back in the mid-1990s, ARC funded a study conducted by the Freshwater Institute of Abandoned Mine Waters in West Virginia in Mingo County and neighboring Logan County, and they identified as having water with enough volume—those two counties, having enough water with volume and quality to generate 25 to 30 million pounds of Arctic Char, the fish that belongs to the salmon industry. Can you further expand on what you have been able to do with that in Mingo County, jobs that you have created and what the future for this industry is and where that Char is going?
    Mr. WHITT. Yes, sir. This is an industry—we just got started. Matter of fact, just last Thursday we hit our third batch of eggs. We get eggs twice a year. We get them in June, December and June.
    Through the study that Freshwater Institute had received ARC funds on a band of mine waters in southern West Virginia, it led us to something that, quite frankly, I thought was crazy when I heard, you know, I am growing mine waters—I mean, growing coldwater species in mine water is something that we have always been told how terrible it was; and, quite frankly, the water is of excellent quality, that we just flow—it comes straight out of an active mine right now. It flows through the hatchery system.
    What this has done, there is about $301,000 worth of public money in this hatchery. This is another project that took us about 4 years to get off the ground. We have done our due diligence, we have done our research, and it just made economic sense. Since we have got the hatchery up and operational, the private sector is three partners, local partners, who came together and formed a limited partnership and called it West Virginia Aqua. That has leveraged about a $2 million capital investment from the private sector for a grow-out facility.
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    What we do, the hatchery keeps—they hatch them from eggs, and they keep them to 30 or 40 grams, large minnows. Then they are transferred to a grow-out farm, which they keep there about 15 months, and they are going to be raising around three-pound Arctic Char.
    One of the unique things about Arctic Char is, the only way that you get it now, it has to be frozen to get to the East Coast seafood market in Boston. We are going to be the only area in the world that can actually deliver fresh Arctic Char, never frozen, to the Boston seafood market. And processing will start in November of this year. With our first batch of eggs coming in, we are going to start harvesting—the harvest cycle. We will be generating about a half a million pounds of fish, and that is about twice what our State is doing right now.
    Again, this Governor was very supportive in this project. And, Congressman Rahall, without your support, we wouldn't have had the hatchery working with USDA, and we appreciate that very much.
    Mr. RAHALL. See if you can open up a market here in Washington, D.C.
    Thank you, Mike. I have no further questions.
    Mr. LATOURETTE. Thank you, Mr. Rahall.
    Ms. Capito.
    Mrs. CAPITO. Thank you. I have one question for Governor Underwood.
    In Mr. White's remarks, he mentioned that the administration was in favor of 50 percent of the funding going to the distressed counties. I know the governor has a lot of discretion and a lot of input into where ARC funding goes. Do you anticipate that that will set up, say, in West Virginia a more competitive environment between county to county, or how do you see that influencing ARC funding?
    Mr. UNDERWOOD. Well, since we are at the core of the distressed counties, that approach would obviously be of great benefit to us.
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    I think it is worth noting that this is a 13-State region, 400 and some counties, and even those counties that are not identified as distressed, one relatively minor impact could put them over in the distressed area.
    So it is a balanced program. It is a partnership among 13 states. I think we have to take into consideration the needs of each of the States that make up the whole of ARC.
    I think Dr. White also pointed out that several governors have on their own—and I know Governor Taft had very strong leadership in moving additional funds into these distressed areas, and we have been spending up to or even over 50 percent of the budgets on distressed areas. So, again, it is a matter of keeping that balanced, and I think that we are moving in the right direction.
    Mrs. CAPITO. Well, thank you.
    I, too, have enjoyed the panel; and I have no further questions.
    Mr. UNDERWOOD. Let me mention one other thing, if I might.
    Mr. LATOURETTE. Certainly.
    Mr. UNDERWOOD. The importance of coal to this region has been stressed repeatedly. There is a new plant being built in Wheeling, West Virginia, at this moment to manufacture a new product called carbon foam. Carbon foam deals with coal waste. It is a very lightweight, very tough, heat resistent, doesn't burn, doesn't conduct heat. The U.S. Navy and the U.S. Air Force made a grant to Touchstone Laboratories to do the research and, if the research proved to be successful, to take it to commercial market. This has a tremendous potential of a new product to be manufactured from what historically has been waste. It would reopen the high sulfur coal mines, because it is environmentally clean and friendly, and research has been done. The pilot plant is under construction now, and I would hope that this new product can be on the commercial market in a year or so from now. This will open up a whole new potential for all of this region.
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    Mr. LATOURETTE. Governor, what do you do with the foam, though, that is—.
    Mr. UNDERWOOD. Building materials. The Navy is interested in it because of its light weight, its toughness, its fire resistance. They are interested in shipbuilding, the Air Force in spacecraft construction. We invested some State money in the research to see if it has a potential for bridge-building material, because one of the problems we had is having the need to rebuild bridges all too often. So I am very excited about this pilot.
    Mr. LATOURETTE. That does sound exciting.
    Again, on behalf of the subcommittee, I want to thank all three of you for being here today and being patient with us while we had the vote. Your testimony again was not only instructive to us but to our colleagues being asked to reauthorize, and we look forward to a successful reauthorization.
    Mr. Costello?
    Mr. COSTELLO. Mr. Chairman, I would ask unanimous consent—there are some members on our side that have written questions—that we be allowed to submit them to the witnesses and ask them to reply to the committee.
    Mr. LATOURETTE. Without objection, so ordered. If we could beg your indulgence, we would appreciate having the benefit of your answers.
    Thank you very much for coming.
    [Whereupon, at 4:20, the subcommittee was adjourned.]

Testimony of Daniel L. Neff, Executive Director, Ohio Mid-Eastern Governments Association, Cambridge, Ohio

    Good afternoon. Mr. Chairman and committee members. My name is Dan Neff and I serve as Executive Director of the Ohio—Mid-Eastern Governments Association (OMEGA). OMEGA is an Appalachian Regional Commission (ARC) supported Local Development District (LDD) which serves a 10-county region of Appalachia in eastern Ohio. In that role, I am also representing today two important partners who support and work with ARC: the Development District Association of Appalachia and the National Association of Development Organizations.
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    I appreciate the opportunity to testify before the Committee on Transportation and Infrastructure's Subcommittee on Economic Development, Public Buildings and Emergency Management and offer proponent testimony concerning the reauthorization of ARC. It is my privilege to discuss with you today the important role of ARC in its efforts to improve the quality of life in one of our nation's most economically disadvantaged and socially distressed regions. Indeed, the history of our country's Appalachian region (which includes parts of 12 states and all of West Virginia) is replete with examples of poverty that denotes an area which is isolated and out of the mainstream of America's system of commerce. As a result, many Appalachians live in substandard housing, have inadequate health care, lack access to quality education and training programs, and have minimal opportunities for employment that provide wages to adequately support their families. It is my belief that we, as citizens of this great nation, have a moral obligation to respond to these issues of social and econormic distress that afflict many residents of our country (in Appalachia and elsewhere) not because of what they have done but because of where they live. ARC, in my opinion, has proven that it is a sound and effective model of program implementation and, with the necessary resources, is successful in meeting these challenges that exist in the Appalachian region.

    I have been involved with ARC in various capacities for almost 17 years and believe that this experience provides me with some unique insight as to the work and functioning of this program. I began my career as an entry-level Planner with OMEGA after having an internship there as a student at Muskingum College. Later, I moved into the Ohio Governor's Office of Appalachia; first as the Program Manager and then as Director of the office and Ohio's Alternate to ARC for then Governor George Voinovich. After serving four years in that capacity, I then had the opportunity to return ''home'' and accepted the position of Executive Director at OMEGA in 1998.
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    Having been at the state level, I have seen how the states must work together with each other and the federal government (represented by the Federal Co-Chairman and commission staff, to craft policy and chart a programmatic direction for ARC. While not always pretty, the process provides for an effective manner in which sound decision-making can take place for the betterment of the region. As the Executive Director of a LDD, I have also been actively involved with the vital ''grassroots'' end of ARC's intergovernmental partnership and the important role that local officials play in project development and the prioritization of activities.

    In essence, LDDs serve as local governments' representative to ARC. LDDs are generally governed by a board of local elected officials and other appointed non-elected individuals representing various economic and social concerns. These organizations were established through the Appalachian Development Act of 1965 as the ''local partner'' in the ARC intergovernmental model. At present, there are 71 LDDs covering 406 counties within the 196,000 square miles that make up the 13-state Appalachian region. With administrative financial support from ARC, each LDD serves as a ''convener'' of local governments and organizations within their area. Each organization seeks to ''assess, plan, and facilitate action within their locality in efforts aimed toward achieving the quality of life enhancement goals of the ARC.''

    Of course, it is my fervent belief that the ARC program model has been and continues to be an extremely effective structure from which to provide services and support to local governments and residents. The ''bottom up'' process of ARC funding which emphasizes state and local decision making and project prioritization provides for a balanced process that limits federal control and bureaucracy. This, coupled with the wide array of eligible activities that can receive assistance truly does make it an intergovernmental model that has not only proven to be extremely successful but I believe is worthy of emulation in other geographic areas of distress in the country. (It is particularly gratifying that Congress modeled the new Delta Regional Authority mostly on the ARC structure.)
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    While the program's funding levels have never been very large (Ohio's non-highway ARC funding has averaged approximately between $4 to $4.5 million per Year during the last decade); it has, nonetheless, been able to leverage significant amounts of other federal, state, local and private sector support. As a point of policy, ARC requires some level of matching funds in virtually all of the projects in which it is involved. (ARC can fund up to 80% of a project in a Distressed County and no more than 50% of a project in a Transitional County. Ohio presently has 9 Distressed Counties and 19 Transitional Counties. Ohio's remaining Appalachian county—Clermont—is defined as a Competitive County and therefore eligible for no more than 30% funding on any given project.) This requirement has enabled a little bit of ARC money to go a long way with the ARC funds often being the stimulus that allows a project to move forward and be completed.

    In addition, Ohio has taken funding for Appalachia a step further by providing state dollars to match ARC Area Development funds received for non-highway projects. As a result, through the strong leadership of Governor Bob Taft, Ohio brought an additional $4.3 million to the table for project related activities during state FY '01. The Governor's Office of Appalachia (GOA) in cooperation with the Ohio Department of Development and Ohio's 3 LDDs (Buckeye Hills-Hocking Valley Regional Development District in Marietta, Ohio Valley Regional Development Commission in Waverly and OMEGA) agreed to adhere to ARC guidelines in making project determinations. This was done because we recognized the strength, value and equitable nature of the ARC funding process. It is also worth noting that even in a difficult funding climate the state of Ohio's recently adopted biennial operating budget included this additional Appalachian support for a second year with no cuts in funding per the recommendation of Governor Taft.

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    One of ARC's strongest features is the flexibility and discretion that its regulations provide each of the 13 Appalachian states and their governor in developing priorities and determining how ARC funding will actually be spent. Ohio, I believe has one of the better systems in place to make those decisions. Through the direction of GOA and its coordination with the LDDs the spending of the vast majority of Ohio's ARC allocation (as well as the state funding) is determined through decision-making at the local level. This is accomplished through each LDD's Board of Directors which (as previously mentioned) is primarily made up of local elected officials. While the process varies with each LDD, the Board of Directors ultimately prioritizes its projects and submits them to GOA. At that point the LDDs meet with GOA to determine the state's project funding priorities for a given federal fiscal year.

    This structure helps to ''depoliticize'' the project selection process and makes it more objective in nature. It further supports the logic that local officials know best as to what their needs and priorities are. With limited funding from ARC and other federal and state sources, the process also takes advantage of LDD staff expertise in helping to coordinate the overall funding structure of any given project. As a result, those projects which have the most funding ''pieces'' in place and have been identified as priority projects for ARC consideration can be moved ahead in a timely manner.

    It is also important to note that each LDD has its own particular role and function within the area that it serves. In Ohio our 3 LDDs are involved in numerous activities that seek to address economic and social concerns that impact the counties and communities that make up their district. These activities include the administration of Revolving Loan Fund (RLF) programs for small to medium sized businesses. In Appalachian Ohio, ARC funds, coupled with those from the Economic Development Administration, have resulted in almost 150 loans totaling over $8.3 million in RLF program investment. These funds have leveraged significant private investment (in OMEGA's case this is a ratio of approximately $5.60 in private funds for every $1.00 in public investment) which has resulted in the creation/retention of almost 5300 jobs in a period of 14 years.
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    Ohio's LDDs are also involved in international trade activities that seek to encourage business and industry in the region to become more involved with world markets. This not only involves direct counseling but also includes participation in various trade events and activities that help to benefit local companies. Each of the 3 districts have been designated an International Trade Assistance Center by Ohio's Small Business Development Center (SBDC) program. ARC funding has played a pivotal role in the start-up and operation of each program in Ohio and throughout much of Appalachia.

    Other activities that involve one or more of Ohio's LDDs include: administration of the Ohio Public Works Commission program, administration of an Area Agency on Aging program, participation in SBDC counseling for those interested in starting their own business, grantsmanship training and counseling for public agencies and non-profit organizations, serving as a census and demographic affiliate for the Ohio Department of Development and providing GIS services to member governments and other interested parties. As can be seen, the LDDs play a varied but important role in each of the areas that they serve in Ohio Appalachia.

    This is true throughout the 13-state Appalachian region where each of the 71 LDDs is involved in a wide array of activities. With guidance and direction from their Board of Directors, each LDD seeks to fill gaps and voids in support and services that many of our communities in Appalachia need but simply do not have the financial or human capacity to accomplish. Attached as EXHIBIT A is a brochure from the Development District Association of Appalachia (DDAA) which highlights the varied functions and roles of the LDDs in their efforts to serve local governments and residents from throughout Appalachia. (The DDAA is a membership organization of LDDs that seeks to strengthen districts and their member governments through training opportunities and technical assistance services. It serves as a facilitator for districts with ARC and state alternates on various initiatives and activities. The DDAA also provides leadership and advocacy for ARC's effective intergovernmental model.)
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    It is my hope that this information has helped to shed some light on the important role that ARC continues to play in sustaining a unique but most needed local, state and federal partnership that means so much to many areas of this nation's Appalachian region. As you may recall when ARC reauthorization legislation was originally enacted 3 years ago it marked the first time that ARC had such Congressional support since the 1970s. It is my belief that this support has helped to legitimize and strengthen the program and therefore make it more responsive to the needs of the region.

    I am pleased to represent NADO and the DDAA and offer out support to this reauthorization legislation for ARC. The present legislation is solid and needs little modification although I would offer the following items as ways that Congress could make ARC more effective:

  Provide an additional $75 million ($15 million a year for 5 years) to ARC for an Information Technology Initiative. This would help Appalachian communities and businesses to better bridge the ''digital divide'' through appropriate planning and development activities.

  Allow Appalachian states the opportunity to administer ARC funded projects where no federal basic agency is available or involved with the project. (This could be done in a manner similar to HUD's Community Development Block Grant program in which states have administrative oversight of the funds allocated to them in non-entitlement areas.)

  Return LDD administrative support provide by ARC back to a 75–25% ratio as opposed to the 50–50% ratio that was adopted with ARC's present reauthorization legislation. This would not provide LDDs with any additional ARC funds but would enable the districts to use their limited matching funds for other activities.
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  Provide fiscal incentives for states to target more of their funds for Appalachian counties. This would increase project dollars for the Appalachian region and encourage state governments to share more of the financial burden for project development.

  Adopt a 5-year period for ARC reauthorization, similar to the current authorization length for the Economic Development Administration.

    In closing, I would like to reiterate my strong support for ARC and its model for service delivery. It is clear that the administration of the ARC program by the agency's staff and the Federal Co-Chairman's office is not conducted in a manner that many would consider to be ''typical Washington bureaucracy.'' ARC has shown that it is a program that seeks to simplify rather to complicate. It does not try to operate under a rigid or lengthy review and approval process that in many other agencies tend to frustrate and confuse the applicant. Indeed, perhaps the most important thing that I can add in this regard is that ultimately ARC operates with a programmatic mindset that seeks to work with the states in order to get their priorities funded.

    Frankly, I think the question before Congress is not about reauthorization; it is about funding ARC at a level that allows it to complete its work in bringing Appalachia to a standard of living that we, as Americans, can be proud of. ARC has proven that it is an intergovernmental model of service delivery that works and a model that is worth replicating in other parts of the nation where there is severe economic distress. If the necessary resources are provided, I belief that there is a day in the foreseeable future in which we can ''lock the doors and turn out the lights'' of the ARC program and the citizens of this nation can say a ''job well done.'' I look forward to that day.
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    Thank you.


Attachment: Appalachian Regional Commission Projects Implemented by Local Development Districts

    Local development districts bring individuals, businesses, and communities together to develop and implement projects that fulfill the Appalachian Regional Commission's five core goals:

  1. Developing a knowledgeable and skilled population.

  2. Strengthening the region's physical infrastructure.

  3. Building local and regional capacity.

  4. Creating a dynamic economic base.

  5. Fostering healthy people.

    The following are examples of outstanding projects developed and implemented by local development districts belonging to both the Development District Association of Appalachia (DDAA) and the National Association of Development Organizations (NADO).

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    Coosa Valley Regional Development Center, P.O. Box 1793, Rome, Georgia 30162–1793, Jim Layton, Executive Director; (706) 295–6485:

    Georgia's Coosa Valley RDC contains communities with high rates of poverty, teen pregnancy, school failure, illiteracy and unemployment. With help from ARC, the RDC and five local communities have begun an Early Childhood Initiative. Working with local agencies, the RDC has identified five services that can bring support to young families: birth contact, intensive home visitation, developmental childcare, parenting education, and adult job training and education. Since July 2000, 416 families with newborns have been contacted, 86 parents have enrolled in GED classes, and 91 children have received developmental childcare.

    Cumberland Valley Area Development District, P.O. Box 1740, London, Kentucky 40743, John L. Bruner, Executive Director; (606) 864–7391:

    In eastern Kentucky, ARC along with state and federal agencies and local development districts, is helping promote a regional project, Personal Responsibility in a Clean Environment (PRIDE). Initiated by Congressman Harold Rogers, PRIDE is a comprehensive approach to cleaning up local communities. By participating in PRIDE, the Cumberland Valley Area Development District (CVADD) has become a leader in Kentucky's fight against two long-standing problems—illegal dumping and inadequate residential sewage disposal into fresh water sources through ''straight pipes.''

    With ARC contributions, CVADD has used GIS technology to map straight pipe and illegal dumpsites in its 8-county region. The data collected is also used to assist communities with more efficient long term planning for sewer service extensions. ARC funds are also used to provide no-interest loans to homeowners willing to replace straight pipes with cleaner, safer septic systems. Larger projects, including the installation of a $1 million sewer system in Magoffin County, Kentucky also rely on ARC funds.
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    East Alabama RP&DC, P.O. Box 2186, Anniston, Alabama 36202, Bill Curtis, Executive Director; (267) 237–6741:

    East Alabama RP & DC has evaluated Appalachian seniors' needs to lessen the costs associated with drug prescriptions, and in response has conceived the ''Prescription DrugAssist Program.'' The program is a well-administered cooperative effort between PDC staff, clients, physicians and pharmacists, social service agencies and pharmaceutical companies. DrugAssist addresses both long-term and short-term prescription needs of uninsured and low-income seniors by helping access pharmaceutical companies' assistance programs and synchronizing community inter-agency resources. During its first six months of operation, DrugAssist served approximately 400 clients with 2000 prescriptions.

    Land-of-Sky Regional Council, 25 Heritage Drive, Asheville, North Carolina 28806, Robert Shepherd, Executive Director, (828) 251–6622; Southwestern NC PDC, P.O. Drawer 850, Bryson City, North Carolina 28713, Bill Gibson, Executive Director, (828) 488–9211:

    In western North Carolina, two local development districts are cooperating with ARC and two community colleges on ''Appalachian Access,'' a 23-county broad-based public/private initiative to formally aggregate bandwidth demand via a large regional cooperative and several smaller sub-regional cooperatives. Currently, companies in this rural region must pay more than their urban counterparts to access the information superhighway.

    Appalachian Access intends to present private providers with a provocative business case, thereby inducing them to install POPs (Points of Presence) in the region with access to high-speed bandwidth at competitive prices. Appalachian Access is conducting the necessary research to determine the amount of current and potential future demand for services. Through e-business college classes, Appalachian Access is both creating more demand and introducing high-wage, high skill jobs to an economy traditionally based on textiles and agriculture.
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    Mid-Ohio Valley Regional Council, P.O. Box 247, Parkersburg, West Virginia 26102, James Mylott, Executive Director; (304) 422–4993:

    MOVRC operates one of the most successful revolving loan funds in West Virginia. Serving Calhoun, Roane, Wirt and Ritchie counties, where poverty rates average from 20% to 32% and unemployment rates range from 14% to 22%. The fund provides local entrepreneurs with access to low interest loans and assistance with understanding the financial implications of operating a new business venture. MOVRC was able to equally match an initial ARC grant of $500,000. The $1 million fund was exhausted after nine successful loans in the fund's first 12 months. These nine loans leveraged an additional $500,530 in local funds and helped save 62 jobs. A second installment of $500,000 from ARC is currently allowing MOVRC to expand its loan activities and to inform more of the region's citizens and businesses about loan fund opportunities.

    New River Valley PDC, 6580 Valley Center Drive, Radford, Virginia 24141, David W. Rundgren, Executive Director; (540) 639–9313:

    The New River Valley PDC has supported the efforts of the New River Valley Economic Development Alliance in obtaining ''User Fee Airport/Port of Entry'' and ''Foreign Trade Zone'' designations for the New River Valley Airport in Dublin, Virginia. These designations will bring area manufacturers greater access to international markets, increased convenience in processing imported merchandise and reduced costs for importing manufacturing components. PDC staff served on the Alliance's Foreign Trade Zone Alliance Committee and provided technical assistance in the development of the Foreign Trade Zone goals, action items and budget. Since March 2000, the Port of Entry has logged over 900 entries representing more than $85 million in imported merchandise.
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    North Georgia RDC, 503 West Waugh Street, Dalton, Georgia 30720, Barry Tarter, Executive Director; (706) 272–2300:

    North Georgia RDC in Dalton, Georgia has cooperated with ARC to provide basic water and sewer infrastructure so that the area's existing industries, including a poultry operation and a bath textiles manufacturer, could expand. ARC's contribution of $300,000 enabled the Ellijay-Gilmer County Water and Sewage Authority to increase the gallons treated per day from 4.0 million to 5.5 million, while improving the facility's water treatment capabilities. Encouraged by the RDC, the two companies also contributed a combined $2 million to the effort. As a direct result of the system improvements, 600 jobs were retained and an estimated 120 new jobs have been created.

    Ohio Mid-Eastern Governments Association, P.O. Box 130, Cambridge, Ohio 43725, Daniel Neff, Executive Director; (740) 439–4471:

    Thousands of low-income working families in southern Ohio lack dental insurance coverage or access to affordable dental care. With support from ARC and OEMGA, local health and human services agencies have joined forces to expand dental services for low-income residents in a five-county area of Appalachian Ohio, including three economically distressed counties. Based in Marietta, the clinic handled well over 4,000 visits from low-income patients last year.

    Region VII PDC, 4 West Main Street, Buckhannon, West Virginia 26201, Rosemary Wagner, Executive Director; (304) 472–6564:
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    Region VII PDC has worked with the Randolph County Development Authority and ARC to enhance the resources provided by the West Virginia Wood Technology Center in Elkins, West Virginia. The Center provides workforce development and technical support necessary to expand and update the regional wood products industry. Training programs in computer graphics, CAD–CAM software, modern sawmill and lumber drying operations are available to citizens of seven counties.

    The Center's students have diverse backgrounds and goals. Some are employees of local companies, looking to improve their ability to perform a specific job. Others are entrepreneurs, struggling to learn the skills required to operate computerized woodworking equipment. Some are unemployed, and realize that their future marketability directly correlates to their understanding of current technology in an increasingly global marketplace. All the students are seeking to enhance their skills in order to find a better job, and all come away with the ability to operate, maintain, troubleshoot and repair modern production woodworking machinery.

    SEDA–COG, RR1, Box 372, Lewisburg, Pennsylvania 17837, Dennis Robinson, Executive Director; (570) 524–4491:

    Some ARC grants allow development districts to evaluate projects before implementing lengthy and complex business plans. SEDA–COG, located in central Pennsylvania, received a $25,000 ARC grant in 1984 to conduct a feasibility study of its Rail Acquisition Project. Area businesses realized that economic viability largely relied on control of access to adequate transportation for industrial products. The initial ARC investment helped establish one of the most successful and nationally recognized economic development projects, the creation of SEDA–COG's Joint Rail Authority. Since 1984, the Authority has purchased 192 miles of track line and has become the second largest short line railroad in the Commonwealth of Pennsylvania. It covers nine counties, serves 64 shippers, and has helped area businesses retain over 3,000 jobs, while creating an estimated 2,500 new jobs at expanded and new facilities along the rail lines. Currently, the Authority is constructing a new rail line, which will serve the region's important limestone industry.
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    Southeast Tennessee Development District, P.O. Box 4757, Chattanooga, Tennessee 37405, Joe Guthrie, Executive Director; (423) 266–5781:

    Appalachian McMinn County faced a myriad of financial and planning problems in the early 1980s, including an overcrowded jail, an overflowing landfill, and deficient public schools. Mounting short-term and long-term public debt compounded the county's problems. Through a series of annual planning sessions involving all ten county commissioners and facilitated by the Southeast Tennessee DD, the county has constantly assessed its financial situation. Because it is now accessing federal and state grant programs such as ARC and planning for future growth and economic shifts, the county will be debt free by 2002 and will operate on a pay-as-you-go basis. Problems with facilities and services have been greatly reduced, and the county has kept its tax rates level.

    Southern Alleghanies PDC, 541 8th Street, Altoona, Pennsylvania 16602, Edward M. Silvetti, Executive Director; (814) 949–6520:

    SAPDC, headquartered in Altoona, Pennsylvania and ARC cooperated on the Bedford County Business Park. This rural area needed facilities with adequate utilities and space to attract and retain light manufacturing, including companies such as Cannondale and Defiance Metals. ARC provided an initial $15,000 grant for a marketing and site feasibility study. By 1998, the project was under construction, and ARC provided $300,000 in project funds. In 1999, the $5.7 million, 143–acre park opened and currently has created 325 jobs. The SAPDC estimates that 1000 jobs win be created by 2004.

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    South Carolina Appalachian COG, P.O. Drawer 6668, Greenville, South Carolina 29606, Robert Strother, Executive Director; (864) 242–9733:

    The SC Appalachian COG is stimulating the market for entrepreneurial ventures in five counties in a diverse area consisting of transitional and distressed counties. With an ARC initial investment of $425,000 and a local match of $637,500, the COG was able to recapitalize its revolving loan fund. Since July 2000, the COG has made 13 loans in its four poorest counties, and ten loans in a transitional county. The COG is also committed to educating the area's economic development and financial services professionals about the flexibility and availability of revolving loan fund opportunities.

    Southern Tier Central RP&DB, 145 Village Square, Painted Post, New York 14870,
William Hess, Executive Director; (607) 962–5092:

    The Southern Tier Central Regional Planning and Development Board has recently developed three water infrastructure projects that are recommended for funding by the New York State Department of State and will be partially funded by grants from the Appalachian Regional Commission (ARC).

    In the Hamlet of Troupsburg, a community with a median household income of $17,813, many households are still without functioning on-site septic systems. An ARC grant of $150,000, combined with state revolving loan funds, a USDA rural development grant and a local contribution will result in a wastewater collection and treatment facility. Without ARC funds this poor community would not be able to afford the project.
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    The Village of Montour Falls in Schuyler County has a sanitary sewer system in need of improvements in order to serve two major employers, a hospital and a manufacturing facility. Even with these two employers, which account for 690 local jobs, the county ranks 60th out of the state's 62 counties for personal per capita income. With ARC's contribution of $150,000, the village will be able to raise $1.3 million 'in bonds to upgrade the sewer system and retain two pillars of its economy.

    Three Rivers Planning and Development District, P.O. Box 690, Pontotoc, Mississippi 38863,
Vernon R. Kelley III, Executive Director; (662) 489–2415

    Three Rivers PDD is helping provide e-government capabilities across the district's wide area network to each of its eight counties' governmental offices and employees. By providing hardware, software, and technical assistance, the PDD is ensuring that offices and employees are connected to the network and can access the internet and e-mail services. As well, each county office now has the capability of establishing a home page and developing 'individual e-government applications for providing specialized local services.

    Tri-County Council for Western Maryland, 111 S. George Street, Cumberland, Maryland 21502,
Leanne Mazer, Executive Director; (301) 777–2158

    The Tri-Counry Council has worked closely with the Regional Education Service Agency of Appalachian Maryland for several years. ARC provides funds that with a local match, allow the Council to continue offering technical assistance and support to personnel at colleges in the University System of Maryland and local public boards of education. RESA and the Council are presently working to improve the level of career programs in science and engineering.
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Testimony of Governor Paul E. Patton, Kentucky

    I'm honored to be here today speaking to you about a subject that is of such great personal importance to me, as an Eastern
Kentuckian and Appalachian, and that is the Appalachian Regional
Commission. I currently serve as States' Co-Chair of the Commission, representing all 13 Appalachian governors.

    I'd like to talk to you about some of the changes that have swept through Appalachia over the last 40 years, and where we now stand. The Appalachia of the opening days of the 21st century is not the same region the country discovered in 1960 when we became part of the national development agenda.

    In the early 1960s, the Appalachian region was overwhelmed in poverty. Over the past 36 years, ARC programs combined with state efforts have helped to cut the region's poverty rate in half, reduce the region's infant mortality rate by two-thirds, double the percentage of high school graduates, build more than 2,300 miles of new highways, provide water and sewer services to over 800,000 Appalachian households, and create hundreds of thousands of new jobs.

    We've made similar progress in Eastern Kentucky, reducing infant mortality, increasing our percentage of high school graduates, and building new roads, water and sewer systems, and revitalizing community infrastructure. We may not have reached our ultimate goal, but we're more than halfway home.
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    Just look at our efforts to make more and better job opportunities available to Eastern Kentuckians. From 1969 to 1998,
Eastern Kentucky saw a 64 percent increase in jobs, as opposed to the 1950s when we experienced a decline of more than 40 percent.
Still, there are some individuals and major corporations that continue to view Eastern Kentucky and the rest of Appalachia through the prism of the 1950s and 60s.

    But we're not the Appalachia of yesterday, and it's past time to put to rest all the negative stereotypes about our people and our region. The advances that our states have made in educating and expanding opportunities for our workforce, in building physical infrastructure in our rural communities, and in fostering the leadership
and civic well-being of our people, have created a ''New Appalachia''—one that is poised to join in the New Economy of the future, where intellect is capital. Support of the Appalachian Regional Commission is vital to continuing this new tradition of progress throughout the New

    One of my top priorities as Governor has been to bring
Kentucky's Appalachian counties the same high quality of life, the same kind of growth and prosperity as the rest of our state, and our nation, enjoys. In my second term as governor, I'm reaching out to corporate America, to show them that Appalachia is a bold, new market they can no longer afford to ignore, primarily through our
''New Appalachia'' video showcasing Eastern Kentucky and a series of business recruiting trips to boardrooms across the country.

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    I point out to these executives the recent experience we had with the Sykes Corporation, a computer trouble-shooting company that now employs over 1,000 highly-trained residents of Pike and Hazard counties to solve the computer problems of people around the globe. And which will soon employ even more Kentuckians with an additional facility in Union County. You might know Pike County for employing more coal miners than any other county in Appalachia, and that's still true, but the health, high tech and tourism sectors have overtaken coal mining as the major sectors for job growth. This kind of success, like we have seen in my home of Pike County, is being duplicated across Appalachia, and the Appalachian Regional
Commission is playing a key development role, providing seed money for innovative projects that are making a real difference in the lives of thousands of our citizens.

    Over the years, ARC has supported many programs assisting rural communities in their efforts to become part of America's economic mainstream. And to a great extent, they've been successful. There's now a thriving and growing middle class in Appalachia that simply didn't exist 40 years ago. Appalachia is home to technical colleges, flexible manufacturing centers, business incubators and electronic villages that are the envy of the country, if not the world. In the early years of its existence ARC pioneered in the development of pre-school programs for rural communities. Today,
ARC is breaking new ground with its entrepreneurship initiative, creating hundreds of homegrown businesses in the region. Last year alone, the Commission invested $65 million dollars in more than 300 community development projects, not including highways. These

projects are expected to create or retain more than 48,000 jobs and provide improved water and sewer systems to over 32,000 households. This tradition of innovation must continue.

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    Now is the time to ensure the best possible future for our region, and the Appalachian Regional Commission has an integral role to play in these efforts. In recent years, the Commission has worked hard to reinvent its role and revitalize its mission. Five years ago, the Commission adopted a strategic plan that set specific goals, and since then the Commission has worked to refine and improve this plan, with a new emphasis on distressed counties and on bringing new technologies to these communities. The Commission has launched a number of initiatives over the past several years to link our schools and communities with the Internet, to bring technological advances to remote areas of Appalachia, to encourage stronger leadership for economic development at the grassroots level, and to encourage the working people of Appalachia to become more self reliant.

    The Appalachian Regional Commission is partnering with foundations and major corporations, including Kellogg, Ford and Levi-Strauss to link community-based organizations, local governments and community colleges to facilitate and encourage economic development and investment. The Commission is also partnering with the United States Department of Agriculture, the Federal Deposit Insurance Corporation, the Small Business Administration, and the National Science Foundation—just to name a few agencies—to get them more involved in the region's development, as well as providing leadership training and organizational development to scores of local and civic organizations.

    The Appalachian Regional Commission has been one of the most important tools our states have in addressing the particular problems faced in Appalachia. Commission community development grants have laid the foundation on which the region will build the necessary infrastructure to participate actively in the new economy. Nearly half of all ARC's state project funds go to our distressed counties with local economies that operate well below national economic norms. The bulk of the remaining funds go to transitional counties with local economies operating a bit better than distressed counties, but still below national norms.
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    On behalf of Appalachia's 13 governors, I strongly urge members of the committee to continue their strong support of ARC and its efforts to improve the quality of life of the region's 22 million people. The governors are asking Congress to support the Commission in three ways.

    First, we are asking Congress to consider raising the Commission's annual appropriation for community development activities to $75 million a year, from its current level of about $65 million a year. Since 1998, under TEA–21 federal highway legislation, funding for the Appalachian Development Highway System has more than tripled. However, during that same period funding for ARC community development activities has remained virtually unchanged. So we are asking Congress to consider a modest increase to the Commission's community development funding base that reflects inflation and cost of living increases. This budget compensation would allow the Commission to continue its financial support of our efforts to build the New Appalachia.

    Secondly, we are asking Congress to consider legislation that would reauthorize the Commission for another five years, ensuring that communities across Appalachia have access to the assistance they need to move forward in the 21st century. As you may know, ARC was reauthorized for the first time in nearly two decades in 1998. At that time, Congress strongly supported our efforts to adopt a new strategic plan and to recommit ourselves to helping distressed communities. Since then, the Commission has done an outstanding job of keeping its programs targeted to strategic goals and focused more on distressed counties.

    By reauthorizing ARC through fiscal year 2008, Congress would not only strengthen the Commission's ability to foster regional collaboration and to engage in new partnerships to address the region's most critical problems, but would send a message that the issues that Appalachia is dealing with are important to our national success, and that progress is being made and will continue.
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    And the last issue I'd like to address today is the digital divide. Appalachia cannot afford to be left behind on the information superhighway. We are asking Congress to consider providing the Commission with an additional $15 million per year for five years in special funding to be invested in bridging the digital divide by opening up Appalachia to new information services and technologies. This new telecommunication-information services program would focus on three key areas: providing education and training in new technologies; creating more job and business opportunities in emerging technologies; and in assisting local governments, businesses, schools and hospitals in developing and benefiting from e-commerce networks. We are currently developing a work plan for the new initiative and would be pleased to share the details with the committee.
    In closing, I would like to emphasize how highly the governors of Appalachia's 13 states regard ARC. I am entering into the record a letter to President Bush signed by all 13 Appalachian governors, urging continued support of the Commission. We know many members of Congress also consider the Commission a model federal-state partnership. Let's join together to ensure the Commission can continue its work to bring all of Appalachia's people into America's economic mainstream.
    Thank you very much for your time and consideration of these issues.   

Statement of Cecil H. Underwood, Governor of West Virginia

    To Chairman LaTourette and members of the Subcommittee on Economic Development, Public Buildings and Emergency Management.

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    Thank you for inviting me to testify today as you consider reauthorization of the Appalachian Regional Commission. I have a long relationship with ARC and am honored to share my views with you.

    In August 1959, three governors met in Annapolis, Maryland, to discuss potential remedies for the economic blight that had devastated the coal producing states of the Appalachian Region. Millard Tawes had been elected Governor of Maryland in 1958. Bert Combs was serving in his second year as Governor of Kentucky. I was serving in my third year as Governor of West Virginia.

    The three governors concluded that a federal-state partnership was needed to address the economic distress of the region. Members of their staffs began to meet immediately to consider a plan for action. This group quickly expanded to other state governor's staffs. Congress created the Appalachian Regional Commission in 1965.

    ARC is a true federal-state partnership. The Federal Co-Chair is appointed by the President. Each year the thirteen governors select one of their own to serve as States' Co-Chair.

    I was honored to serve two years as States' Co-Chair. I have testified each of the past four years at congressional hearings. I have spent my entire career working in economic development, education and health care in the region.

    Since its creation, ARC has made significant impact throughout the thirteen states of the region. Working with states, communities and private sector groups, the Commission has helped to cut the region's poverty rate in half, reduce infant mortality by two-thirds and double the percentage of adults over 25 with a high school education. The 2,331 miles of completed new highways link the region with the Interstate System and the commercial centers of Eastern United States. More than 800,000 households now enjoy and benefit from ARC investments in water and sewer services.
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    In spite of this remarkable progress, many communities—especially in Central Appalachia—are unable to enjoy the nation's recent economic growth. During my two years as States' Co-Chair, I dedicated special attention to economically distressed communities.

    Regional community meetings were held in several states, where elected officials, development leaders, educators, business people and health care providers identified the greatest needs and proposed potential solutions. Also, the committee sought the advice of nationally recognized economic development experts.

    Last fall the Commission approved an enhanced program for distressed counties that will invest in technical assistance and capacity building to promote the development of high-speed Internet access and other telecommunication technologies. The region must be linked to the Information Super Highway if it is to participate in the nation's economic mainstream. The region must not be left behind the telecommunications infrastructure, as it was when the Interstate Highway System was built.

    The economically depressed counties are rural and small towns, not major metropolitan areas. They are ideal prospects for new technology commercial investments because they are free from traffic and noise congestion, have low crime rates, and offer lower operating costs. They are close to spectacular natural scenery and recreational facilities. To attract commercial technological investments, these counties must offer telecommunication excellence and easy access to colleges and universities.

    I speak in strong support of Congressional reauthorization of the Appalachian Regional Commission. I hope you will extend the reauthorization for a period of five years.
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    For the past several years, the ARC budget has been flat. The Commission has lost nearly $10 million to inflation from 1997 to the 2002 proposed budget. I seek your support to keep ARC even with inflation.

    This investment in regional development will enable the ARC to make even more dramatic progress to reach its goals:

  —Appalachian residents will have the skills and knowledge necessary to compete in the world economy of the 2Ist century.

  —Appalachian communities will have the physical infrastructure necessary to sustain economic development and improved quality of life.

  —The people of Appalachia will have the vision and capacity to mobilize and work together for economic progress and community improvement.

  —Appalachian residents will have access to financial and technical resources to build dynamic local economies.

  —Appalachian residents will have access to affordable, quality health care.    

Statement of Jesse L. White, Jr., Federal Co-Chairman, Appalachian Regional Commission

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    Mr. Chairman and Members of the Committee:

    Thank you for the opportunity to appear before the Subcommittee to discuss the work of the Appalachian Regional Commission and to lay the foundation for what I hope will be a five-year reauthorization of the agency.

    It is a pleasure to be joined this afternoon by Governor Paul Patton of Kentucky, himself a son of Appalachia and this year's States' Co-Chairman of the ARC. Governor Patton's vision of a ''New Appalachia'' is one that all of us at the Commission share. I also want to acknowledge that on a later panel this afternoon you will be hearing from former West Virginia Governor Cecil Underwood. He was the States' Co-Chairman for the past two years and was a guiding force in crafting the Commission's enhanced program for distressed counties.

    I am pleased to report that the reauthorization measure that you passed three years ago has worked well. You put in place sound policies that the Commission has easily accommodated and that require no major changes. This afternoon I want to share with you some of ARC's accomplishments, review the activities we have undertaken in response to the 1998 reauthorization, and outline some of the challenges that still limit the economic opportunities of thousands of Appalachians.


    Congress established the ARC in 1965 to bring roughly 400 counties in the 13-state Appalachian Region into the mainstream of the American economy, to make these 22 million people and their hundreds of communities contributors to, rather than drains on, the national resources. Through its flexible programs, ARC helps equip communities with the basic building blocks of economic development: a trained and educated workforce, basic infrastructure, local leadership and civic capacity, entrepreneurial local economies, and access to health care.
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    The Commission represents a unique partnership between the federal government and the 13 states we serve. The Federal Co-Chairman of ARC—appointed by the President and confirmed by the Senate—has one half of the votes on the commission and the 13 governors have the other half. No policy can be set or any money spent unless the federal representative and the governors reach agreement. The ARC model does not represent the dictation of policy from Washington; rather, it is a joint policymaking model that yields true collaboration.

    ARC employs a ''bottom up'' approach, with projects and priorities being developed at the local level. To accomplish this, we rely upon the region's 71 local development districts (LDDs), multi-county economic development planning agencies that work with local governments, non-profit organizations, and the private sector to determine local economic development needs. For many communities, these LDDs are the principal source of professional guidance in crafting and implementing local economic development strategies. They are literally the first stop on a community's path to economic self-sufficiency.

    The ARC story is one of substantial progress in giving Appalachia a full seat at the table of American prosperity. When we were created, 219 of our counties were economically distressed. Today that number has been cut roughly in half. Other indicators also show marked improvement: the infant mortality rate has been cut by two-thirds; the regional poverty rate has been cut in half; the per capita income gap between Appalachia and the U.S. has been narrowed; the percentage of adults with a high school education has doubled; and the percentage of Appalachian students completing high school now is slightly above the national average.
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    In more concrete terms, more than 840,000 Appalachians now have access to clean water and sanitation facilities through ARC grants; a network of more than 400 ARC-funded primary care health facilities has been established; and ARC grants to revolving loan funds have assisted 1,357 small businesses in creating over 25,000 new jobs and saving nearly 31,000 existing jobs. From any perspective, then, ARC's impact in Appalachia has been substantial.


    From ARC's inception, highways have been central to the economic development of Appalachia. A region unconnected to the transportation grid of the nation cannot possibly participate fully in its economy. Because the interstate system had bypassed much of Appalachia, Congress authorized the Appalachian Development Highway System (ADHS), the only major highway system created primarily to foster economic development.

    The ADHS consists of 3,025 miles, reaching across all 13 of our states. At the end of FY 2000, 82 percent of these miles were open to traffic or under construction. TEA–21 for the first time authorized funding for the ADHS out of the Highway Trust Fund, providing $450 million per year for work on the System from 1999 through 2003. With this increased funding our states are making major progress toward completing the System. But we are also encountering some of the most difficult terrain, which results in higher construction costs. When it comes time for your Committee to write the next multi-year highway bill, we hope you will continue to support the Appalachian Development Highway System, accelerating the day that the entire system will be completed.

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    Currently ARC, in conjunction with the state Departments of Transportation and the Federal Highway Administration field offices and headquarters, is preparing the next estimate of the cost to complete the ADHS. This is scheduled to be completed and sent to your committee by the end of FY 2002.

    Three years ago we commissioned a study of the economic impact of the ADHS—the first full-scale, rigorous assessment of the effectiveness of the system in contributing to economic growth. Conducted by Wilbur Smith Associates, a leading transportation consulting firm, the study examined completed portions 12 of our 26 corridors, focusing on those corridors that are largely complete and therefore should be contributing to job creation in the region.

    The results are both dramatic and reassuring:

   Creating jobs. The report estimated that the 12 corridors had produced a net increase of 16,000 jobs in 1995 and projected a net increase of 42,000 new jobs in 2015. These jobs would not have been created without the ADHS. Less than 10 percent of these were construction jobs attributable to the actual building of the corridors.

   Generating economic benefits. The report estimated that the total economic impact of the completed portions on these 12 ADHS corridors at $5.48 billion from 1965–2005, without considering direct construction benefits. When construction benefits are included, the total impact rises to $6.9 billion over the same period. Overall, the study estimated that each $1 of federal investment will yield $1.32 in economic impact benefits.

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   Making travel easier, safer, and more cost-effective. The ADHS highway corridors are expected to produce travel efficiencies nationwide valued at $4.89 billion over the 1965–2025 period.


    While a network of modem highways is essential to Appalachia's economic growth, highways by themselves are not sufficient to enable many of the region's communities to prosper. Our non-highway activities offer a flexible approach that embraces basic infrastructure, job skills training, local leadership development, small business assistance, and improved health care.

    Based on the priorities of ARC's state and local partners, the Commission spends about two-thirds of its annual nonhighway budget on infrastructure and public works projects in the region. These typically include water and sewer systems, industrial parks, access roads, and business incubators.

    In an attempt to be accountable for our programs and to help guide our investment decisions, two years ago we commissioned an outside examination of the effectiveness and performance of ARC's infrastructure projects. Examining a representative sample of projects, the study shows that these projects are creating more jobs than anticipated and are spurring significant economic activity across the region. Roughly three-fourths of the sampled projects with specific business or job-related goals either met or exceeded their projections.

    The local impact of these ARC projects is profound: in 45 of the 65 counties for which measures could be developed, the report found that ARC infrastructure investments created jobs equaling at least 10 percent of all net employment growth in the counties between 1990 and 1996.
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    Other findings include the following:

   Private investment. These ARC projects have leveraged a total private sector investment of $3.075 billion, in a ratio of almost $107 to every dollar invested by ARC. When an unusually large project in the study is excluded from the analysis, the private sector investment is $1.675 billion, with a ratio of $58 to $1.

   Wages. The total $32.4 million in ARC support has led to $576.9 million of new wages annually for the jobs created by the projects. This has led to a net expansion of $950.3 million of personal income.

   Tax revenue. Each year the ARC projects are yielding $14.3 million of state income tax revenue, $13.9 million of state and local sales tax revenue, and $29.2 million in local property tax revenue. The annual property tax revenue alone almost equals the entire amount of the ARC investment.


    The reauthorization you passed in 1998 encouraged the Commission to target our resources to the areas of greatest need . . . to our distressed counties. Almost a fourth of the region's counties can be classified as economically distressed, suffering the debilitating effects of persistently high unemployment, low per capita income, and widespread poverty.

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    The Commission targets its resources in two fundamental ways: first, it sets aside funds for use exclusively in economically distressed counties; second, it restricts funding in counties that are performing at or near national economic norms.

    Currently the Commission reserves 30 percent of its project dollars for use solely in the counties that are classified as economically distressed. While these funds can be used only in distressed counties, states may also use other ARC funds in the distressed counties. And they are doing so. During the past four fiscal years, states have consistently exceeded the 30 percent set-aside, spending about half of their total project funds on programs that benefit distressed counties. The Administration would support a statutory change which would require the Commission to spend at least half of its project funds on activities that benefit distressed counties or areas.

    Last year the Appalachian Governors and I launched an extensive regional outreach effort to craft an enhanced program for our distressed counties, to see how we can do even more to help move these counties forward economically. We began by undertaking an economic analysis of the strengths and weaknesses of distressed counties and consulted with experts on rural economic development.


    Despite robust economic growth nationally, many Appalachian communities have yet to share fully in the nation's unprecedented prosperity. Too many rural areas still remain cut off by terrain and by history from the broad economic currents that are raising American standards of living.
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    Structural changes in declining sectors such as coal mining, manufacturing, textiles, and agriculture have hit Appalachia disproportionately hard, threatening to reverse the modest economic gains that many communities have made. A culture of economic dependency continues to impede the drive toward entrepreneurial innovation and risk-taking that is reshaping so much of the national economy, while a widening digital divide threatens to leave Appalachia's residents disconnected from the educational, e-commerce, and telemedicine opportunities created by the technology revolution.

    Even the current resurgence of coal presents only the mirage of long-term economic revival, as coal production continues to shift away from Appalachia to other areas, and increased mechanization results in fewer workers employed in Appalachian mines. As a result of declining regional output coupled with labor-saving productivity gains, Appalachian coal mining employment fell from 101,500 workers in 1987 to 58,600 in 1997. Based on current coak-usage scenarios, the Energy Information Administration projects a continuation of this trend, with the number of coal-mining jobs in Appalachia falling to between 49,000 and 22,000 jobs over the next decade. The renewed importance of coal as part of the nation's energy mix will not reverse these trends.

    These national and international economic currents thus make even more critical ARC's efforts to help the region develop a more diverse economic base. They underscore both the challenge and the importance of crafting strategies that can enable distressed communities to seize new economic opportunities.

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    In addition to our economic analysis of distressed counties, we also sought extensive public participation in shaping our enhanced program for distressed counties. More than 750 people, including three of our Governors, attended eight community meetings in seven states. The consistent theme throughout these meetings was the need for more help in the following areas: technical assistance, strategic planning and leadership development, regional cooperation, and telecommunications.

    As a result of these deliberations, last fall the Commission unanimously voted to devote an additional $10 million, from existing funds, over the next five years to provide more technical assistance to Appalachia's distressed counties. During FY 2001 this new targeted technical assistance program is providing the Region's distressed counties an additional $2 million.

    Elements of the new technical assistance program include:

 A new flexible grant program to provide strategic planning and capacity building so local communities can jump-start the process of economic development;

 Workshops, specialized training and other activities to encourage community learning and leadership development;

 ARC outreach efforts that give local communities access to other sources of technical assistance, including nonprofits, foundations and government agencies; and

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 An online resource center for accessing information on funding, grant writing, and best practices.

    ARC is working with the states and the local development districts in administering the new technical assistance grants. We believe these additional activities will help many of Appalachia's distressed counties create a brighter future for themselves.


    Throughout our distressed counties listening sessions, we heard one theme loudly and repeatedly: Appalachia must have affordable access to modern telecommunications and information technology, and the people and businesses of the region must make this technology an integral component of their daily lives.

    With technological innovation driving the most remarkable revolution in business, industry, and communication in a century—and diminishing the relevance of geography—there has never been a better moment for Appalachia to move into the nation's economic mainstream. But this new infrastructure will also cruelly separate those communities that have the access, skills and motivation to use technology from those that do not. This infrastructure cannot be allowed to bypass the mountains as did the interstate system in the 1950s and 1960s.

    To ensure that the people and businesses of Appalachia have the knowledge, skills, and access to telecommunications services necessary to compete in the knowledge-based economy, the Appalachian Governors and I have challenged the nation—government, private business, the non-profit sector—to a bold vision that places Appalachia squarely in the center of the new digital economy. In its role as an advocate for the region, ARC can help lead this effort.
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    Addressing Appalachia's telecommunications needs will require a comprehensive, integrated strategy that links improvements in infrastructure with significant investments in human resources and business development. The new initiative would emphasize the following key elements:

 Access and infrastructure. The first priority will be a concentrated effort to work with private firms, foundations, other federal agencies, and state agencies in connecting Appalachia to the information highway. Access to voice, video, and data transmission services must be affordable and within practical reach of Appalachia's most remote communities. ARC's key roles will be in helping local communities aggregate local demand to make private sector investments feasible, building public-private partnerships that encourage these investments, and facilitating ''last mile'' connections.

 Education and training. To capitalize on the investment in infrastructure, the people of Appalachia must have the appropriate skills to use the technology and the region's communities must foster a climate that embraces technology. This will require upgrading the skills of teachers, creating training opportunities for local leaders, and

conducting broad public outreach, so that all Appalachians will feel at home in the new digital world.

 E-Commerce. To remain competitive, Appalachia's businesses must increase their use of the internet. Both existing businesses and aspiring entrepreneurs need guidance in how to migrate traditional face-to-face activities to an internet environment, craft strategies for marketing products over the web, and design plans for meeting production and shipping requirements in an internet economy.
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 Information Technology Sector Jobs. Closing the digital divide does not mean simply providing access to broadband technology. It means, as well, cultivating new business opportunities for the region that arise from the information technology sector. These include supplying the region's hardware needs, fostering indigenous software and network design companies, capitalizing on the maintenance activities of the IT sector, and developing content to be delivered by broadband.

    Mr. Chairman, we encourage the committee to consider adding a provision to our reauthorization that would recognize the importance of meeting the region's telecommunications needs. This would enhance ARC's leadership in this area and would strengthen the efforts of the Commission to partner with the private sector in addressing the region's telecommunications challenges.


    The final program area I would like to highlight is our truly pioneering work in entrepreneurship. We are now in the fifth year of this special $17 million initiative.

    Appalachia's future economic vitality, therefore, depends in large measure upon nurturing homegrown firms—businesses that create jobs, increase local wealth, and ultimately reduce the region's need for outside subsidies. Unfortunately, due to Appalachia's longstanding dependence on extractive industries and branch plant manufacturing, the culture of entrepreneurship in the region is neither broad nor deep, and research findings suggest that there are many gaps in the infrastructure needed to support entrepreneurship.
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    Your 1998 reauthorization recognized this challenge and explicitly charged ARC with helping build more entrepreneurial communities in Appalachia. Since 1997 ARC has committed $17.6 million toward this effort through a special entrepreneurship initiative. The initiative has focused on four essential components in building sustainable entrepreneurial economies:

 Entrepreneurial education and training

 Technical and managerial assistance to new and expanding businesses

 Developing entrepreneurial networks and sectors

 Improving access to debt and equity capital

    To guide its investments, ARC has engaged an extensive network of partners—state and local government, private financial institutions, philanthropies, and service providers—all united in a common goal of ensuring long-term, sustainable change in the economic landscape of Appalachia.

    From the beginning of the initiative in FY 1997 through FY 2000, the Commission has provided $13.9 million in support to 169 projects which have leveraged an additional $13.2 million from partner institutions. Sixty-eight completed projects report the creation of 264 new businesses, and the 101 on-going programs project to create 389 new businesses and 2500 jobs.
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    A few examples suggest the sweep of this initiative:

 The Shoals Entrepreneurial Center, a state-of-the-art business incubator in Alabama, has graduated 22 firms that have created over 800 jobs. This incubator manages two facilities and is currently creating a sectorally focused kitchen incubator with ARC's support, to nurture new specialty food businesses.

 ARC assistance has helped a Tennessee developmental venture capital fund attract $42 million in private equity to provide venture capital for locally owned businesses in Appalachian Tennessee.

 In West Virginia, Appalachia By Design provides specialized training—and customers—to home-based knitwear producers resulting in the creation of over 100 self-employment jobs in the Region.

 In Pennsylvania, ARC enabled 32 schools to utilize the REAL Enterprise curriculum, a nationwide provider of youth entrepreneurship programming and reach 1,600 students with basic training in how to run their own businesses.

    As these examples suggest, Mr. Chairman, ARC is helping create a culture of entrepreneurship that can produce a more diverse and self-sufficient economy in Appalachia. We encourage the Committee to retain this emphasis on creating entrepreneurial communities.

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    Mr. Chairman, I think you will agree that we have fully honored the spirit of your 1998 reauthorization. We have renewed our commitment to region's most distressed communities. We have made sound investments that are yielding demonstrable results and are improving the economic opportunities of thousands of Appalachians.

    We encourage you to consider a five-year reauthorization. Long-term, regional planning is an important component of ARC's work. A five-year authorization will enable our state and local partners to take a longer-term and more strategic direction to their planning and will enable us at headquarters to better serve Appalachia.

    We at the Commission appreciate the bipartisan support that your committee has given us in the past and we look forward to working with you in crafting a strong reauthorization bill.    

Testimony of Mike Whitt, Executive Director, Mingo County Redevelopment Authority of West Virginia

    Thank you, Chairman LaTourette and Ranking Member Costello for holding this hearing today. My name is Mike Whitt. I am the Executive Director of the Mingo County Redevelopment Authority in southern West Virginia. I support the reauthorization of the Appalachian Regional Commission. Congressman Rahall represents Mingo County and I am here because West Virginia is one of the 13 states covered by ARC.

    My job as Executive Director is to create economic opportunities through the diversification of Mingo County's economy. I am here to tell you about what ARC has done for Mingo County and why I think it is a must that ARC be reauthorized.
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    The example that I am going to share with you is the James H. Buck Harless Wood Products Industrial Park that is owned by our agency.

    We purchased 650 acres about three years ago and we have started recruiting clients to come together to start manufacturing value-added wood products to our abundance of hardwoods.

    I am pleased to announce to you that as of this past Monday, the hardwood flooring plant started production. By the end of this year we're going to have 90 employees, and by the end of next year there will be 150.

    Of the 100-acre Phase I area, we have 44 acres developed and we are very excited about the potential of creating 1,000 jobs over the next 10 years by manufacturing valued-added products. That's non-traditional in my part of the country.

    This is the first industrial park located in Mingo County, which has solely been dependent upon the coal industry all my lifetime and my father's lifetime. We must diversify away from the coal industry because it is a depleting resource that's not going to be around forever.

    The most important part of our funding package to make this $30 million dollar project possible was the one million dollars that ARC provided to this project. As you know, you can't do any type of diversification or economic development without transportation, sites and water.
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    We had transportation and we had a site, but the ARC funded the waterline extension from the Pine Creek area of Logan County to provide potable water and fire protection for this extremely important project. This water line also provided potable water to 23 families along the way that would otherwise not have had potable water.

    I've never seen so much excitement in my county over this new industry coming in. Projects like this are dreams coming true. Because of the ARC, we now have roads and are getting water lines extended throughout the county. We're getting industrial parks. We're diversifying our economy.

    A lot of you folks have maybe never been to rural West Virginia, but I'm sure you have rural areas in your states that you represent. I'm telling you, I wish you could see the excitement on people's faces when you can offer them some hope of economic development.

    This is just a little hope from the disappointments that they are used to seeing, such as our schools closing and teachers being laid off, major industry jobs lost, our unemployment rate has sky rocketed and our population has declined from 33,000 down to 28,000.

    For a project like this to come to fruition, the excitement down there is just electrifying. And I want to thank you folks for giving me the opportunity to testify and tell you about how important ARC has been to Mingo County.

    Our projects that ARC has been a part of in helping to come to fruition are too numerous for me to mention them all. In particular . . . roads, development sites, utility extensions, education and recreation.
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    All of these things are very integral parts of becoming a self-sustaining county. And I for one can commit to you that with the reauthorization of this program we will work hard to accomplish our goals to become self-sustaining. We don't want to just stick our hand out to you. We want to do our due diligence first. We want to do our part and then we need your hand to help us get up over that hump. And I think our past has proven this to be the case. I can assure you that if we can continue our progress that within the next 10 years we're going to be a self-sustaining county and the most diversified county, not only in West Virginia but throughout the United States.

    In closing, I would like to say that among all the federal funding agencies out there, ARC has been the most important funding agency for Mingo County, West Virginia. We have utilized it; it's been very instrumental in economic development and quality of life issues. I'm sure you folks understand the importance of reauthorizing the ARC for areas like Mingo County. If there's anything I can do to help ensure that the ARC is reauthorized please feel free to contact me. Better yet, I would like to invite you to come down and I'll personally take you around our county and show you what ARC has done for Mingo County.

    With that, I'll be more than happy to try to answer any questions you may have in regards to my comments.

    Thank you very much.

    Our Mission Statement—

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   We are committed to becoming a diversified self-sustaining county and providing an improved quality of life for the residents of Mingo County.

    How does Mingo County propose to become self-sufficient?

   By utilizing our existing assets:

  —Abandoned Mine Waters

  —Rugged Terrains/Historical Background

  —Reclaimed Surface Mine Sites

    What has ARC Funds done for MC?

   Corridor G (Robert C. Byrd Freeway)

  —Provides the only 4-lane transportation access through Mingo County

   Naugatuck Water Project

  —$26 million budget / $1.5 ARC Funds

  —55 miles of water line

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  —Provides water to 1,600–2,600 homes & businesses

   Hatfield McCoy Trails Recreation Project

  —$100,000 ARC Funds

  —Promotes the travel and tourism industry in southern West Virginia

  —Utilizes our rugged terrain for motorized and non-motorized vehicle trails

   Regional Jail

  —ARC Funds provided potable water to a Regional Jail Facility in Logan County that also serves Mingo County

   Aquaculture Industry

  —Provided funds to Freshwater Institute to conduct a study of abandoned mine water in southern West Virginia

    Our Shining Star Project:

   James H. Harless Wood Products Industrial Park/''Proudly'' Owned by the Authority

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  —$28 Million Dollar Project/$1 Million ARC Funds

  —Provides potable water to the Industrial Park & to 23 homes that otherwise would have been financially unfeasible

  —Utilizing our once exported abundance of hardwood to create approximately 1,000 new jobs over the next 10 years.

  —Jobs (90–Dec 2001 & 150–Dec 2002)

  —50% women

  —Day Care Facility provided in former mine office

   Allows parents to view their children during their breaks
   Allows Southern WV Community & Technical College to return a child care curriculum to their program

  —Seeking funds for on-site workforce training

    Needs of Southern WV Counties:

   Development Sites

   Water & Sewer
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   Education & Workforce Training

    Meeting the Needs with ARC Funds:

   ARC Funds plays a critical role in helping Mingo County meet the needs of its economy and residents

   Without the ARC Funds many of our successful projects would not have been a reality

  —Corridor G = Wood Products Industrial Park in Mingo County

  —Study on Abandoned Mine Water & Technical Training = Fish Hatchery & Grow Out Facility in Mingo & Logan Counties

  —Water Projects = Diversification opportunities & addresses quality of life issues

    Mingo Counly has made great progress towards becoming self-sufficient:

    Private Investments as a result of Federal, State & County Investments:

   Wood Products Industrial Park
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  —22% Federal, State & County Funds—$6.2 Million

  —78% Private Sector Funds—$23.3 Million

   Fish Hatchery & Grow Out Facility

  —12% Federal, State & County Funds—$301,000

  —88% Private Sector Funds—$2.1 Million

    Our Strengths:

   A Strong County Leadership
   An Eager Workforce
   A Potential Abundance of Available Development Sites through reclaimed mining activities
   A Beautiful Region
   A Famous Historical Area
   A willingness to work collectively as a county, state & region in order to strengthen our county's economy!

    Our Plea:

   Is for the ARC Program to be re-authorized
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   ARC Funding Program plays a very important role in helping distressed counties become self sufficient
   Mingo County is now reaching a level in economic diversification where improvements can be visually displayed, but the need for ARC Funding still exists
   Without the continuance of ARC funds, many counties that have progressed could begin to decline and therefore, render all past assistance in vain!   

Appalachian Regional Commission,
Washington, DC, March 21, 2001.

The White House,

Washington, DC.

    DEAR MR. PRESIDENT: The governors of the Appalachian Region wish to bring to your attention the needs of our 22 million citizens who live in the 13-state region that stretches along the Appalachian mountains from southern New York to northeast Mississippi.

    Created by Congress in 1965 and reauthorized in 1998, the Appalachian Regional Commission has played a critical role in addressing the problems of isolation and the economy in the region. Since 1965, ARC has helped to cut the region's poverty rate in half, reduce the region's infant mortality rate by two-thirds, double the percentage of high school graduates, build more than 2,300 miles of new highways, provide water and sewer services to over 800,000 Appalachian households, and create hundreds of thousands of new jobs.
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    In its governing structure, ARC has been ahead of its time, giving the governors of the 13 states an equal role with the federal government in determining ARC policies and spending decisions. ARC is truly a model of federalism that brings states and the federal government into a creative partnership. We collectively agree that the ARC is a vital mechanism for pursuing the economic well being of this Region.

    Under ARC's strategic plan the Commission is providing the building blocks for economic growth, with a special focus on distressed counties. Top priorities include completing the Appalachian Development Highway System (about 600 miles of the 3,025-mile system remain to be built) and helping counties that are performing below national economic norms to become more competitive.

    Additionally, we want to ensure that the information highway does not bypass the Appalachian Mountains as the interstate highway system did in the 1950s and 1960s. In this regard, we support the Commission's initiatives to assure the inclusion of our Appalachian citizens in the information technology revolution that is already impacting our nation's economy.

    We the undersigned seek your support for the Appalachian Regional Commission as it strives to complete its commitment to bring all of Appalachia into America's economic mainstream.


Paul E. Patton, Governor of Kentucky, ARC States' Co-Chairman; Roy E. Barnes, Governor of Georgia; Ronnie Musgrove, Governor of Mississippi; Michael F. Easley, Governor of North Carolina; Thomas Ridge, Governor of Pennsylvania; Don Sundquist, Governor of Tennessee; Robert E. Wise Jr., Governor of West Virginia; Don Siegelman, Governor of Alabama; Parris N. Glendening, Governor of Maryland; George E. Pataki, Governor of New York; Bob Taft, Governor of Ohio; James H. Hodges, Governor of South Carolina; James S. Gilmore III, Governor of Virginia.
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Written Testimony for the Record From the National Association of Regional Councils

    Mr. Chairman and members of the Subcommittee, the National Association of Regional Councils is pleased to offer its support for the reauthorization of the Appalachian Regional Commission (ARC). The Commission represents a working relationship among the federal, state and local governments. At the heart of the Commission, however, are the 71 local development districts in the 13 Appalachian states. It is these districts that advance the goals and purpose of ARC by providing the necessary assistance to local governments and community-based groups to carry out the agency's mission from the ''ground up.'' It is these districts that add value to the ARC program by coordinating projects and funding with other federal, state and local programs through an extensive planning process. These districts have formed a regional organization—the Development District Association of Appalachia—that fosters a cooperative support group to maintain a level of professionalism and program quality throughout Appalachia and to keep programs on track and responsive to the needs of Appalachian communities.


    ARC and the districts have completed their planning and support duties despite a stagnate level of funding. Planning funds to the districts have not kept pace with inflation, leaving districts; with the burden of responding to shifts in program initiatives from the federal and state offices without added resources.

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    In fact, ARC has operated without an increase in non-highway funding for the past four years. If given increases for inflation, ARC's current budget of $66.4 million would be $73.7 million. And that amount simply keeps pace, rather than advances the Commission's agenda. The adjusted level of funding still does not assist the Commission in responding to new challenges confronting Appalachia. The National Association of Regional Councils urges Congress to support an increased funding level for ARC that goes beyond current inflationary levels.


    NARC also urges Congress to address the requirement of a 50–50 match, particularly for the distressed counties within Appalachia. The increased match requirements have placed a heavy burden on already cash-poor communities. NARC supports reinstatement of the 75–25 match requirement for distressed communities and waiver authority, allowing 100 percent support for the most distressed areas. Many other federal programs allow a graduated level of support, depending on distress factors. Program requirements for ARC, which supports some of the poorest areas in the United States, should be no different.


    NARC and its member regional councils urge Congress to support a five-year reauthorization for ARC. Extended periods between reauthorization allow an agency to develop a long-term strategy that it feels can be carried out in a reasonable length of time without having to concern itself with the uncertainties of reauthorization. ARC's programs have proved their worth to federal, state and local government by moving 105 counties (using current criteria) from distressed to economically competitive during its history while serving one of the poorest regions of the country. Additional counties have been moved forward as well. Citizens of these counties have become more productive and have added to the federal, state and local coffers.
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    Competitiveness in the current economy requires access to technology. The counties in Appalachia, for a variety of reasons, lag behind the most of the country in access to information technology that can improve education and make local businesses more competitive, while offering technology services to expanding and new businesses that may consider locating in the Appalachian region.

    The National Association of Regional Councils supports an appropriation of $15 million for a telecommunications program to be developed by ARC in conjunction with the states, development districts and local governments. This revenue should be in addition to moneys appropriated for general programs of the Commission.


    During its entire 37-year history, ARC has proved its value. The Commission has taken responsibility for improving the quality of life for residents of Appalachia who were among the poorest of the poor, the least educated and the most isolated of any people in the country. ARC has succeeded in reversing that bleak picture for many Appalachian residents. Moreover, the Commission has brought back a sense of pride in their heritage and their culture. The Appalachian Regional Commission should be rewarded with a funding level that will allow it to continue moving forward and advancing opportunities for the region's residents.
Testimony by Congressman Ted Strickland, Transportation and Infrastructure Subcommittee on Economic Development, Public Buildings and Emergency Management
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    Thank you, Mr. Chairman for allowing me to submit my testimony for the record. I would like to begin by expressing my appreciation towards the efforts of the Appalachian Regional Commission (ARC). Since its establishment in 1965 the ARC has helped fund such projects as education workforce training programs, water and sewer system development and highway construction. The 6th District of Ohio covers fourteen counties, twelve of which are in the Appalachian region. Unfortunately, this part of Ohio was bypassed by the Interstate Highway system in the 1950's. Therefore, my district has historically suffered from geographic isolation, poor roads, and limited employment opportunities. These circumstances are compounded by the lack of advanced technology infrastructure in the region or a situation we have come to call the digital divide.
    ARC has created a proposal that would include a five-year, $75 million federal investment that can help transform Appalachia's telecommunications infrastructure. This new initiative would emphasize a variety of key elements that would prove to be beneficial to the 6th District of Ohio. One of the ARC's priorities is to concentrate efforts on access and infrastructure to connect Appalachia to the information highway. The goal is to provide advanced technology that will be universal, affordable and within practical reach of Appalachia's most remote communities.
    Appropriate funding for this ARC project is a necessity. With this funding it will be possible to upgrade the skills of teachers, create training opportunities for local leaders, and conduct a broad public outreach, so that all Appalachians will feel at home in the new digital world. To remain competitive, both existing Appalachian businesses and aspiring entrepreneurs must increase their use of the internet. Closing the digital divide includes not only access to broadband technology, but also the cultivation of new business opportunities for the region that arise from the information technology sector.
    Like many other rural communities, Southern Ohio finds itself without adequate broadband deployment to support highspeed internet access. Because broadband deployment is a business decision for the private sector, communities like Appalachia who do not represent lucrative business markets, are being left behind on the information highway. Mr. Chairman, much like the prominent role the federal government played in the electrification of rural America, I feel that we should take yet another lead role in deploying advanced internet services in rural America. Mr. Chairman, I encourage you to support the ARC's proposed $75 million federal investment and help merge Appalachia onto the information highway.
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State of West Virginia,
Office of the Governor,
Charleston, WV, June 19, 2001.
House of Representatives, Ranking Democratic Member,
Transportation Committee, Washington, DC.
    DEAR CONGRESSMAN COSTELLO: I want to thank you for holding hearings on reauthorization of the Appalachian Regional Commission (ARC). It is a privilege to write a letter of support for the reauthorization of the ARC. I find myself in a very unique position to advocate for the ARC. For the past 18 years, I served as a Congressman from a state that is totally within the geographic boundaries of ARC. Today, I am the seated Governor of that same state.
    West Virginia has a long history with the ARC. For the past 35 years, the ARC has been a great help in assisting state and local leaders find a brighter pathway to community and economic development. As Governor, I see firsthand the value of the Appalachian Regional Commission's contribution to the state. For example, we have seen many of our rural distressed communities gain access to potable water and improved sanitary waste systems. We have provided laptop computers to school districts in our severely distressed communities; provided daycare opportunities in communities that had the will to support these programs, but not the resources to develop and implement them; encouraged civic leadership development; and fostered opportunities for rural entrepreneurial development.
    While poverty is still with us, it is at a fraction of what it once was. Our economy is rapidly diversifying, taking with it the boom/bust cycle which had been our constant companion, and leaving in its place a level of employment stability that the Region has never before known.
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    Our work is not complete. Too many of our counties still remain economically distressed. They lack the basic amenities, such as adequate water, sewer, healthcare, and education opportunities necessary to attract and expand business opportunities. Additionally, many of our rural distressed communities are unable to compete in the global economy due to the lack of high-speed telecommunication infrastructure. ARC can play a critical role in supporting the continued development of our rural distressed communities.
    We appreciate the Committee members' support of ARC. Through your efforts, I am encouraged that the ARC will be reauthorized. As a former colleague, I truly understand the budget constraints that the Congress now faces. I personally believe that the five-year reauthorization of ARC offers a solid foundation for renewing the work of the Commission in helping us move toward that goal of economic parity.
    I urge the passage of this reauthorization bill as soon as possible so that we can continue our work for the people of the Region. I look forward to working with the Committee in a common effort to achieve broad congressional support for reauthorizing the Commission.
Very truly yours,
Bob Wise,