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«June 21, 2010 M-10-21 MEMORANDUM FOR THE HEADS OF EXECUTIVE DEPARTMENTS AND AGENCIES FROM: Peter R. Orszag, Office of Management and Budget Melody C. ...»

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THE WHITE HOUSE

WASHINGTON

June 21, 2010

M-10-21

MEMORANDUM FOR THE HEADS OF EXECUTIVE DEPARTMENTS AND AGENCIES

FROM: Peter R. Orszag, Office of Management and Budget

Melody C. Barnes, Domestic Policy Council

Derek Douglas, Domestic Policy Council and Office of Urban Affairs

Lawrence Summers, National Economic Council SUBJECT: Developing Effective Place-Based Policies for the FY 2012 Budget This memo provides guidance on developing place-based policies for the President’s FY 2012 Budget. Effective place-based policies can influence how rural and metropolitan areas develop, how well they function as places to live, work, operate a business, preserve heritage, and more.

Such policies also leverage investments by focusing resources in targeted places and drawing on the compounding effect of cooperative effort. This Administration has made a priority of promoting such policies, and, last year, we issued a guidance memo laying out the principles and definitions underlying place-based policies and requesting agency proposals (see Appendix I).

For the FY 2012 Budget, the Administration aims to build on the encouraging progress made to date (see Appendix II). Our goal is to continue applying place-based principles to existing policies, potential reforms, and promising innovations, with a particular focus on strengthening

economic growth and achieving greater cost effectiveness:

• Economic growth. Place-based policies should reflect the comparative advantages and needs of distinct regions across the Nation, both in mature and emergent economic sectors that operate in rural and metropolitan areas. Policies should help economically distressed cities and regions, for example, to transition from reliance on their anchor industry(ies) to an economic base that would spur productivity and growth in a sustainable economic trajectory.

• Cost-effectiveness. The American people deserve a government that spends taxpayer dollars as cost-effectively as possible. Especially in light of the fiscal challenge we face, we must eliminate unnecessary spending and focus federal resources on effectively addressing clear needs or problems. This is as true for place-based efforts as it is for other Federal spending.

I. More on Growth as a Priority Economic growth should receive special focus in your FY 2012 Budget submissions. This priority is not meant to preclude agency submissions related to the Administration’s other placebased priorities, i.e., environmental sustainability, community health and access to opportunity, and safety and security, all of which can contribute to or complement economic growth. Growth is a particularly urgent priority for our nation’s communities, and it is one that smarter federal policy can accelerate in a variety of ways.

Competitive, high-performing cities and rural areas are the building blocks for strong regional economies, and strong regional economies are the foundation for national economic growth. The elements of economic productivity – strong infrastructure, a skilled workforce, and interrelated networks of firms – come together with smart economic strategy on the regional level to drive prosperity. Yet by and large, Federal programs are based on one national economy, or 50 state economies, and miss the local or regional reality. Furthermore, Federal programs typically support infrastructure, workforce development, and other building blocks without tying them explicitly to strategies for regional growth, which many communities lack.

By coordinating their programs, Federal agencies can promote collaboration at the regional level to link, leverage, and align federal, state, local, and regional resources and promote more effective use of existing dollars in a fiscally constrained environment. Coordinated investment aimed at building upon regional assets can also catalyze private investment, increasing the resources available to propel a region forward.

Such policies are particularly important for the many cities, rural areas and regions in America undergoing major economic transitions. Some have experienced long-term decline due to shifts in production technologies and market power that made it impossible for their primary industry(ies) to support the population and development base that it once did. The recession has deepened the economic crisis in these regions, and this is a pivotal moment for the Federal government to help these regions find their way in the new economy. Other regions have experienced a seismic shock to their economies more recently, but they can also benefit from well-focused efforts to generate stability and new growth.

II. Specific Actions Requested

Appendix III outlines some major types of place-based policies that could enhance economic growth. This outline is a starting point for identifying programs in your agency that may lend themselves to restructuring, termination, or promising innovations. Please include the following

as a separate section in your FY 2012 budget submission, due to OMB on September 13, 2010:

• Identify the place-based programs or initiatives that you believe show special promise for achieving better outcomes, whether the place-based approach is well-established or newly proposed. In so doing, please give special emphasis to programs that promote economic growth. These policies should be within OMB Guidance (M-10-19) and cost effective. For each, please explain the policy’s measurable outcomes, using empirical evidence to the degree possible. In addition, please provide options for improving the intra- or inter-agency coordination and effectiveness of the proposed policy.





• Identify the existing place-based programs or policies within OMB Guidance (M-10-19) that are not cost effective and that you would propose to reduce, terminate, or significantly restructure due to inefficiencies or ineffectiveness. Please explain why you have reached this determination, using empirical evidence to the degree possible.

This guidance will be discussed in meetings with agencies that OMB and DPC will schedule this summer. Agencies are also encouraged to work with their OMB RMO and their policy council contacts to identify candidate programs. OMB will weigh these questions throughout the process of policy development for the President’s FY 2012 Budget.

–  –  –

See complete FY 2011 memo at www.whitehouse.gov/omb/assets/memoranda_fy2009/m09pdf A. Definitions Place-based policies target the prosperity, equity, sustainability and livability of places – how well or how poorly they function as places and how they change over time. Place-based policy leverages investments by focusing resources in targeted places and drawing on the compounding effect of cooperative arrangements.

By definition, all domestic policies affect people who live or work in particular places. But many domestic policies are not place-based or place-driven. This is not to say that place-based approaches are always the most effective way to achieve particular policy goals. However, the Administration’s work should be guided by a clear understanding of the useful role that placebased policy can play and how to make it most effective.

–  –  –

A program to foster successful networks A Federal program to make credit available or clusters of businesses at the local or to small businesses generally.

regional level A Federal program to foster A program to make mortgage credit homeownership through a neighborhood- available to qualified borrowers generally.

based approach to financing, redevelopment, and financial literacy development A Federal program that targets local A program to provide unemployment workforce development organizations insurance to the unemployed as a category.

(which help supply skilled labor) and connects them to efforts to generate jobs (local demand for labor) Though the boundaries blur in some cases – for example, tax deductions to promote homeownership appear to benefit the households that receive them as well as their neighbors, thanks to spillover effects – the place-based distinction applies in education, health, and other domains not in the list above.

Furthermore, various Federal programs can function more effectively if they include wellfocused, place-based strategies. Evaluations of Federal programs commonly underscore the importance of encouraging local networks of referral, support, and coordination – for instance, to make disparate Federal programs more effective in generating employment.

B. Principles for Place-Based Policy

Consistent with the Administration’s overall approach to policy making and commitment to investing in what works, three principles should serve as a guide to agencies as they review their

place-based policies or review their programs for opportunities to implement place-based policy:

• Clear, measurable and carefully evaluated goals should guide investment and regulation. As agencies consider which policies and programs to integrate into place-based focus, these should incorporate clear measures of success and concrete measures by which the comprehensive effectiveness of Federal action can be evaluated over time. Goals and results should be transparent and widely and effectively shared.

• Change comes from the community level and often through partnership; complex problems require flexible, integrated solutions. The Administration must break down Federal “silos” and invest in such a way that encourages similar coordination at the local level. To make the Federal government a more effective and nimble partner, agencies also should pursue opportunities to engage State, local, and tribal governments, faith institutions, nonprofit organizations, businesses, and community members at-large as collaborators. Effective collaboration rests on developing shared agendas for action, strategies that are smart, success measures that make sense, and implementation focused on results.

• Many important challenges demand a regional approach. The Nation is increasingly a conglomeration of regional economies and ecosystems that should be approached as such.

Federal investments should promote planning and collaboration across jurisdictional boundaries. Given the forces reshaping smaller communities, it is particularly important that rural development programs be coordinated with broader regional initiatives. Programs in neighboring zones and within larger regions – some of which connect rural communities to metropolitan regions – should complement each other. Federal programs should better reflect the Nation’s economic and social diversity, both in rural and metropolitan areas. To the extent possible, programs should allow for communities to identify distinct needs and address them in appropriate, strategic ways.

Appendix II PROGRESS TO DATE

While programs and policies internal to Federal agencies naturally tend to be siloed, the notion of place-based policymaking has already begun to change the way the Federal Government does business. We have seen this in a number of interagency initiatives and FY 2011 Budget

proposals that serve Administration priorities in this area:

Sustainable Communities. The Departments of Transportation (DOT) and Housing and Urban Development (HUD), and the Environmental Protection Agency (EPA), have taken a wholeagency approach to rethinking policy and programs through a place-based lens. They each administer large sums of money directed at planning for and constructing infrastructure, housing, or other “place-making” investments that shape physical development patterns. Yet the agencies recognize that their siloed incentives and requirements lead to cumbersome and inefficient planning and use of resources at the local level. Some of these decisions – such as laying water lines to the outskirts of center cities without regard to transit, accommodations for affordable housing or linkages to job centers – incentivize higher maintenance requirements, often putting the Federal government on the hook for increased subsidies over time.

With support from the Congress, these three agencies have begun to align planning rules and regulations, as well as funding decisions, to encourage integrated solutions to these problems, such as by reusing existing infrastructure assets and promoting fiscal responsibility. In the current fiscal year, the agencies are collaborating on grantmaking across several programs. And in the FY 2011 Budget, the three agencies proposed coordinated reforms and expansions to increase the capacity of their grantees to work across sector lines and coordinate planned investments. HUD’s budget request includes $150 million to help stimulate comprehensive regional and community planning efforts that integrate transportation and housing investments and that result in more sustainable development patterns, reduce greenhouse gases, and increase transit-accessible housing choices for residents. This is combined with the DOT’s requested $539 million for strengthening the capacity of States and local governments to make smarter infrastructure investments, and the EPA’s requested increase to $11 million in its Smart Growth Office for technical assistance.

Regional Innovation Clusters. Federal programs for planning and supporting regional economic development are fragmented and largely uncoordinated across the Federal government. To be most effective on the local level, business, economic, and workforce development efforts should be coordinated and built around an analysis of a region’s economic assets and challenges as well as the changing global economy in which regions compete. The Departments of Commerce (DOC), Labor, and Education and the Small Business Administration (SBA) have come together to work toward a more coordinated strategy built around innovation clusters. Over the past year, they have worked with the Department of Energy to align major energy technology investment with business and workforce development support to ensure that communities can translate R&D dollars into greater prosperity for the region.

The U.S. Department of Agriculture (USDA) is helping to lead this approach in rural America.



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