Economically Distressed Area (EDA) Questions and Answers
(November 12, 2009)
Question EDA-1: Which projects are subject to the August 24 guidance? Do we need to go back and reassess our EDAs based on the August 24 Supplemental Guidance on EDAs?
Answer EDA-1: You should follow the August 24 guidance when authorizing (obligating) Recovery Act funds for any additional projects. As stated in the guidance, States shall use the guidance to determine if existing projects should be reclassified to more accurately reflect State’s investment in EDAs.
Question EDA-2: If my state plans to have Recovery Act projects in the future that are in EDAs and I am being requested to authorize projects today that are not in an EDA, can I approve those projects?
Answer EDA-2: Yes, under certain conditions. As the August 24 guidance indicates, use of Recovery Act funds requires a balancing of several priorities and preferences, as well as satisfaction of normal project eligibility criteria. At the time of obligation, the State should consider the following.
Question EDA-3: Can I approve a project without reviewing the EDA priority issue if the project was in one of the State’s section 1511 certifications posted on the USDOT web site prior to August 24?
Answer EDA-3: No, the authorization process (i.e., obligation) is the official list of projects and constitutes the point of project selection for purposes of the EDA priority.
Question EDA-4: If the State obligated Recovery Act funds only for one phase of a project, such as preliminary engineering, and later wants to obligate Recovery Act funds to a later phase of the same project, do I have to take a fresh look at whether the project is in an EDA?
Answer EDA-4: This question presents a hybrid situation that does not fall cleanly within the parameters of the August 24 guidance. We believe that the most appropriate approach in such cases is to treat the decision on project selection for that particular project as having been made at the time of the first obligation if at the time of the first obligation there was documentation showing the State planned to use Recovery Act money for the subsequent project phase(s). If such documentation of the State’s intention to fund additional phases with Recovery Act monies was in place at the time of the first obligation, then the State does not have to revisit the EDA priority issue under the August 24 guidance.
We do encourage States to review such projects to determine whether they may be in EDAs based on sub-county level data analysis, or the application of the four special need criteria outlined in the August 24 guidance.
Question EDA-5: Can a State justify selection of a non-EDA project based on the need to meet other criteria outlined in the Recovery Act [e.g., 3% of Highway Infrastructure Investment funds must be spent on transportation enhancement (TE) projects]?
Answer EDA-5: The EDA priority applies to all funds apportioned under the Highway Infrastructure Investment appropriation. This includes the TE set-aside as well as suballocated funds. The guidance provided above concerning selection of non-EDA projects over EDA projects would apply to the selection of TE-funded projects. Again, we encourage States to review their EDA determinations to see whether there are additional EDAs at the sub-county level based on per capita income or unemployment, or additional EDAs based on special need criteria applied at the county or sub-county level.
Question EDA-6: If an area, within the previous 12 months, has been determined by the Department of Commerce to be an EDA, may the State use that EDA designation for meeting the EDA priority under the Highway Infrastructure Investment appropriation?
Answer EDA-6: Yes, as long as there is no reason to believe that the reasons for Commerce’s EDA determination are no longer valid.
Question EDA-7: What kinds of evidence can be used to satisfy the requirements in FHWA’s special need criteria #1 relating to “actual closure or restructuring of one or more businesses within the past twelve months, resulting in sudden job losses”?
Answer EDA-7: The data needed to demonstrate actual or threatened closures under special need criteria #1 may come from a number of sources. The key is that it be reliable, credible, and verifiable. Once there is reliable evidence of business closure or restructuring affecting the area, changes in CLF are presumed to reflect the effects of those events. Methods States may use include, but are not limited to:
We understand States may find it difficult to capture closure and restructuring information on businesses that are not required to provide WARN notices (such as businesses that employ fewer workers than Federal or State WARN thresholds, or lay off fewer workers than those WARN thresholds). It is generally acknowledged that small businesses are more vulnerable to economic disruption than larger businesses, typically leading to higher rates of closure or restructuring. We are working to develop an appropriate methodology for addressing this situation.
States may consider other information sources for evidence of business closure and restructuring IF the State is able to verify the information. Such sources may include trade publication reports, press announcements, and reports in the media. However, caution is warranted because the effort required to obtain and to verify the closure/restructuring data in this manner may well exceed the value of the data for purposes of the EDA priority.
Note that the economic distress measured by special need criteria #1 and #2 is different than distress measured by general unemployment rates. States may not use general unemployment rates as a basis to presume the occurrence of business closures or restructuring. If a State wishes to make EDA determinations using unemployment rates that do not meet the requirements of the statutory unemployment criteria in Public Works and Economic Development Act (PWEDA), then the State should contact its FHWA Division and Office of Chief Counsel for an individual review of the proposed criteria under the special need provision of PWEDA.
Question EDA-8: If a State does not think the four special need criteria described in the August 24 guidance sufficiently capture EDAs in the State, can the State make a special need determination on other grounds?
Answer EDA-8: Yes, but before doing so the State first should contact its FHWA Division Office. The Division Office in turn will contact the Office of the Chief Counsel (Nicolle Fleury or Janet Myers) for assistance. FHWA will work with the State to ensure that any additional special need determination meets the requirements of the Recovery Act and PWEDA.
Question EDA-9: Can a state utilize any of the FHWA EDA maps on HEPGIS to determine EDA status for a project?
Answer EDA-9: The determination of whether a project is located in an EDA is made at the time of obligation. EDA status is dynamic in nature and may change over time. Therefore, States should use the FHWA HEPGIS EDA map that is closest in time to the date on which the EDA determination is being made.
Question EDA-10: What types of documentation and reporting are required for EDA determinations?
Answer EDA-10: For reporting purposes, the Recovery Act Data System (RADS) has data fields that ask the State to indicate what percent of a project is in an EDA and to describe briefly the kind of EDA determination that applies. Examples of the kinds of EDA determination that a State would enter into RADS include:
Separate from Recovery Act reporting, both the State and Division are expected to create and retain documentation describing the justification for any EDA determination other than determinations made using the March 13, 2009 FHWA GIS maps. For determinations made using FHWA GIS maps with a different date, the documentation can be limited to the map title, map date, and the date the project was authorized (the authorization date must be a later date than the map date). For use of special needs 1 through 4 in the August 24 guidance, the documentation should describe the facts that demonstrate the area meets the special need criteria. For a special need other than those listed in the August 24 guidance, State and FHWA Division documentation should describe:
Question EDA-11: What type of documentation is required if you have an area you think may fall into the EDA criteria for income, but is not listed in the FHWA maps? For instance, if we have a project the State believes is located in an EDA, but it is unclear whether there is available census data or income data to prove it?
Answer EDA-11: The determination of an EDA under the per capita income or unemployment criteria must be based on either Federal data, or State data meeting reliability criteria. We suggest that in such cases the State contact the Division, and the Division work with FHWA GIS Specialist Supin Yoder for help in determining whether the Federal data shows additional EDAs in the State at the sub-county level.
If the State would like to use non-Federal data for an EDA determination under the per capita income or unemployment criteria, the Division can work with the State and FHWA Headquarters to determine whether appropriate non-Federal data demonstrate the existence of such EDAs at a county or sub-county level. Similarly, if the State wishes to make a special need determination other than one of the four described in the August 24 guidance, the Division and Headquarters will work with the State to help it decide whether such determination would meet the requirements of the law.
Question EDA-13: How will the EDA percentage of statewide or multi-county projects be reported in RADS?
Question EDA-14:How are we supposed to measure the 12-month period mentioned in the August 24 guidance special need criteria #1 (actual business closure or restructuring)?
Answer EDA-14: The determination of whether a project is located in an EDA is made at the time of obligation. EDA status is dynamic in nature and may change over time. Therefore, the 12-month period is measured as of the date of the EDA determination, which is made at the time of project authorization. This is consistent with the measurement used in the natural disaster special need #4.
Question EDA-15: Since there were no specific performance measures established for EDA’s in the legislation (dollar amounts or percentage of projects), what is FHWA trying to achieve as the end result? If a State has only one or two EDAs, and the majority of the roads in those EDAs are not eligible for Federal funding, are the States supposed to do projects in the EDAs just because they are EDAs? What about other transportation or public needs?
Answer EDA-15: The August 24 Supplemental Guidance is part of FHWA’s continuing effort to ensure that the EDA priority in the Recovery Act is implemented appropriately. This priority requirement has not changed. As discussed above, if a State wants to select a non-EDA project over an EDA project, then the State should meet with the Division to review the reasons the State believes the non-EDA project should be selected over the EDA project and to review whether the State has otherwise demonstrated that it has given (or will have given once all projects are obligated) adequate priority to projects in EDAs.
Question EDA-16: For TIGER grants, who makes the EDA determination if the applicant(s) is not the State? The State or the applicant(s)?
Answer EDA-16: The Office of the Secretary will determine whether an applicant has adequately demonstrated that an area is an EDA. In a Federal Register notice published on June 17 (74 FR 28755), the Office of the Secretary indicated that priority would be given to projects that “are expected to quickly create and preserve jobs and stimulate rapid increases in economic activity, particularly jobs and activity that benefit economically distressed areas as defined by [PWEDA].” The notice also specifies that TIGER Grant applicants may show that a municipality or similar political subdivisions (i.e., an area below the county level) meets the PWEDA criteria. See 74 FR at 28758, including footnote 1.