[Senate Hearing 109-1037]
[From the U.S. Government Printing Office]



                                                       S. Hrg. 109-1037
 
TESTIMONY ON THE IMPACT OF THE LAST REAUTHORIZATION OF THE APPALACHIAN 
 REGIONAL COMMISSION AND ISSUES REGARDING THE UPCOMING REAUTHORIZATION.

=======================================================================



                                HEARING

                               BEFORE THE

                              COMMITTEE ON
                      ENVIRONMENT AND PUBLIC WORKS
                          UNITED STATES SENATE

                       ONE HUNDRED NINTH CONGRESS

                             SECOND SESSION

                               __________

                      APRIL 20 2006--MARIETTA, OH

                               __________

  Printed for the use of the Committee on Environment and Public Works


Available via the World Wide Web: http://access.gpo.gov/congress.senate

                               __________



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               COMMITTEE ON ENVIRONMENT AND PUBLIC WORKS

                       ONE HUNDRED NINTH CONGRESS
                             SECOND SESSION

                  JAMES M. INHOFE, Oklahoma, Chairman
JOHN W. WARNER, Virginia             JAMES M. JEFFORDS, Vermont
CHRISTOPHER S. BOND, Missouri        MAX BAUCUS, Montana
GEORGE V. VOINOVICH, Ohio            JOSEPH I. LIEBERMAN, Connecticut
LINCOLN CHAFEE, Rhode Island         BARBARA BOXER, California
LISA MURKOWSKI, Alaska               THOMAS R. CARPER, Delaware
JOHN THUNE, South Dakota             HILLARY RODHAM CLINTON, New York
JIM DeMINT, South Carolina           FRANK R. LAUTENBERG, New Jersey
JOHNNY ISAKSON, Georgia              BARACK OBAMA, Illinois
DAVID VITTER, Louisiana
                Andrew Wheeler, Majority Staff Director
                 Ken Connolly, Minority Staff Director

                                  (ii)


                            C O N T E N T S

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                                                                   Page

                      APRIL 20, 2006--MARIETTA, OH
                           OPENING STATEMENTS

Voinovich, Hon. George V., U.S. Senator from the State of Ohio...     1

                               WITNESSES

Grossman, Steve, executive director, Ohio Water Development 
  Authority......................................................    29
    Prepared statement...........................................    69
Hughes, Jeff, director, Environmental Finance Center, University 
  of North Carolina at Chapel Hill, Institute of Government......    27
    Prepared statement...........................................    52
Justice, T.J., director, Governor's Office of Appalachia, 
  Appalachian Regional Commission................................     7
    Prepared statement...........................................    45
Little, Gary, president, Information Technology Alliance of 
  Appalachian Ohio...............................................    18
    Prepared statement...........................................    48
Matusoff, David, principal and director of Technology Planning, 
  Whiteboard Broadband Solutions.................................    16
    Prepared statement...........................................    47
Myers, Don, director, Ohio Mid-Eastern Governments Association...     9
    Prepared statement...........................................    46
Pope, Anne, Federal co-chair, Appalachian Regional Commission....     4
    Prepared statement...........................................    37
Reed, Ken, director, Vinton County Community and Economic 
  Development, Vinton County Courthouse..........................    31
    Prepared statement...........................................    81
Scholl, David, Ph.D., president and CEO, Diagnostic Hybrid, Inc..    22
    Prepared statement...........................................    51
Stuber, Angela, executive director, Ohio Community Computing 
  Network........................................................    20
    Prepared statement...........................................    49

                          ADDITIONAL MATERIAL

Reports:
    Appalachian Regional Commission: Index of County Economic 
      Distress in the United States, Fiscal Year 2006............    44
    Appalachian Regional Commission: Telecommunications and 
      Technology in Appalachia, Program and Impact Summary, April 
      20, 2006................................................... 84-95
    Drinking Water and Wastewater Infrastructure in Appalachia, 
      An Analysis of Capitol Funding and Funding Gaps--Report 
      Summary.................................................... 56-68
    Water and Wastewater Infrustructure in the Appalachian Region 
      of Ohio.................................................... 71-80
Statement of Jeff Spencer, executive director, Ohio Valley 
  Regional Development Commission................................    81


TESTIMONY ON THE IMPACT OF THE LAST REAUTHORIZATION OF THE APPALACHIAN 
 REGIONAL COMMISSION AND ISSUES REGARDING THE UPCOMING REAUTHORIZATION.

                              ----------                              

                        THURSDAY, APRIL 20, 2006

                                        U.S. Senate
                 Committee on Environment and Public Works,
                                                       Marietta, OH
    The committee met, pursuant to notice, at 10 o'clock a.m., 
Washington State Community College, Graham Auditorium, 710 
Colegate Drive, Marietta, OH. Hon. George V. Voinovich 
presiding.

  OPENING STATEMENT OF HON. GEORGE V. VOINOVICH, U.S. SENATOR 
                     FROM THE STATE OF OHIO

    Senator Voinovich. Good morning everyone. Can you hear me? 
I am very, very pleased to be here today to conduct this field 
hearing on reauthorization of the Appalachian Regional 
Commission. It is nice to be back here in Washington County and 
at Washington State, and I would like to thank Dr. Hatfield for 
hosting us today. I know that when you put one of these things 
together, it is a lot of inconvenience to your staff, and we 
are very, very grateful for the venue that you provided to us.
    I think the last time I was here was back in 2002 when we 
toured Washington State's nursing program which was set up, 
supported by the ARC, and Dr. Hatfield said she has a whole 
list of things that Washington State has adopted in part, I 
have it right here, for ARC. So it is nice to be in a place 
where we are having an impact on.
    I would also like to thank and recognize Joy Padget, the 
former director of the Governor's Office of Appalachia, and now 
your State Senator. I really appreciate the good job that Joy 
did up at the Governor's office, and we worked together for a 
long time, and was preceded by someone's else work and that is 
T.J. Justice.
    I would also like to recognize some of our local 
development district directors, Boyer Simcox with Buckeye Hills 
which is based here in Marietta, Jeff Spencer the Ohio Valley 
Regional Development Commission based in Waverly. They do an 
outstanding job in making a difference in their respective 
communities.
    I am also very, very happy to recognize our first witness, 
Anne Pope. Ann is our Federal co-chair, and I know that this is 
a special day for you today, Ann.
    Happy birthday to you. Happy birthday to you. Happy 
birthday dear Ann. Happy birthday to you.
    Ann has a background, her nationality is Hungarian, and I 
said that is the first hungarian--when I met her, the first 
hungarian I ever met that speaks southern. She has done an 
outstanding job, and she has been a great advocate of ARC, and 
I really appreciate all of the cooperation that you have given 
me over the years.
    As many of you know, the reauthorization for ARC that we 
got back in 2002 is about to expire and so we are going to be 
introducing legislation to get ARC reauthorized. What we hope 
to do today is get an overview of the importance of these 
programs to Appalachia and to closely examine the progress that 
has been made with respect to the implementation of our 
programs.
    In addition, we will look to identify the challenges that 
still must be overcome for the region to fully realize its 
economic potential. I think we always hear in Washington, ``We 
don't need it anymore. It's caught up.'' The fact of the matter 
is, you know the statistics. We haven't caught up.
    To help us to meet this objective, we have assembled an 
impressive array of witnesses who will testify about the ARC 
and the variety of ways ARC funds can be used to foster local 
economic and social development.
    I want to welcome our witnesses and thank you for coming 
here today. We are looking forward to your testimony. I want 
you all to know that your written statements will become part 
of the record, and that record is available to my colleagues on 
the Environment and Public Works Committee, and more important, 
to their staff which they rely upon.
    I would like to ask all of the people to keep their opening 
remarks to no longer than 5 minutes because we do have a lot of 
witnesses here today.
    Since 1965 when Congress established the ARC to bring the 
Appalachian region--how do--is it Appalachia, the word, Scott, 
or--he's not here. Let's see the hands. Is it Apalasha 
(phonetic) or Apalayshea (phonetic).
    It was 1965 and it was established to improve the lives of 
23 million citizens. You know, I do remember the need of this 
area because I lived here from 1954 to 1958 and I did get out 
into the community, and I did identify with John F. Kennedy in 
1960. I didn't vote for him, but I did identify with the fact 
that there was a part of America that wasn't participating. As 
you know, he really brought the eyes of America to this part of 
the country and let folks know that we were not where we were 
supposed to be.
    We have done a great job of reducing infant mortality by 
two-thirds and increasing the percentage of adults with high 
school educations by over 70 percent, and creating 1.6 million 
jobs.
    Our region includes 416 counties in 13 States including 29 
right here in Ohio. Twenty-nine Ohio counties in Appalachia. 
The ARC is composed of the Governors of the 13 Appalachian 
States and a Federal representative who is appointed by the 
President.
    It is a unique partnership between the Federal Government 
and these 13 States. The ARC runs programs in a wide range of 
activities, including the highway construction, education and 
training, health care, housing, enterprise development, export 
promotion, telecommunications, and water and sewer 
infrastructure.
    All of these activities help achieve the goal of a viable 
and self-sustaining regional economy and address the four goals 
identified by ARC in its strategic plan: The one, increasing 
job opportunities and per capita income, strengthening the 
region's physical infrastructure, building a local and regional 
capacity, and creating a dynamic economic base.
    ARC's programs fall into two broad categories. The first is 
a 3,025 mile corridor highway system to break the regional 
isolation created by the mountainous terrain, thereby linking 
the Appalachian communities to national and international 
markets. I think we should feel very good that roughly 81 
percent of the Appalachian Development Highway System is either 
completed or under construction. Here in Ohio, it's 83 percent. 
I am hopeful that in the next couple of years it will be 100 
percent. As Governor, we really worked on this area to make 
sure that we did our thing to help make that happen.
    The second is an area development program to create a basis 
for sustained local economic growth. Ranging from highway and 
sewer infrastructure to worker training to business financing 
and community leadership development, these projects provide 
Appalachian communities with the critical resources for future 
growth and development. The sweeping range of options allows 
Governors and local officials to tailor the Federal assistance 
to their individual needs. One of the great things about this 
program is the flexibility that it provides to communities.
    As many of you know, I have been an advocate for funding 
our Nation's water infrastructure, particularly the Clean Water 
State Revolving loan program.
    In July, the EPW Committee, which I belong to, approved a 
water infrastructure funding bill which authorized $20 billion 
for the Clean Water SRF. I must tell you that I am disappointed 
that Congress has not passed this bill yet. Quite frankly, it 
is just being held up on the issue of prevailing wage.
    I am also deeply concerned about the Administration's 
budget request to cut $310 million from the SRF program from 
the EPA's annual budget. These proposed cuts will have a 
devastating impact on the ability of our States and cities to 
continue upgrading their water infrastructure and meet Clean 
Water Act requirements. I am going to be interested, from our 
witnesses today, to find out how the ARC funds have melded with 
the SRF funds to make a difference in their respective 
communities. And I really encourage everyone to lobby Congress 
to make sure that those funds are restored.
    The ARC uses the Federal dollars it receives to leverage 
additional State and local funding in order to undertake a wide 
variety of projects to help improve the region's economy and 
its people. In rough figures, every ARC--this is really 
important, and you really need to drive it home. I call it the 
yeast that raises the dough. The ARC has leveraged 
approximately $3.37 in additional Federal, State and local 
funds, and over $4 in associated private investment, which I 
consider a great public, public-private partnership. People 
forget about how important those dollars are in leveraging 
other dollars in the community. In Ohio, the ARC funds support 
projects in five areas: skills and knowledge, physical 
infrastructure, community capacity, dynamic local economies, 
and health care.
    In the fiscal year 2005, ARC provided approximately $5 
million to fund projects in Ohio. Roughly half of this funding 
was spent exclusively on projects in Ohio's nine distressed 
counties. This successful partnership enables communities in 
Ohio and throughout Appalachia to have tailored programs which 
help them to respond to a variety of grassroots needs.
    Today we are going to concentrate on the successes and the 
future needs of the ARC's telecommunications and water 
infrastructure programs.
    While we still have a long way to go, we have seen some 
improvement since the last reauthorization legislation passed. 
In the last 5 years, ARC-funded infrastructure projects have 
provided clean water and sanitation facilities for over 183,000 
households.
    In December 1999, 43 percent of zip codes in Appalachia had 
at least one high-speed Internet provider, and in 2002, 64 
percent of zip codes had access to high-speed Internet. We've 
not more recent statistics on internet access of zip codes.
    Despite its successes to date, the ARC has not completed 
its mission in Southeastern Ohio and throughout Appalachia. The 
ARC is the type of Federal initiative that the Federal 
Government should be encouraging.
    I know there is a vast reserve of potential in Appalachia 
that is just waiting to be tapped. I wholeheartedly agree with 
one of ARC's guiding principles that the most valuable 
investment that can be made in a region is in its people.
    I am anxious to hear the testimony of our witnesses and 
hear their views as to their experience with the ARC, 
especially what they believe the ARC should be doing in 
cooperation with other Federal and non-Federal entities to do 
the most good for the region's people with limited resources.
    I would like to now call on our panel to begin with Anne 
Pope. Anne, you can begin. We're so happy to see you.
    Ms. Pope. Thank you, Senator Voinovich, and I appreciate 
that birthday song, and I want to just let you know that I am 
announcing here a significant budget savings as I am going to 
fire all of my staff.
    Senator Voinovich. Could you bring that up closer, the mic?

STATEMENT OF ANNE POPE, FEDERAL CO-CHAIR, APPALACHIAN REGIONAL 
                           COMMISSION

    Ms. Pope. It is wonderful to be here, Senator. I want to 
thank you for holding this hearing and giving me the 
opportunity to testify on behalf of the Bush administration. 
The President is very strongly committed to Appalachia, and I 
want to take a moment and thank you for being a champion of ARC 
and a champion of all of Appalachia. Appalachia is a wonderful 
region of the country. So I want to thank you.
    I also want to thank Washington State Community College and 
Dr. Hatfield for hosting this field hearing. Washington State 
Community College is a partner to ARC and it has done some 
great things with the resources and things that ARC has given 
this wonderful facility.
    The President is strongly committed to Appalachia and he 
recognizes that this region has not fully participated in the 
growth of the American economy and that he will not be content 
until every person who wants to work has a job. He believes ARC 
can play an important role in this.
    Since I have had the pleasure to have traveled around 
Appalachian Ohio with you and seen firsthand your passion for 
this region and for its people, I am grateful for your 
commitment. I'm also pleased to be joined here with T.J. 
Justice with the Governor's Office of Appalachia. He and 
Governor Taft have been vigorous and affective advocates for 
this region and for ARC. He has done a lot to move ARC forward.
    Also, I am delighted to be here with Don Myers who is the 
director of our ARC local development district. When you see 
this panel sitting here, I think that is what makes ARC work. 
They represent a Federal, State, and local partnership, and I 
believe that is what--this model is why ARC has been so 
effective.
    Mr. Chairman, I know that you know that the economic 
landscape of Appalachia has shifted. With this global economy, 
we are seeing dramatic changes in every local economy in the 
Appalachian region. Appalachia has relied on what I called the 
big four which is manufacturing, mining, tobacco, and steel, 
but this has shifted to a knowledge-based economy. You know 
that the knowledge-based economy, 80 percent of these jobs will 
be knowledge based and therefore require enhanced education and 
training. We know that Appalachia must match up to this new 
economy. We know that we are going to have to look for new ways 
to create jobs. We are going to have to enhance our schools. We 
will have to home grow some of our own businesses. We have to 
have innovative, regional strategies that position our 
communities to compete when, as the book says, the world is 
flat.
    In ARC, we've adjusted our programs to respond to this 
changed environment. We've become more performance based. We 
are increasing our leverage, we're expanding our partnerships, 
and we are focused on innovative regional strategies. All of 
this will help communities help themselves.
    I want to talk a bit about each one of these when we 
discuss the new ways that ARC is responding to the Appalachia's 
changing economic landscape.
    First, performance based. I believe to be effective, ARC 
must have a plan, work that plan, and then measure what it has 
accomplished. For that, we are guided by our strategic plan. We 
developed that in 2004 in a public way. We went to over 1,000 
people across five town hall meetings throughout the region who 
actually voted on what was important to them. From that, we 
came up with four goals or four things where we are going to 
make investments. One, we need to invest in creating jobs. Two, 
we need to invest in strengthening the capacity of our people. 
Three, we need to invest in our infrastructure knowing that 
that infrastructure is one of the building blocks that we need 
to make our region competitive. And four, you also mentioned, 
we have to continue to build and complete the Appalachian 
Development Highway System. That is the linch pin of our 
economic development strategy.
    With that, we have for the first time in 2004 developed 10-
year performance goals. We call them ``buckets''. We have four 
areas. I am always asking, ``Which bucket does it go into?'' So 
every investment that we make has to be in those four areas. So 
after 10 years our investments will create and retain 200,000 
jobs, will enhance the employability of 200,000 workers, and 
provide basic infrastructure to 200 households--200,000 
households, and open 250 miles of the Appalachian Development 
Highway System.
    Our new strategy and our mission now is that Appalachia 
should reach parity with the Nation and to measure that, we 
have developed an economic index that measures Appalachia 
against the rest of the country. When we reach that mission, 
Senator, I believe ARC will go out of business. What our index 
has shown is that Appalachia has more of the worst counties and 
fewer of the best counties than the rest of the Nation.
    Second, leveraging. We know that we can't do it alone and 
we must use our resources to leverage other resources, and we 
are doing that. I am very pleased that this last year we have 
increased our leverage ratio so that every $1 the ARC invests, 
we are leveraging $11, and out of that, $8 is from the private 
sector investment. This is very impressive, I believe, because 
most of what we do at ARC is predevelopment in nature, and so 
this private investment is significant because the private 
sector is risking its own capital in Appalachia.
    Next, partnerships. We know that we have to expand our 
partnerships, and we are doing that with the Government 
Agencies and with the private sector. I consider that as one of 
my main jobs, to increase our partnerships within the Federal 
structure and the private sector. We are doing that. Senator, 
you and I were together last year, and I was pleased there to 
announce a major commitment that Microsoft was donating a 
million dollars of software to the region, but I quickly saw 
that the demand and need was far greater, and Microsoft doubled 
that. We have delivered most of that software out in the 
region, including a significant portion right here in Ohio.
    National Geographic recognized that tourism is a key 
industry and a growing industry here in Appalachia. We have 
partnered with National Geographic to create the first map of a 
region, first map ever that National Geographic has done to 
boost tourism and create jobs. That map had many sites 
throughout Appalachia, including one right here in the 
Marietta, and I think it is very fitting that we have a hearing 
in Marietta, the heartbeat of tourism. I saw this morning, when 
I was running in downtown Marietta, where Lafayette's American 
Tour ended in Marietta. I think that is something that is 
really important in this area.
    The Centers for Disease Control. Since 2001, the CDC has 
committed well over a million dollars to the partnership of ARC 
that targets diseases such as diabetes, which I know is 
something that affects your family, as well as mine, and 
cancer. These two diseases, as well as others, 
disproportionately affect Appalachia. I know this is something 
that is key to moving the region forward.
    You and I, Senator, were at Ohio University a few years ago 
to announce the diabetes initiative. This is critical in 
dealing with the health issues that face Appalachia.
    Innovative regional approaches. We know that we have to 
look at innovative regional approaches to make our communities 
work together to be competitive.
    Senator Voinovich. You are about 10 minutes already.
    Ms. Pope. Let me just say, end by saying that we--we thank 
you for being here and I--many of the things I'm saying I am 
summarizing from my written statement, so I appreciate you 
letting me say that. I want to thank you for helping make ARC 
better. You have done much to push us and to make us look at 
what we can do to do better, and I think that we are making a 
difference and we are helping Appalachia move forward. So thank 
you. I think that ARC has positioned itself to respond to the 
challenges that face the region, and I thank you for helping us 
to move Appalachia forward.
    Senator Voinovich. Thank you. Thank you very much. T.J.

   STATEMENT OF T.J. JUSTICE, DIRECTOR, GOVERNOR'S OFFICE OF 
          APPALACHIA, APPALACHIAN REGIONAL COMMISSION

    Mr. Justice. Thank you, Senator. Good morning. I too am 
very thankful to have an opportunity to provide testimony 
today. I appreciate your willingness and effort to hold this 
field hearing here in Ohio. I am here on behalf of the 1.4 
million people that live in the 29 counties that you mentioned 
which compose the 13-State Appalachian region throughout the 
country.
    Your leadership on behalf of the ARC is very much 
appreciated, and it is recognized that you have not been 
bashful or shy about your appreciation of the program.
    I would also like to thank President Bush and Anne Pope 
for--despite the fact that these are difficult economic times 
and while many programs are being cut, this is a program that 
is proposed to be kept whole this year with the $64.8 million 
budget request. So I certainly thank them.
    I would also like to thank Bob Ney, my Congressman from 
back home, who equally has been a true advocate and strong 
supporter of the ARC.
    Finally, before I offer my formal testimony as to why I 
believe the ARC should be reauthorized for another 5 years, I 
would like to recognize four previous directors of the 
Governor's office of Appalachia that are in the room. One of 
them--Senator Joy Padget. There is also Jennifer Simon. Nancy 
Hollister was here, former Lieutenant Governor, as well. And 
Dan Neff. So thank you for joining us today.
    Senator the ARC breeds success and fuels partnerships that 
have led to an organization that I would like to talk about for 
a moment that excels here in Ohio called OACHE. You will have 
an opportunity to visit with some of the students tomorrow over 
in Perry County.
    The Ohio Appalachian Center for Higher Education is one 
example of the ARC at work. This is an organization that begins 
to work with students as young as in the 6th grade and allows 
them to come up with--to dream big and find adequate resources 
to make their dreams come true.
    I would like to share a personal story about a young man 
that I met a couple of years ago in Scioto County that moved me 
and I hope that it moves you in the same way it moved myself. 
While visiting the OACHE students at South Webster High School 
in Scioto County, a senior approached me and wanted to let me 
know how the OACHE program affected him and his life. He told 
me as he was growing up, his own family, including his own 
father, had discouraged him from even trying to go on to 
college. He was discouraged to apply. He was discouraged to 
take placement exams. He was discouraged from visiting 
campuses. But he knew deep down inside, he wanted to go. He 
wanted to try. He wanted to succeed and excel.
    OACHE found this young man and through their work, this 
young man who had been discouraged by his own family from going 
to college, he today is a sophomore at Hocking College in 
Nelsonville studying to be a police officer. I had hoped that 
he would be here to join us today, but he was unable to join 
us. This young man represents the work of the Appalachian 
Regional Commission and the way that they impact folks and our 
lives here in the region.
    This is a model and successful program that has also been 
replicated here in Ohio by Governor Taft. We are the only State 
that replicated that program by providing an equal amount of 
State money following the same ARC guidelines, goals, 
objectives and network using the local development districts. 
So by receiving $4.1 million in our Federal allocation, the 
Ohio General Assembly and the Taft administration have matched 
that--also through difficult budget problems, have maintained 
that in recent years, including the current biennium. That is a 
true testament as to how Ohio, including Governor Taft and 
myself, value the Appalachian Regional Commission.
    Their commitment to communities in the region have 
developed a number of new programs, and you have several in my 
formal written testimony, but I would like to specifically 
mention a couple that I believe are of significant value.
    When we talk about jobs, the beauty of the ARC program is 
that they will assist an entrepreneur creating as few as two or 
three jobs, or they will help to rehabilitate a water plant in 
Jackson County that will preserve 1,000 jobs, a large, major 
manufacturing employer. So it is a unique program that supports 
small business entrepreneurs, as well as large and major 
employers, and that is very unique.
    This is a program that has also allowed a mobile diabetes 
clinic to be deployed, and it travels throughout five or six 
counties, including Pike, Vinton, Athens, Hocking and others, 
through Ohio University. They are reaching out and testing 
other individuals who otherwise would not be screened to 
determine if they have diabetes. Another positive, we now have, 
thanks to ARC, a kit to give them so that they can self-manage 
their disease and take better care of themselves.
    So I believe this is an appropriate program that truly 
works, and we make very strong efforts that are measurable here 
in Ohio that allow us to have a very positive impact on the 
residents of our region. Senator, this is a program that works. 
There is no question about that. I appreciate your staunch 
support of this program and the opportunity to be here today. I 
hope the few minutes of testimony that I provided will make a 
difference and allow you to reauthorize this for another 5 
years. Thank you.
    Senator Voinovich. That is very comforting to me to hear 
that has been involved here, as one of the Governor's regional 
reps in charge of the ARC for the State of Ohio, because I 
think that you bring a real insight into the job, and thank you 
for being here today.
    Don, you have been at this a long time, haven't you.
    Mr. Myers. Real long. Too long. I had the privilege of 
working with you a couple of times. I am going to bring that up 
in my testimony. I hope that you remember some of the items 
that I wish to bring before you today.
    Senator Voinovich. Thank you for staying in there, and I am 
really interested in your perspective because you have had a 
chance to kind of watch how things have moved along. I am 
really interested in if we are holding our own or going 
forward, or you think we are slipping backward. You're on.

STATEMENT OF DON MYERS, DIRECTOR, OHIO MID-EASTERN GOVERNMENTS 
                          ASSOCIATION

    Mr. Myers. I have to be good today in front of Anne Pope. 
She demands that. I get to tell you the truth today. It is a 
privilege to be here testifying before you today and your 
Senate Environment and Public Works Committee. I testify to 
express my comments and those of the Ohio Mid-Eastern 
Governments Association's (OMEGA) Board and to seek your 
consideration and support in securing funding and 
reauthorization status for the ARC and all of its programs. In 
addition, we ask that you and the committee support retaining 
the original mission of the program as a flexible, locally 
driven program that provides valuable assistance to county 
commissioners, mayors and development officials working to 
improve local communities and the needs of those communities.
    As Executive Director of OMEGA, I represent an organization 
that serves as, quote, a Council of Governments (COG), a Local 
Development District (LDD) and an Economic Development District 
(EDD) serving a 10-county region with a population of 593,211 
plus people in eastern Ohio.
    At our most recent Annual Board meeting held last 
Wednesday, April 12, 2006, 90 officials were in attendance, 
including commissioners, mayors, county engineers, development 
officials, educators and private business leaders, and we spoke 
of the critical importance of continuing funding and securing 
reauthorization of the ARC program. At this meeting, we held 
discussion on this hearing today that you are holding, and our 
Board in its entirety requested your support and leadership in 
securing proper funding and reauthorization of this most 
important ARC program.
    As a former development directer in Belmont County, OH, 
I've had the privilege of working with you personally as 
Governor on three separate occasions. They are as follows, the 
$80 million Ohio Coatings Electrolytic Tin Plating Plant in 
Yorkville, a Wheeling Steel project, the Shadyside Stamping 
Plant in Shadyside, OH, built a cost of $32 million, and the 
Belmont Correctional Institution built at a cost of $38 
million. These three development projects alone were built at a 
total cost of $150 million and have approximately, when I left 
Belmont County in 2001, 900 employees with a payroll of over 
$35 million. Belmont County and its people today benefit 
because of these developments. These special projects could not 
have happened had it not been for the ARC program and others 
like it.
    Senator we met with Ohio Coatings in your office, Wheeling 
Pittsburgh Steel, Chairman Song from Sole, South Korea, 
Nitetsu's (phonetic) chairman, and Jim Antem, Wheeling 
Pittsburgh Steel, and we put that $80 million package together. 
Five Hundred thousand dollars of it came from ARC to build that 
road when we had no other place to look. And that $1.3 million 
road, a mile and a half of it, serves needy people today.
    Senator on the side, we gave them a 50 percent tax 
abatement, and that company today has paid over $3 million in 
taxes in this 8-year period of time at a 50 percent tax break. 
That will go off in 2 years, and they will be doubling that 
payment, and that's how it is returned to the community. The 
jobs that are there are $56,000 a year, the 80 jobs that we 
have. So I know that you liked that project, and it is very, 
very special to eastern Ohio. Records at our OMEGA office 
through 1968 to 2005 in our OMEGA region 10-county area state 
that we have been able to give out $75 million in ARC grants, 
both State and Federal. These grants have enabled us to 
complete 360 projects addressing health, safety, welfare, and 
educational projects totaling over $305 million just for those 
items themselves. This does not include an $80 million project 
like Ohio Coatings. These programs could not have happened, 
these developments, without the ARC program.
    Our infrastructure needs are many, not only here, but 
throughout the county. Last summer, the American Society of 
Civil Engineers prepared a report which addresses 12 categories 
of infrastructure that gives the Nation's transportation, 
water, and energy system an overall grade of D--D+, excuse me. 
Both drinking water and waste water received the grade of D. 
The report states that the Nation's 54,000 drinking water 
systems are aging rapidly, and some sewer systems and water 
systems are more than 100 years old. We need quality programs 
like the ARC that address these issues of concern and 
importance.
    In closing, this program is very, very, very, special to 
the districts in Ohio. We are in Buckeye Hills District right 
now, and I just wish we had time to tell you Senator, and I 
will not because of the sake of time, but in closing, you have 
done much for the people of Ohio and for economic disadvantaged 
citizens throughout the United States. We ask that you continue 
to look out for these individual and those people living in the 
shadows of light.
    It is a very sluggish economy, and three major floods in 
our region, our 10-county members need your help and that of 
Congress more than ever. We ask for your continued leadership 
to support programs like the ARC and to secure the necessary 
reauthorization that we need for a 5-year period of time, at a 
minimum. We thank you for everything and for being here in Ohio 
today.
    Senator Voinovich. Thanks very much for your testimony. I 
would be remiss if I didn't introduce the blessing on me, and 
that is my wife. It's really interesting, last week, or the 
last week, and I know a lot of you are going to say, it must 
have been a real deal with the Asset Institute in Honolulu, and 
I conducted a hearing there. I am chairman of the Oversight of 
Government Management and the Federal Workforce with Senator 
Dan Conklin who is a member of the National Security of 
Personnel System. Here we are in Ohio, and this is just the 
second hearing that she sat in on since I have been a U.S. 
Senator, and I just want to thank her for coming along today.
    John, you mentioned the Civil Engineering Commission of 
Infrastructure, and I have introduced a piece of legislation 
that with Senator Clinton and Senator Harper and several others 
to look at the infrastructure needs of our country, and I think 
that maybe Congress has followed the advice that Jim Rhodes 
gave me one time. Jim Rhodes, some of you remember, was 
Governor of the State. He said, ``Georgie, never put anything 
in the ground because they don't see it.'' I think that is the 
flag that we have been flying.
    I think that we really have some real difficult challenges 
here. Thank God for the ARC, and it has been able to handle 
this with some of these infrastructure problems particularly. 
But we need to do a whole lot more in that area or we're going 
to end up--if you don't have the infrastructure, you just can't 
be competitive. We need this infrastructure and we also need 
the intellectual infrastructure more than ever before, and 
energy.
    Anne, your testimony mentioned the need to improve basic 
water, water infrastructure in Appalachia and we know it is a 
complex problem. What I would like to know is, when we passed 
the last authorization, one of the things that I wanted in 
there was to have the ARC be the coordinator for the Federal 
dollars in an area. Have you been able to take advantage of 
that? Has that helped at all, or has it been in the law but 
people have not taken advantage of it?
    Ms. Pope. Are you talking about the interagency----
    Senator Voinovich. Yes. The concept of leveraging all of 
the Federal dollars and bringing them to the table to get the 
biggest bang for our buck, and then after that interfacing with 
the State money and with the private sector money.
    Ms. Pope. I think the short answer is yes, and I think that 
the Interagency Council has 15 Federal Agency members that make 
up the vast majority of the investment within the Appalachian 
region. I was the Federal person to chair that, and I think 
that it has been very effective for a number of reasons, not 
the least of which is, what we have found is that many of the 
Federal programs--and let's just talk about infrastructure, our 
main partners, USDA, EPA, the State Agencies as well, TVA for 
the southern part of Appalachia region, they have difficulty 
getting into the Appalachia region and getting their programs 
into the Appalachian region in many places.
    We call that a low ``take rate;'' where for some reason, 
those Appalachian communities are just not applying for these 
grants within these areas for several Federal Agencies. So we 
are helping with the grassroots organization through the local 
Governments and State level, as well, to try to bring the 
Federal Government into the Appalachian region.
    So I think that has been something that has been most 
effective, I think, with this partnership. We have had some 
concrete results, as well, something that we are going to see, 
I think, tomorrow. This partnership with the Department of 
Labor and the private sector working in the utility industry to 
try to create a highly trained work force, where there is a 
shortage of it within the utility industry. So we are working 
with other agencies to try to increase that. It is something 
that we need to continue to do. We still have a ways to go.
    But yes, in answer to your question. I am sorry to--us 
southern Hungarians talk a little slower, but yes, it has been 
a very effective tool for us and we have had four meetings--as 
well as a field meeting, and we will continue to do that.
    Senator Voinovich. Don, have you seen any of that on the 
local level as a result of the change in the law?
    Mr. Myers. Senator, we have three projects this year and 
I--I have got to say this. Our poorest counties are not 
applying for the ARC program because they do not have the 
necessary match money, the ones that we really, really want to 
help. In OMEGA, we have no distressed counties. We have two of 
them that are very, very borderline, and you know Bob Harron 
(phonetic), Commissioner Bob Harron, he told me last year that 
they got 30 projects that they would like to submit. They 
cannot submit any of them because they don't have the necessary 
match dollars. If you are a distressed county, you need 20 
percent. There has to be something done for those programs that 
are not where we think they should be. There has got to be a 
mix between the distressed counties and those that are at 
attainment, or those right on the borderline.
    We lost--we had one up here on Stark for 2 years. It's one 
of the poorest counties in Ohio. They're not at risk here, or 
if they are, they just made it. Fourteen thousand people, you 
lose 1,500 jobs, they need help.
    Senator we are doing water projects that are in to the 
Federal co-chair, Anne Pope, right now for signature 
consideration. One of the----
    Senator Voinovich. May I say something? Are you using any 
SRS funds along with that?
    Mr. Myers. We are. Whenever we get the chance, we are.
    Senator Voinovich. So that is a case where you are working 
with the EPA?
    Mr. Myers. Absolutely. They have been a salvation to us on 
our big water projects. We are doing one in Guernsey County. 
You'll be there tomorrow and meeting today.
    But as we come from Muskingum County, Zanesville to 
Cambridge to Belmont County, we have three projects, water and 
sewer. All of them are under citation, and in Muskingum County, 
49 people's homes have been trying to get water for 30 years.
    In Guernsey County, 112 homes, we have to run 13 miles of 
water line at $1.3 million. ARC has $125,000 in it, but it was 
enough to put the project over the top to where the people 
could afford it. In Bridgeport, OH in Belmont County, for 40 
years they have been trying to put in a sewer project, $3.1 
million. We have $125,000 into that. It is that small amount of 
money, coupled with EPA and CDBG and USDA that makes these 
three projects go, the 30, 40, and 50 years of water and sewer 
projects.
    Senator Voinovich. And all of them----
    Mr. Myers. Yes.
    Senator Voinovich. We have a lot of that, and you put them 
under water and then the community doesn't have the resources 
to deal with the demand and what we are mandating them to do.
    Let's move from water infrastructure to technology and 
telecommunication. One of the things that we also put in the 
legislation and anticipated doing it again this time is the 
issue of divide and the issue of technology. I would be very 
interested to know how successful that has been and if you 
could share with us any examples of where you think that that 
has made a difference, and if you had your druthers, would you 
look for more money in that area than what we are now spending 
percentage wise?
    Ms. Pope. Let me just say it is a big issue for ARC. The 
specific authority that you put in the last reauthorization has 
been very useful. ARC is focusing on the importance of 
technology. The answer is that it is very helpful. I do believe 
that the investments that ARC has made have been very positive.
    You asked about the numbers. In December 1999, 44 percent 
of Appalachian zip codes had high speed providers, and in 
December of 2002, it was up to 63 percent. We are moving 
forward, just not at the pace that the rest of the country is 
moving forward, but we are making progress. I would, Senator, 
like to put in the record the program impact summary of our 
telecommunications program.
    To answer your question, it was very helpful, and if I had 
my druthers, yes, Senator, I would like to see that language in 
there again. I believe that telecommunication is very 
important. If business can be done anywhere, with technology, I 
think that no region can benefit more than the Appalachian 
region. Small communities can stay small communities, but can 
compete with technology.
    Senator Voinovich. One of the things that we started doing 
was to build a highway system, and you have to be able to get 
in and out to the area as you mentioned. Technology-based jobs, 
you can have computers, but if you don't have broadband or 
can't get it in, it's just--I don't see how you can possibly 
survive.
    One of the things that we did when I was Governor is we 
rewired all of the classrooms and started putting the computers 
in the school, and hopefully they will be computer literate, 
but the issue at the time, do they have the infrastructure to 
have broadband.
    T.J., could you comment on where we are with broadband in 
the region? Do you have any information on how it might compare 
with some other States?
    Mr. Justice. Sure, and I think that you will obtain some 
additional information later today from a couple of other folks 
that testify to that. The statistics have shown from 2002 to 
2004 a more than 50 percent increase in terms of access to the 
high speed broadband, which is largely by the private sector, 
like the phone companies running DSL or the cable companies 
running broadband.
    Our emphasis here in Ohio through work with Dave's 
organization has been to try to identify the communities where 
it is highly unlikely that broadband or DSL is ever going to be 
extended there, even in the foreseeable future. The best 30 
second example that I can think of is Chesterhill up in Morgan 
County, a small village, very little commerce, no major 
industry. It is isolated. It is probably cost prohibitive for 
the cable companies to run broadband there. They used the 
technology from out west through Ohio State University. You 
will find this amazing. I love telling the story. For $9,000, 
they have two towers that they put up. Right, David?
    David. Antenna.
    Mr. Justice. Antenna. I call them towers. So by way of 
doing these antenna----
    David. Radios, things like----
    Mr. Justice. I am not technologically sophisticated. For 
$9000, they have these two antennas up, so now the whole 
village of Chesterhill has wireless high-speed broadband 
access. We are exploring replicating that using the ARC dollars 
to other communities in the Appalachian region where it is just 
very unlikely they are ever going to get this kind of access.
    I think the short answer to your question is that we have 
had some dramatic improvement in terms of areas that have high-
speed internet access in their homes.
    Ms. Pope. I----
    Senator Voinovich. The 29--go ahead.
    Ms. Pope. I was just wanting to add one other thing. I 
think the word is getting out to communities, one, that it is 
important, and they have to know how to use it. I think the 
word is getting out and I think the reauthorization money is 
very effective for that.
    But I think that one of the things that we were doing--I 
come from a business background, and we are cross promoting 
telecom and every other program that we have. We just started 
this last year, and we are looking at what we call E-
infrastructure. Anything we build, any project that we do, any 
education project that we do, any infrastructure that we add, 
we are asking the grantees, ``Is there a telecom component in 
there? Does it make sense? If so, how much money do you need?'' 
I think that that is going to be very important, particularly 
in infrastructure.
    As you know, we spend half of our non-highway money in 
infrastructure, so while we are laying the pipes, we can lay 
the fiber, as well.
    Senator Voinovich. Any other comment?
    Mr. Myers. We have the infrastructure in place, the 
programs, the bands to do the assistance. We have come a 
remarkably long way in a very, very short period of time with 
just the little per capita, and we are indebted to that, and we 
have high hopes for the future. We think that technology 
improvements are going to assist a lot of this in the very, 
very, very near future. The money is there. USDA has it, ARC 
has it, CDG has it, and we are indebted for that. We are taking 
advantage of it. We are here and very proud of some of our 
accomplishments. We're not there yet, but we have come a long 
way.
    Senator Voinovich. Do you have a score card, T.J., on 
broadband in the county? Of the 29 counties, how many of them 
have broadband?
    Mr. Justice. Broadband is present in all 29 counties. We do 
have an updated map that shows areas that have broadband and 
areas that don't that we could certainly provide to you or your 
staff.
    Senator Voinovich. I want to thank you very much for your 
testimony, and I can assure you that Congress will spend--pool 
the money for it. It is not what we originally authorized back 
in 2002. I want to thank Anne for digging in with the 
administration a couple of years ago to get about 36 or 
something like that for the ARC, and you were able to get them 
to bring it up and at least keep it at a flat-funded amount.
    What all of you should realize is that the non-defense 
portion of the discretionary budget, we have mandatory spending 
and we have discretionary spending. Mandatory is, about two-
thirds of the money goes out for Medicare, Medicaid, Social 
Security. Veterans programs, and a lot of them the money just 
automatically shows up, and you are entitled to it.
    The discretionary is where we have some options available 
to us, and because of the war and the Homeland Security, all of 
which is thrown on the non-defense discretionary, so it is 
very, very tight today, and the budget that we had, quite 
frankly, did not do the job.
    What I am concerned about is that we are neglecting the 
infrastructure, our education commitments, and if we don't keep 
up with those things, we are not going to be able to compete in 
the global marketplace. In other words, we are now in the most 
formidable, competitive environment that I experienced in my 
life, and it is not going to get any better. Our seminar with 
the Asset Institute was on U.S./China, and you see what is 
happening in China and see what is happening, and the 
competition is out there. My dad once said that the reason why 
we have more of the world's prosperity than any other Nation in 
the world is we got more out of our people because of education 
and free enterprise. Frankly, other countries are getting on to 
it. The issue is, how do we stay in there, and we are seeing it 
right here, aren't we? The jobs that traditionally were here 
are gone. We are never going to see them again. What do we do?
    There are jobs that are here in Muskingum County training 
them for the energy industry. I understand there is going to be 
a great need for more coal mining. New technology, there are a 
lot of parts of Ohio that we are going to see more mining 
because of the fact that they are coming down here. We have to 
have an idea of just where are we going. What is the strategy. 
Where are we 5 years from now and what are the things that we 
should be concentrating on then.
    I love this part of Ohio. It's beautiful. I've always said 
the more beautiful it is, the poorer it is. But the fact is 
that more people are interested in their environment, and if 
you can have broadband and get a job and live in a beautiful 
place like this part of Ohio, I think it has got tremendous 
attraction. So thank you very much for being here.
    Our next panel is Mr. David Matusoff, Mr. Gary Little, 
President of Information Technology Alliance of Appalachian 
Ohio, Dr. David Matusoff, Principal and Director of Technology 
Planning for the Whiteboard Broadband Solutions, Ms. Angela 
Stuber, Executive Director of Ohio Community Computing Network, 
and Mr. David Scholl, President and CEO of Diagnostic Hybrid, 
Inc. Mr. Matusoff, we are going to start off with you.

    STATEMENT OF DAVID MATUSOFF, PRINCIPAL AND DIRECTOR OF 
           TECHNOLOGY PLANNING, WHITEBOARD BROADBAND 
                           SOLUTIONS

    Mr. Matusoff. Senator Voinovich, thank you very much for 
the opportunity to be here. As I was listening to the panelists 
before me, one of the things that struck really me, and one of 
the things that I like so much about working in the Appalachian 
region of Ohio is--you could really hear it in Don's voice--
people are really passionate about economic development down 
here and about sustainability. As you mentioned, I believe you 
posed the question to Anne Pope about the telecommunication 
portion of the ARC budget. I believe it is critical. As you 
mentioned in your comments at the end, with all of the natural 
assets that we have in this part of the State, improving the 
broadband infrastructure, I think that we really have something 
that we can sell here in Appalachia. I think it is something 
that we can be excited about.
    I just want to spend a few quick moments this morning 
talking about the impact that ARC investment has had on 
improving broadband access in Ohio, and not only improving 
access, but changing culture, which I think you talked about--I 
think that they have done a really good job of that, and I 
think there are some more opportunities in that area.
    I started working with the Governor's Office of Appalachia 
and the Appalachian Regional Commission back in 1999 when Joy 
was here and Jennifer Simon, and I think that we were one of 
the first States in the ARC region to really take a 
comprehensive snapshot of the supply and demand for broadband 
services in a region like the ARC region within Ohio. To date I 
have managed three large-scale broadband assessment improvement 
projects in the State. As T.J. mentioned, we are currently in 
discussions about replicating successes like we have seen in 
places like Chesterhill where we are looking at wireless 
investments, broadband investments in communities without any 
access to broadband services today. So the very last of the 
last mile. In general, I spend a significant amount of my time 
not just in Ohio, but in many States proselytizing about the 
importance of the broadband infrastructure and the 
possibilities that that create for economic development and 
educational opportunities and workforce development 
opportunities.
    And central to that discussion and any broadband 
improvement project is what we call a sparkplug. This is 
someone in a community that gets a hold of this issue and says, 
``No matter what, I am going to make sure that we have better 
broadband access in our community.'' In many instances, it is a 
public sector official. Sometimes it's a private sector person. 
They don't have to have any real knowledge or understanding of 
the technology. They just know what is important and really are 
passionate about doing something about it.
    I kind of view ARC's role in this region as the sparkplug 
for moving broadband access, because I think what we have been 
able to do through ARC funded projects in the State of Ohio 
over the last 6 or 7 years has really raised the overall level 
of education about the importance of broadband. Through all of 
the outreach that has been associated with the projects that I 
have managed in the State and through talking with the 
development districts--it is funny. When I came here, I had 
been--I live in Columbus. I have been to this campus probably 
about 40 times now talking about the importance of broadband 
and, you know, I believe sincerely that that has made a real 
difference. As I said when I started, changing culture is more 
difficult than building the infrastructure.
    Building the infrastructure is getting much cheaper today 
than it was 6 or 7 years ago when we started taking a look at 
this, and it is much easier. But I think the change in culture 
thing has been really significant.
    I want to give you a few specific examples of, not just the 
indirect impact that the ARC has had, but the direct impact I 
believe that the ARC has had on improving broadband access. In 
2003 there was a national organization called Technet. A bunch 
of big Fortune 500 companies, CEO's that participate in this, 
and they ranked States. There was an index for State broadband 
access and use. Ohio was ranked, in 2003, fifth nationally, 
which I was really proud of.
    Three of the projects that I worked on specifically were 
part of the justification for that ranking. One of the projects 
listed specifically was the Access Appalachian project which 
was funded through ARC and the Governor's office of 
Appalachian. So part of it is a perception issue, and I think 
looking at economic development opportunities, if we are 
perceived nationally, this region in the State of Ohio, as a 
place that is focusing on telecommunications and doing 
interesting things with it, I think that that can really help 
in the economic development. I think that is important.
    The second thing, as T.J. mentioned, between 2002 and 2004, 
we actually measured it. Broadband access doubled in--or in the 
ARC region of Ohio. I think that is significant.
    Data from the Access Appalachian Project was used to 
facilitate the providers when they were going to alternate 
regulations. So I think that is really important. The final 
thing that I want to mention is that through our last project 
here in Ohio, we developed plans for broadband improvement in 
13 different counties here in Appalachia, so while some of the 
folks are still going out and looking for funds to implement 
those projects, having the capacity to have the plans in place 
allows them to go pursue State and Federal dollars to help 
implement those.
    I cannot speak enough about the importance of ARC's 
investment in this area, how critical it is. I was with your 
colleague Senator DeWine earlier this week doing a USDA 
broadband financing conference here in Ohio. There were almost 
300 people there, which was very exciting, folks around the 
State figuring out how to get these plans implemented.
    One of the things that Anne Pope talked about was 
leveraging other dollars, and some of the folks that the ARC 
funded to put these plans together are now going to be going to 
USDA to get low-interest loans to implement some of those. So I 
think that is a really good example of how the communities are 
leveraging these ARC investments to go after additional 
dollars.
    So included in my testimony are a few more instances, but 
as T.J. mentioned, I would be happy to provide more 
information, specific information for the record about the 
important contributions that ARC had made in this area.
    I will wrap up saying that first, I want to thank you for 
your championing this program in the past, certainly the last 
time. I think that it has had a significant impact on the 
region, and for inviting me to be here today.
    Senator Voinovich. Thank you very much. Do you think it is 
cold?
    Mr. Matusoff. Do I think it is cold? No, but because I am 
testifying before you----
    Senator Voinovich. The air conditioning seems to be pretty 
cold. I don't know who controls it, but--I see the breeze 
blowing by here. Mr. Little.

  STATEMENT OF GARY LITTLE, PRESIDENT, INFORMATION TECHNOLOGY 
                  ALLIANCE OF APPALACHIAN OHIO

    Mr. Little. Thank you, Senator. I have crammed a lot into 5 
minutes, and I am going to try to stick to the script here. I 
may run over 30 seconds. Please bear with me.
    I am going to be speaking to the creation of a new economy 
and new high-tech industry and high-tech dollars. The IT 
Alliance of Appalachian Ohio wants to thank you Senator 
Voinovich and members of the Senate Committee on Environment 
and Public Works for this opportunity to speak in support of 
the reauthorization of the Appalachian Regional Commission. 
ITAAO, the IT Alliance of Appalachian Ohio is a nonprofit 
organization fostering economic development for the information 
technology sector of the region. For clarity, this sector 
includes computer, internet, ecommerce, and related businesses 
and industries, and also all the various computer applications 
found in public sector organizations including education.
    ITAAO, Ohio's IT Alliance, the State of Ohio, the 
Governor's Office of Appalachia, and the Appalachian Regional 
Commission have partnered on several occasions over the past 5 
years to create an information technology community, an 
information technology visibility in Appalachian Ohio where it 
barely existed before. I often find myself on a soapbox 
promoting the region. Appalachian Ohio not only has a 
significant information technology sector, but we are leading 
the way in some areas.
    Shawnee State University in Portsmouth, for instance, is 
one of the few universities in the country to offer two 
bachelors degrees in interactive digital technology 
development; one with a digital arts concentration side and 
another with computer science and engineering concentration. 
Student enrollment is now over 100 bright, exceptional students 
from all around the country and locally. An article recently 
published by the Associated Press, and was in the USA Today 
yesterday, told of Michael Zyda's astonishment with the 
program, the creativity, and enthusiasm for computer game and 
serious game development in Appalachian Ohio. Zyda was the lead 
researcher on the U.S. Army's recruitment and instructional 
game, America's Army, and is Director of the GamePipe 
Laboratory at the University of Southern California. Zyda 
presented at the Shawnee Conference 3.0 on Interactive Digital 
Technology in 2005. This conference gained national attention 
in 2004, in part because of the support of the Appalachian 
Regional Commission. This is an example of great return on your 
investment. The small, but important, $5,000 grant generated 
nearly $20,000 in support on that specific event in 2004, but 
the real value is measured in the national publicity for 
Interactive Digital Technology (IDT) development, for Shawnee 
State University's IDT degree programs, and also for related 
degree programs that are developing at Ohio University, 
Washington State Community College, Hocking College, and an 
existing computer animation degree program at Kent State 
University's Tuscarawas campus.
    That event in 2004, grew from an original concept of a 
Region of Excellence in Interactive Digital Technology when 
ITAAO Board Chairman, Bill Sams; Adena Ventures president, Lynn 
Gellermann, Shawneee State University Fine and Digital Arts 
Chairman, Tom Stead, Ohio University Provost, Kathy Krendl, and 
Shawnee State University President, Rita Rice Morris germinated 
the idea in 2003. This has now grown to the development of a 
prototype ``cyber park'' in the GRID (Game Research and 
Immersive Design) Lab that you will be seeing this afternoon, 
Senator, at Ohio University with a $247,500 Appalachian 
Regional Commission grant. From the original local match 
commitment of $62,000 from Ohio University, they have now 
expanded that dedication to nearly $250,000 for this project, 
with additional funds from various local sources of nearly 
$20,000.
    The Lab has also developed research and project 
relationships with the Smithsonian Institute, with a Columbus, 
OH company, a Massachusetts company, and a New York City game 
development company to develop educational and instructional 
games, and recently developed a partnership with Intel. To 
expand upon this success, Ohio University has now announced its 
intentions to create an IDT, interactive digital technology, 
research and development institute seeking Ohio Third Frontier 
support. Hundreds of thousands, and very possibly millions of 
dollars of program, research, and education activities are 
about to explode onto the scene only 2 years after ARC made its 
initial $247,000 commitment, and in the previous year a $5,000 
investment. Without these funds you would not see the 
interaction and possibly the business development in 
Appalachian Ohio by some of the Nation's leading computer and 
IDT development companies.
    Shawnee State University also has further expansion plans, 
and is now seeking private and public support to develop a 
whole new immersive arts and technology center that will 
include the most advanced motion capture facility for digital 
animation east of the Mississippi River.
    The Appalachian Regional Commission has been instrumental 
in the blossoming of this concept, and will be a valuable 
partner in our continued efforts to create an innovation 
economy for this century.
    A huge economy continues to grow nationwide (estimated at 
$100 billion this year in computer games, educational and 
health applications, and corporate and business applications) 
and worldwide in an interactive digital technology and there is 
no reason why our students, our young entrepreneurs, and 
retrained workforce in our region could not or should not take 
advantage of it. All we need to do is focus upon the polygon--
in IDT terminology--and strive for it. Thank you, Senator.
    Senator Voinovich. Thank you. Very impressive. Ms. Stuber.

STATEMENT OF ANGELA STUBER, EXECUTIVE DIRECTOR, OHIO COMMUNITY 
                       COMPUTING NETWORK

    Ms. Stuber. Thank you, Senator. I am very excited to be 
here.
    ARC is a Government Agency in which one of its benefactors 
is Community Technology, so that is pretty exciting.
    Community Technology is providing technology access to 
those who don't have access. ARC actually invests its time and 
resources and has made a huge difference in the community. So 
it is very good.
    I'm representing the Ohio Community Computing Network and 
the Community Technology Centers Network. I am the executive 
director of OCCN which is a State network of Community 
Technology, which is a non-profit, and I am also Board 
President for the national network.
    ARC is fortunate to have--or the Appalachian region is 
fortunate to have two strong State networks within the region, 
West Virginia and Ohio. In West Virginia, they have a program 
called STEP UP, which for them, ARC's program is instrumental 
in bringing in new technology to their existing programs and 
able to improve existing programs for them. What this is is 
they put labs in the churches and community organizations and 
they utilize existing space, so it is matching up of existing 
resources with new technology. They have leveraged funds with 
the Investment Board and the State Department of Education. 
Their approach is to partner community assets and create strong 
relationships.
    For OCCN the relationship is to match the Microsoft 
dollars. So what we did was distribute the Microsoft dollars to 
Community Technology programs. The Microsoft dollars, we could 
not distribute them to libraries or to schools, because 
Microsoft already distributes those to those organizations in 
other programs, which really limits the distribution to 
Community Technology Centers. So in Ohio, we distribute them to 
seven Community Technology Centers, so it's $90,000 of 
Microsoft software distributed in Ohio.
    What ARC found when distributing the Microsoft software is 
that there are not Community Technology Centers in all areas of 
Appalachia. I should note that Community Technology Centers are 
not Government Agencies. Community Technology Centers can be 
community centers. They can be labs. They are developed by 
folks who see the need for community technology. They see the 
need for folks to have access to technology and the training 
that is needed. So it is not that they are everywhere. They are 
not in every county or every community. So when ARC went to 
distribute the Microsoft software, they found some communities 
simply don't have Community Technology Centers, and upon 
realizing this, are now developing a program to develop new 
community technology programs, and that is hugely commendable 
and I think that is needed.
    One thing that we should note is that the Community 
Technology Centers in Appalachian are some of the most 
innovative programming in Ohio. In Perry County, we are doing 
multimedia technology, which includes video cameras and then 
the software to figure out how to use that technology. It's 
amazing.
    In Muskingum County, they are using online learning tools, 
and in Coshocton County we are doing after school family 
focused programs.
    The youth have become so engaged in their Community 
Technology Centers that they feel the centers are theirs, as 
they should. I took a couple of the ARC staff to one of the 
Community Technology Centers, and we were sitting in the 
center, and a couple of the kids came in and gave us looks 
like, ``Well, you're sitting in my seat.'' That is cool, right? 
That is great because that means that they feel that the center 
is theirs.
    Senator Voinovich. These are kids that don't have access at 
home?
    Ms. Stuber. They may or may not have access at home, right. 
If they have access at home, it is probably not broadband 
access, and the centers often have broadband access because the 
centers are created--they've either gotten it through the 
library or they've gotten it through some sort of network or 
come up with some sort of creative arrangement with someone 
else that has access when they're in town. The kids might be 
out of town, but come in for school, and they stay for the 
after-school programs. Some of them, if they do have computers 
at home, then it is an issue of who gets on the computer, the 
parents or the child.
    A lot of the centers, they become training places, also. 
There is the issue of training. There is also an issue of 
community building. They are there to hang out with their 
friends there and it is a safe place to be, while they're also 
learning skills. ARC has supported OCCN's attempts to find 
technology programs. Because they are not government funded 
programs that we know where they are, we have to search for 
them, and when we find them, we can show them where the 
resources are so they are not recreating the wheel, so to 
speak.
    Another thing that we found, or found us actually, was 
Chesterhill that has been mentioned twice now, I think. That is 
a really amazing project. The really neat thing for me to see 
there is that not only do they have the project going, but they 
realized the need for the Community Technology Center also. So 
they are already developing a public space for community 
training in association with their wifi network.
    We are actually helping them to figure out how they are 
going to sustain their wifi network. That is the next issue, 
that they may have this wifi network; how do they keep it 
going.
    The issue of local control is a big issue because there are 
going to be lots of pressures on them to figure out what to do 
with the wifi network.
    The one thing that I want to note is that the digital 
divide has not been closed. You might think every now and then, 
``Oh, well, there has been money allocated. We are done.'' It 
is not done. You have been hearing that here today. We still 
don't have broadband everywhere. That is my whole testimony. I 
am really excited to be here.
    Senator Voinovich. Thank you very much. Mr. Scholl.

STATEMENT OF DAVID SCHOLL, Ph.D., PRESIDENT AND CEO, DIAGNOSTIC 
                          HYBRID, INC.

    Dr. Scholl. Thank you, Senator Voinovich, for inviting me 
to partake in this hearing. A couple of comments before I 
start. No. 1, I share some similarities with you. I was born in 
Northeast Ohio, graduated from Ohio University, and stayed 
there 27 years, and enjoyed the same quality of life and beauty 
that you cited.
    Second, I was fortunate to hear you speak last year about 
your early activist days as a student at Ohio University, and 
your aggressive, passionate pursuits and I appreciate that.
    The third thing that I would like to suggest is DHI, before 
I go too much further, is what it is for several reasons, but 
most, many people in this room have allowed us to grow and 
thrive. Joy Padget is one of those. Jen Simon is another. T.J. 
Justice.
    Actually, I remember Anne coming to the innovation center 
where we are located, and making a commitment, I think, of $1 
million. Without that million dollars, the innovation center 
wouldn't be here, nor would the 170 employees.
    So I would like to start on the script and say I wish to 
thank you for allowing me to testify on this important issue 
that affects the vitality of DHI and that of other businesses 
trying to get a start or maintain their operations and growth 
in the region.
    So that I don't fail to summarize, I would like to begin at 
the end. Operating as a business enterprise in a global 
marketplace means having ready access to two major things, a 
telecommunications infrastructure capable of delivering you to 
the world, and the world to you, each and every second of the 
day, 24/7, and two, the necessary human resources to assist 
business operators like myself with implementing productivity 
applications such as Enterprise Resource Programming, bar 
coding technology, web-enabled business applications, EDI for 
processing business transactions, e-mail, and internet security 
solutions. That is a requirement whether you are in Athens, 
Appalachia, Chicago, New York or Tokyo. That is required.
    Diagnostic Hybrids has been successful to date for multiple 
reasons. Underpinning the national recognition we received in 
2004, 2005 by being named in consecutive years to Inc. 500 
Magazine's list of Fastest Growing Companies in America, we owe 
that to our people. Our employees are dedicated, committed and 
talented, and we attract them from within a 50-mile radius of 
Athens. We invest heavily in workforce development, both inside 
our organization and within the community, to help us meet our 
projected need for talent, particularly in the specialized 
manufacturing and laboratory technician area. This commitment 
is paying off and it is a great investment for our company.
    Meeting our needs at Diagnostic Hybrids for 
telecommunications infrastructure is a bit more daunting task. 
Certainly, much progress has been made in focused areas of our 
region to build the telecommunications infrastructure necessary 
to meet the two primary needs I mentioned above. For example, 
The Ohio University Innovation Center, a small business 
incubator affiliated with Ohio University, is equipped with 
broadband capability, and is a phenomenal facility. Access to 
the telecommunications infrastructure provided by the center is 
absolutely critical to our past and future growth.
    I am sure there are other examples in the region, but I 
don't know how many.
    Unfortunately, I can drive 10 to 15 minutes in any 
direction from our headquarters in Athens where we employ 
nearly 170 of the best and brightest biotech employees in the 
world and likely be without cell phone service for lengthy 
stretches, wireless internet access, and broadband capability. 
Actually, I was on a cell phone over by the hospital, and from 
that location to the top of the hill, we were not connected to 
the world by cell phone, 3 minutes away from this hearing. Not 
too surprisingly, the many areas of the Appalachian Region in 
which this major deficiency, or digital divide, exists are 
characterized by those that develop telecom infrastructure as 
rural and underpopulated, and thus economically not feasible to 
establish proper infrastructure.
    Perhaps even more demoralizing, both personally and 
professionally, is to hear ``outsiders'' characterize those 
people that live within these areas, including me, as 
economically and intellectually impoverished because we are not 
connected. At a minimum, we are viewed as out-of-step with 
today's global economy, and perhaps more fundamentally, today's 
world.
    The impact of this situation sooner or later ends up as a 
nonviable outcome for those without access. The impact is first 
felt with reduced educational aspirations on the part of our 
young people and ends with a lack of opportunity on the 
economic side, forcing many to move to somewhere that has the 
infrastructure and thus the opportunity. My recommendation for 
you to act upon would include providing incentives or grants to 
communities and/or businesses to acquire towers to increase the 
density within the region to enable DSL and wireless 
connectivity, underground cable to provide for greater access 
to broadband, and consulting service talent to enable 
implementation of important productivity IT applications to 
help businesses run more efficiently and cost-effectively.
    In summary, telecommunications infrastructure has become a 
vital utility to the global educational and business community 
in a fashion similar to the value placed on water, sewer, and 
hybrids. Without immediate and aggressive attention paid to 
this regional need, residents of the very beautiful and scenic 
region known as the Appalachian Region are destined to fall 
behind even further. Thank you very much for your time.
    Senator Voinovich. Thank you. Mr. Little, I was very 
impressed with what you had to say in terms of what is going 
on. I think the real issue is how is what is going on in the 
educational institutions, how much of a spin off are you 
getting in terms of creating businesses like Mr. Scholl's?
    Mr. Little. In the region right now, there are seven 
companies that are involved in computer game or educational 
game development. Three of those are local companies, four are 
companies outside of the region that are working with 
organizations.
    The entire focus of this effort, to create a region of 
excellence in interactive digital technology, is to not only 
attract an educational or series of educational companies to 
the region, but to grow our own. Continued support by the 
Appalachian Regional Commission with market access visibility 
for any new business that may startup in this area is going to 
be vitally important.
    We have spent 3 years in this effort, and we are finally 
starting to get the national attention with this associated 
press article that has gone nationwide now. In it, 
incidentally, the author mentions that the world may be 
flattened in Appalachia, because the people that were 
interviewed for that article did talk about the low cost of 
business startup, the low cost of operating a business in the 
region, and the quality of life here, and with broadband 
access, they can do business anywhere.
    Senator Voinovich. The point is that you have got three or 
four businesses from outside that have found out about what you 
are doing, and they have established themselves or are in the 
process of establishing themselves?
    Mr. Little. They are working with research facilities on 
software modifications and on upgrades. One company out of New 
York City has a computer game that is focused on improving 
Algebra II skills, but they did not have that in an Apple 
format. They had it in a PC format. So the Grid Lab with Ohio 
University is working with that company to convert it.
    Senator Voinovich. The Grid Lab, I guess so I understand, 
that is located at the university and the university, through 
their resources, have some very bright people that are there 
and are they doing research work or are they doing research and 
education?
    Mr. Little. It is a multipurpose facility. The college of 
communications
    Senator Voinovich. Does that create jobs?
    Mr. Little. That is what our intent is.
    Senator Voinovich. On the campus you have more people and 
more teachers.
    Mr. Little. It is located on Court Street beside the 
courthouse, and the reason that it was put there in a 
storefront facility where the Chamber of Commerce's office used 
to be is so that middle school and high school students could 
have access to the facility, and also so that upstart computer 
companies--and there are three students, two undergrad and a 
grad student at Ohio University right now that are working with 
the Dean of Interest starting a computer game company. They can 
use the facility for special equipment and software that they 
may not have access to.
    So that facility is to capture and bring into this new 
technology middle school and high school students. They can be 
a part of the demonstration process of games that are in their 
data phase and are being tested. The students can get involved 
with that process with the research staff at Ohio University. 
We want to encourage the students then to improve their math 
skills, improve their science skills, so if they like this kind 
of activity, which most kids do with computer games, they can 
have a career in the computer game work or serious game 
development. So we are working
    Senator Voinovich. You have that interest, the universities 
are putting in the people that in the event that you have got--
they have courses in the subject.
    Mr. Little. That is right. Through the College of 
Communications, they have some degree programs that are 
beginning to evolve into classes that are in computer game 
development, animation development and so on, so----
    Senator Voinovich. Ventured capital----
    Mr. Little. One of the lead partners in this effort from 
the beginning has been a Adena Ventures and the concept grew 
out of Lynn Gellermann's, Adena's president involvement with a 
computer game development company, butterfly.net, one of the 
first companies that the Adena Ventures invested in, in West 
Virginia, and it is now being purchased by Sony. They saw that 
this could be a new industry for our region, and with very 
little capital initially, companies could start, and students 
fresh out of college and even while they are in college could 
begin the development of the companies, and the market is 
expanding greatly.
    You hear a lot of negative comments about the computer game 
industry, the shoot-them-up programs that are out there, but 
that is a very small segment of the industry, about $10 billion 
per year. Nearly $90 million is tied to education, research, 
simulations, military per year.
    Senator Voinovich. When I first heard about it, my wife 
said, ``These guys are in the gaming business.'' You know how I 
feel about gambling. It is the way to get people turned onto 
technology for educational purposes, you play a game on it and 
spin off into the other applications.
    Mr. Little. There are two existing companies in our region 
that are doing very well with educational, online education and 
using the gaming technology, and with cooperate education. 
Visum in Marietta does corporate education with this same 
technology, and Electronic Vision in Athens----
    Senator Voinovich. So actually, you are building up--it is 
starting to build----
    Mr. Little. An entire industry.
    Senator Voinovich [continuing]. An entire industry, right. 
Obviously, where they are locating, they have the broadband, so 
you were saying--I understood that you could compete because 
you were saying to me that there are places that could 
potentially be--that have a potential, but they are not there 
at all in terms of the
    Mr. Scholl. I think at Ohio University we are really 
blessed with a significant amount of activity within the State 
and the educational institution itself. There is an issue of 
doing an incubator and doing a full scale constructional outlay 
for early startups and young companies. I think it is showing a 
tremendous amount of reward and benefit. I think it's the same 
model we are trying to apply in Gary's case, and I think that 
is also very good.
    What I would think is that region needs to decide whether 
regional hot spots, sparkplugs, not ARC as a sparkplug, but 
regional sparkplugs is the way to go because, you know, you 
have got to be careful to not get spread too thin, and there is 
not enough to go around anyway. How can you take some of those 
Centers of Excellence that are starting to kind of come out of 
a significant amount of time--23 years we tried to grow to this 
level. Sometimes people would say a typical slow, bad 
management team, but I think in some respects, the startup 
companies generally take time. They take that 12 to 15-year 
period.
    So I think it would be useful to take an inventory of what 
has happened, and then try to identify things that are 
nationally, and certainly regional highlights and see how it 
can kind of spin off of that and go into the region.
    Senator Voinovich. Who would do that?
    Mr. Little. Who would do that? Not me. I think the place is 
look into--let's look at Ohio for a second. I think Ohio is 
very interesting because it has a major network of operations 
and has these three huge cities 70 miles away from Appalachia. 
So it seems
    Senator Voinovich. By the way, I think nationally that Ohio 
and Cleveland, in terms of broadband capacity, is like right at 
the top.
    Dr. Scholl. Yes. I have a map here that actually is from 
Time Warner that shows the Appalachian States in color. This is 
over stated, because if one home in the zip code has access, 
then it counts. Anyhow, I guess the digital divide is common in 
Ohio because if you think of just those distances that we 
travel, we do it everyday to get to Columbus, but--I think in 
the region, if you look at the regional hot spots, you learn a 
lot. I think Governor Taft in his program, the Office of 
Appalachian, I think they would be somebody that would be very 
much interested in trying to----
    Senator Voinovich. Trying to get a task force together, 
look at the region, see what the strengths are, and start 
talking and figuring out how it all works together. That is 
what I miss about not being Governor, because I like that 
stuff----
    Dr. Scholl. If I might add, speaking of leverage, in 2004, 
we raised $10 million for the Palo Alto Fund. So what that does 
is tell you that if the opportunity is there, the money will 
come. Creating that opportunity I think is really what has 
happened in Athens.
    Senator Voinovich. I am excited about it. You have the 
center there. Its--I just--the potential is fantastic.
    Dr. Scholl. I think that model needs to be discovered.
    Senator Voinovich. I thank you very much. I am very 
impressed. And the real--we put this technology thing into the 
ARC, and we specified that, we focused in on it, and what I am 
hearing from you is that that helped, so we should continue it 
and maybe even do more, understanding that there are also other 
needs that are in the communities and we have limited 
resources. So it is a question of, where do you get the biggest 
return on your investment for the area, and the bottom line is 
people want to work and keep jobs. Thank you.
    We are going to take a little recess before we start with 
the next panel.
    [Break taken--11:50 a.m. through 12:01 p.m.]
    Senator Voinovich. We are going to resume the hearing and 
have our last panel. We are pleased to have with us Mr. Jeff 
Hughes who is the Director of the Environmental Finance Center 
at the University of North Carolina at Chapel Hill. We are 
very, very happy you are able to come over here from the 
wonderful location over there.
    And Mr. Steve Grossman, the Executive Director of the Ohio 
Water Development Authority, which is near and dear to my 
heart.
    And Mr. Ken Reed who is the Director of the Vinton County 
Community and Economic Development organization. Vinton County 
is one of my favorite counties, and my wife's. We spent a lot 
of time at the State forest and have been there on several 
occasions. I think it is the smallest county.
    Mr. Reed. Yes.
    Senator Voinovich. I will be interested to hear what you 
have to say. We will start out with Mr. Hughes.

   STATEMENT OF JEFF HUGHES, DIRECTOR, ENVIRONMENTAL FINANCE 
CENTER, UNIVERSITY OF NORTH CAROLINA AT CHAPEL HILL, INSTITUTE 
                         OF GOVERNMENT

    Mr. Hughes. Thank you very much, Senator Voinovich, for 
giving me the opportunity to present today. As you said, I am 
the Director of the Environmental Finance Center at the 
University of North Carolina. We are one of nine environmental 
finance centers across the country that focus on the ``how-do-
we-pay-for-it'' question. The ARC has that question thrown at 
them a lot. How do you pay for it is really the critical 
question in the case of planning for infrastructure.
    We recently completed a project for the ARC where we 
examined the current status of water infrastructure throughout 
Appalachia. Over a period of 2 years, we visited numerous 
communities, interviewed and surveyed literally hundreds of 
State, Federal, and local officials, and analyzed data from 
dozens of organizations.
    I am going to take the few minutes I have to give you the 
highlights from that study especially in regard to the 
assistance that ARC provides.
    While we focused on the 410 counties in the ARC region, we 
realized quite quickly that from a water quality standpoint, 
you really cannot separate out ARC from the rest of the 
country. Appalachian is the home to the head waters of many of 
the eastern United States rivers, and clearly their water 
quality successes and water quality failures flow downstream. 
So assistance in this region is really assistance that cuts 
across political boundaries, and that was a big finding for us.
    There is a saying that what goes on in Las Vegas stays in 
Las Vegas. What goes on in the ARC relative to water quality 
does not stay in the ARC. It has a big impact far from the 
boundaries of the region. Our work involved a series of 
fundamental basic policy questions. I'm just going to go over 
those now quickly. Are water and wastewater services in 
Appalachia much different from other areas of the country? The 
answer is yes. We found that while community water system 
coverage has expanded quite a bit in the region over the last 
15 years, the region as a whole still lags approximately 10 
percent behind the rest of the Nation in terms of coverage by 
community water systems (pipe water systems as opposed to a 
private wells).
    The difference is even more pronounced on the wastewater 
side. 1990 was the last time that good data was collected on 
this issue, and 75 percent of the United States reported being 
served by the public sewers and only 50 percent reported being 
served by public sewers in Appalachia. Not being served by 
public sewers is not necessarily a problem, except that studies 
in Appalachian show that folks not served by sewers have a lot 
of problems with their septic systems and in some cases have 
direct discharge (strait-piping).
    Are there sizable infrastructure needs in the region? Yes. 
The documented need is quite significant. If you look at the 
EPA studies, you will see some large numbers. These numbers do 
not even include a lot of the needs that are disproportionately 
high in Appalachia like failing septic systems and the cost of 
running lines to people that are not currently served. We 
estimate that the capital needs are probably $35 to $40 
billion, and this is larger than some of the estimates you 
might see coming out of the surveys.
    How significant is public funding in Appalachia for water 
and sewer? Very. Relatively few communities in this part of the 
country have access to commercial credit. They rely on public 
funding. During a 4-year period between January 1, 2000 and 
December 30, 2003, we documented $4.6 billion in funds went to 
water and wastewater in Appalachia from public sources.
    ``Public sources'' does not equate to ``grants''. $3.1 
billion of the funds were in the form of subsidized loans. This 
public funding is not simply ``handouts.''
    We found that the manner in which disbursements are made 
and for what purpose they are made quite important. Very little 
of that public money is accessible for certain types of 
projects, particularly projects involving decentralized 
systems. So where half of the population is served by 
decentralized wastewater systems, very little public funds can 
go toward these systems.
    It is important to point out that in my home State (North 
Carolina), the ARC has stepped in and been eager to correct 
failing septic systems in areas where other funding sources 
couldn't.
    We looked at some of the financial management funding 
strategies that are likely to have the biggest impact on 
service in the region. There are a lot of national policy 
prescription being suggested--some of those will work in the 
ARC region and some won't. The core factor in all of these 
strategies is that they require capacity. The idea of 
regionalization, the idea of improved asset management, the 
idea of privatization. All of these have benefits, but they 
require educated staff and they require some basic resources 
which in some cases in the Appalachian region are still 
lacking. There is not very much money going into the 
development in these areas. ARC is one of the few organizations 
that focuses on this area and we saw some big impacts.
    Just to finish up, the word ``leveraging'' has come up over 
and over again today. We have found that leveraging does hold a 
lot of promise in the ARC region. Leveraging is really hard 
work. You need someone on the ground pulling all of these 
groups together. So often we found it is not necessarily the 
``big guys'' (big funders) doing that leveraging, it is the 
little guy, and I do not mean that in a derogatory sense at 
all. You can look at the funding sources, and sometimes the ARC 
will be a relatively small percentage of an overall project, 
but it is their effort behind the scenes leveraging that really 
makes the whole project go. We found this over and over in our 
study.
    I think that is a good place to leave. I thank you for the 
opportunity to present and I will be happy to answer any 
questions.
    Senator Voinovich. Thank you very much. Mr. Grossman.

  STATEMENT OF STEVE GROSSMAN, EXECUTIVE DIRECTOR, OHIO WATER 
                     DEVELOPMENT AUTHORITY

    Mr. Grossman. It is a privilege to be here this morning. 
The Ohio Water Development Authority has existed for 38 years. 
We have to date funded $7.3 billion worth of projects. 
Currently a little bit under half of all of the funding for 
water and wastewater projects in the State comes through the 
Ohio Water Development Authority.
    We are extremely proud, Senator, that you had the insight 
to help create the authority, and we are proud that U.S. EPA 
used the work of the Authority as its model to create the State 
Revolving Fund Program in the mid 1980's. It is with an 
extensive background and numerous experiences in funding water 
and wastewater projects and a strong interest in knowing and 
understanding all of the funding sources for water and 
wastewater in the State that I come before you today. I have 
submitted with my testimony some attachments which document 
what I am going to be saying.
    During the period of 2000 to 2004 throughout the State, 
approximately $4.15 billion was invested in Ohio's community 
water and wastewater projects. Of this amount, 12 percent came 
from grants, 45 percent came from loans with an interest rate 
that had been subsidized by a governmental body, and 43 percent 
came from loans at a market rate of interest.
    Funding during the 5-year period of 2000-2004 has averaged 
$830 million, and that is compared to a 10-year average 
starting in 1990 of approximately $500 million. This is an 
increase of 64 percent. While there was an increase in funding 
of 37 percent in grants and 43 percent in loans at a market 
rate of interest, the greatest increase of 120 percent came 
from loans at an interest rate that had been subsidized by a 
governmental body.
    Further analysis reveals that the SRF programs, both for 
water and wastewater, primarily accounted for this increase; 
thus enabling Ohio to keep up with the 64 percent increase in 
demand.
    Having set the overall State picture, one needs to look at 
what is happening in the Appalachian region. A breakdown by 
funding types is significantly different in Appalachia as 
compared to the rest of the State. Where the rest of the State 
received 9 percent of its funding from grants, Appalachia 
received 32 percent. As the rest of the State received 46 
percent of its funding from loans at a market rate of interest, 
Appalachia received 15 percent. The difference for loans with 
an interest rate that has been subsidized by a governmental 
body is not as dramatic; the rest of the State received 45 
percent compared to 53 percent for Appalachia.
    Appalachia also is significantly different from the rest of 
the State in terms of program participation in funding water 
and wastewater projects. Historically, bonds issued by a local 
Government and the SRF Programs account for more than 75 
percent of project funding outside of Appalachia. Within 
Appalachia they account for only 34 percent.
    Ohio, as compared to many other States, has a relatively 
large variety of programs to assist communities in funding 
their water or wastewater projects. While this is good, with 
this variety comes complexities and an increased need for 
program coordination, especially at the small community level. 
This is clearly shown in two of the attachments provided where 
the role of each program is shown. There is no one dominant 
program. Each community, with the assistance of its technical 
assistance provider and/or consulting engineer, sorts through a 
variety of programs, choosing the group of programs that the 
leadership of the community believes is best suited for its 
needs.
    While 5 percent of total funding comes from the Appalachia 
Regional Commission, this is 15 percent of all grant money, a 
critical component for funding projects in Appalachia. As one 
looks toward the future, and by the future, please assume a 
period of no more than 4 years, it is clear that there will not 
be a let up on demand for project funding in Appalachia. Using 
a variety of sources from Ohio EPA's Intended Use plans to an 
Appalachia Bulletin Board which was initiated at the stimulus 
of Joy Padget when she was Director of the Governor's Office of 
Appalachia and carried on through T.J. Justice, I estimate that 
the next 4 years would need $340 million. I believe this is a 
minimum demand for funding that will be requested over the next 
4 years. As noted earlier, the total demand has grown in the 
State and will continue to grow.
    If the number of $340 million proves to be accurate for a 
period of 4 years at $85 million per year, it would exceed the 
annual average of $80 million for the period of 2000 to 2004. 
The estimates are not precise and, as I have discovered in my 
17 years with the Authority, the seriousness about any one 
project comes and goes. But one thing is certain, decreases in 
any grant funding will provide an increasing financial burden 
on any community.
    One only has to look at the increasing water and sewer 
rates as compiled by the Ohio Environmental Protection Agency 
to see that user fees for both water and wastewater are 
increasing at a faster pace than inflation, and this increase, 
given today's economic conditions and environmental demands, is 
only going to continue to increase at this higher pace.
    If one was to look at all sources of funding in the State, 
one would conclude that, at best, it will remain the same 
during the next 4 years. While grant funds from the Ohio Public 
Works Commission will increase by approximately 20 percent, 
this will not happen until 6 years from now. There is 
continuing pressure on the U.S. Department of Agriculture's 
Rural Development Program to reduce the percentage of grants it 
provides to communities, and this decrease has been occurring 
in recent years, and the Community Development Block Grant 
Program is under continuous pressure to have its funding 
reduced. Besides the U.S. Department of Commerce's Economic 
Development Program, which really just plays a minimum but 
significant role in the Appalachian region of the State, the 
only other program source of grant money is from the 
Appalachian Regional Commission.
    Decreasing these funds would have a significant impact on 
Appalachia. I might add that a major unknown in all of this is 
Federal appropriations coming from Ohio's congressional 
delegation to Ohio communities through State and Territorial 
Assistance grants and through the Army Corps of Engineer's 594 
Program. While I recognize this is congressional prerogative, I 
believe that funding for this is not going to increase.
    So I think that the increase in actual demand is going to 
continue. It will not be as dramatic as all the national 
studies proclaim it will be, but it will increase. Where will 
the funding come from for this? There only are three possible 
sources, debt issued by the community which infrequently occurs 
in Appalachia, OWDA's market Rate of Interest Loan Program and 
it's Community Assistance Program, or the SRF programs.
    Regardless of which of the three financial programs is 
selected in the future, users in the communities will be paying 
more. Obtaining a 5-year reauthorization of the ARC will be a 
significant alleviating financial factor in Appalachia.
    Thank you.
    Senator Voinovich. Thank you. Mr. Reed.

 STATEMENT OF KEN REED, DIRECTOR, VINTON COUNTY COMMUNITY AND 
         ECONOMIC DEVELOPMENT, VINTON COUNTY COURTHOUSE

    Mr. Reed. Thank you, Senator. I welcome the opportunity to 
be able to testify this morning about the effects of ARC in my 
communities.
    You are aware of Vinton County, and I don't know if you and 
Mrs. Voinovich have heard, that beautiful lodge of the State 
park burnt down a couple of months ago.
    The good news is that the State of Ohio has assured us that 
they insured a replacement value, and they want to try to build 
something back similar to all of the wood. It was a beautiful 
place. But as you have noted to me, I think Vinton County is 
probably, if not the most rural, the most economically 
depressed county in the State of Ohio. With this comes a lot of 
challenges.
    Jeff gave the regional perspective for many States. Steve 
kind of brought down the State of the Ohio and Appalachian 
region, but I am the little guy that Jeff speaks of. I am the 
guy with the boots in the ground, to use a common phrase, 
implementing ARC projects in my community.
    I am the one trying to get water up City Run Road and up 
State Route 278. I am the one that folks stop at the ball game 
at the school and ask, ``When are they going to get Vinton 
County water?'' I am the one. I hear it all of the time. ``We 
are working on it,'' and we are working on it.
    With ARC funding, we've made a huge impact in implementing 
rural water projects in Vinton County. As I came in on US 50 
out of Vinton County today, the USDA Rural Development big 
signs are still up from the project that we completed last year 
in which $300,000 in ARC funds was used to leverage $3.5 
million to run 53 miles of water line in Vinton County. The 
folks who hauling water was a way of life are no longer hauling 
the water. That was made possible through the ARC. There are 
folks out there that stop me--she had bought a new washer and 
dryer. She was tickled to death to be able to do laundry at 
home. So we see the impact, the human face.
    There are projects that we've done where we went and ran 
water, and then later in our housing program were able to put 
in bathrooms for people, putting in flush toilets for somebody 
that lived on $400 a month Social Security, but because of the 
rural waterway, we put in a septic system and a bathroom. There 
are a lot of basic human needs we are trying to meet.
    I appreciate young, smart guys like David in the technology 
end and things. We are still trying to get folks water out 
there. Sometimes when I see the billions of dollars going for 
water and sewer infrastructure in Iraq, I wish that we had some 
of that in our community to be able to extend those lines.
    In Vinton County and all over southern Ohio are dotted with 
small villages that simply don't have the affordability go in 
to put in municipal sanitary sewer systems. I have seen that. 
We are working with a village in Vinton County, 800 folk. We 
need some $300,000 in ARC funds to put together a $6 million 
funding package to do sanitary sewer. A huge impact with a 
relatively small amount of ARC funding.
    We are able to use the ARC money. It does take somebody in 
the community. It does take that little guy on the ground to be 
able to put these types of things together, and I have seen 
some communities in our area that do not have that person.
    I have been doing this for 16 years. It is a good program. 
It is able to help people. We really put a human face on it.
    One thing that I liked about the ARC--I have went through a 
wide variety of Federal and State grant programs, so I see 
them. ARC is an impacting program. There is a good partnership 
with the State of Ohio to the Governor's Office of Appalachian, 
our local development district, our local county caucus. We do 
work together in identifying local needs, prioritizing local 
projects. We have that flexibility to address our local needs. 
I think that the system works in Ohio. My on-the-ground 
experience, it works well in the State and the local and the 
regional.
    But the ARC funding has had an impact on the quality of 
life in Vinton County. It has made a difference in our 
community. I implore you and the committee to continue the 
reauthorization of the ARC so we can continue to improve the 
lives in our community.
    In our written remarks, I close by saying ``The Bible says 
`a man reaps what he sows.' How true that is of the ARC.'' It 
says that, ``The local projects that have been seeded with ARC 
funds have resulted in a harvest of improved living conditions 
for the residents of Vinton County. If you continue to furnish 
us with the seeds, we at the local level will continue to 
plant, water, and cultivate, and we as a society will reap all 
the benefits.''
    Thank you.
    Senator Voinovich. Thank you. I think that Vinton County is 
very fortunate to have you. I appreciate your input today. You 
are the kind of person that Mr. Hughes talked about that needs 
to be on the ground. That is human capital that you need to 
kind of organize. You were saying, Mr. Hughes, that a lot of 
communities do not have those individuals. They do not have the 
capacity from an organizational point of view to put these 
things together, and then I suspect you have to have the volume 
of the capacity of the community to pay for the rate increases 
that are necessary to go ahead and get the job done.
    I should know this, but in terms of the paying for your 
salary, who pays for your salary?
    Mr. Reed. I am glad you brought that up.
    Senator Voinovich. Can you get any ARC money for yourself?
    Mr. Reed. No. The county commissions do not pay me a dime, 
or my staff. I live off of the programs I administer. It is 
kind of like a business. I cannot show up everyday and get a 
paycheck. I have to produce. I am only as good as my last 
project and last program, and in our community, they don't have 
the resources. The county commissioners, they have to come up 
with money to buy tires for the ball field truck. It's a budget 
issue in a small county.
    So we operate off of the administrative dollars, and 
fortunately, the CDBG and some of the other programs, there are 
sufficient administrative dollars.
    Senator Voinovich. You don't have the administrative 
dollars that you can take off of ARC.
    Mr. Reed. No. Many times though we blend the ARC and CDBG 
and there are some administrative dollars there. That would 
help increase the capacity. When it's the local ground spending 
the money, I think we should be able to have a portion of it. I 
think ARC will get a better product also, if somebody is 
getting paid.
    Senator Voinovich. That might be something to look into 
because it is the issue of having somebody who has the 
knowledge to put this together. As I mentioned to Ms. Pope, one 
of the things that we want to see is coming together of these 
various programs, but you need someone with the capacity to 
understand what the programs are and how you can bring them 
together, and I suspect that--I know that you are one of those 
people.
    So what you do in terms of your cost would be off the CDBG. 
By the way, come hell or high water, we are not going to cut 
CDBG. We didn't do it last time. I think the CDBG is one of the 
finest programs that we have in terms of throughout of the 
county dealing with the problems with the small cities and big 
cities, and it is one of those programs that just leverages a 
whole bunch of money. You can get something out of that.
    How about the USDA? I keep hearing that. That is money that 
comes from the Department of Agriculture? What program is that?
    Mr. Grossman. That is a project, a program that divides 
waterworks loans and grants. It's been in existence for several 
decades now.
    Senator Voinovich. It is part of the Department of 
Agriculture?
    Mr. Grossman. Yes, it is. It provides in the neighborhood 
of $40 to $50 million in loans and grants. Over the years it 
was changed from approximately 60 percent grant money and 40 
percent loans to now 30 percent grant money and 70 percent loan 
money.
    Senator Voinovich. The loans are paid off from user fees.
    Mr. Grossman. Correct. Yes.
    Senator Voinovich. I would like to know, and maybe--I would 
like to see how some examples of Appalachia in ARC, how some of 
the water projects are funded. In other words, the various 
sources of funds and how they are blended, and I suspect that 
you might have some from the rural, from the Department of 
Agricultural. You probably would have some money from the 
revolving loan fund.
    Mr. Grossman. Correct. I have developed an extensive data 
base going back to 1989 through 2005, which can show you by 
county, by community----
    Senator Voinovich. I would be interested to see how this 
all blends together.
    Mr. Grossman. I can provide that to you.
    Senator Voinovich. If you increased one of them, where 
would you have the largest impact? The SRF, as you know, has 
just been frozen, and we need to put more money into it. But 
you have got--just melding together a bunch of stuff--How about 
the OWDA, where do you fit into the picture. Do you--does the 
community come to you and say, ``We want to do something,'' and 
you issue the bonds?
    Mr. Grossman. We only issue the bond. First of all, from 
the SRF we are the financial administrators of that, the Ohio 
EPA is the program administrator, but we still have our own 
program.
    Senator Voinovich. So any of the money that comes from the 
SRF program to the State, you are the one that would administer
    Mr. Grossman. Yes.
    Senator Voinovich. In other words, the allocation out of 
that money to Ohio, you guys, you run it.
    Mr. Grossman. We run it, and if we need more money, we 
issue bonds. We have a leverage program to get more money that 
way. All of our programs, while OEPA has a better sense of what 
is about to happen than we do, the money is there, they come to 
us for a loan and we make the loans, and
    Senator Voinovich. Again, the money is paid off through 
user fees.
    Mr. Grossman. That is correct. We are an extremely sound 
financial body. I am proud to say that through our three major 
programs, they have rated a triple A from standard and poors; 
and Mondays and the strength of all of our programs lies in the 
fiscal responsibility of all of Ohio communities. Not the State 
of Ohio, the Ohio communities.
    Senator Voinovich. Do other States do it that way? Do 
they--that is how
    Mr. Grossman. Most of the States operate the same way. I am 
part of the trade associate of State Agencies, similar 
agencies, I can speak to that. More than half of the States, 
for the SRF programs, issue bonds to leverage the program.
    The beauty of the SRF is when you do run out of money, you 
do have the ability to issue interest payment on the bonds. 
When you're lending money at a lower rate of interest than the 
bonds, eventually that cannot go on. But to the extent that you 
can do it, in Ohio we have issued over $1.6 billion of bonds in 
the SRF program in wastewater alone to enable more loans to be 
made.
    About half of the States do it that way. The other half of 
the States do not do that and just loan the money out without 
leveraging.
    Senator Voinovich. You have to compete with other tax 
exempt bonds in terms of the rate. You have to get people to 
buy your bonds.
    Mr. Grossman. We do, but we don't compete. I am not a 
licensed broker, so I cannot market our bonds, but I can tell 
you when the bonds are issued, they go fast and they go at 
competitive levels.
    Senator Voinovich. So the point is that you end up having--
you said some of them are at market rate and some are 
subsidized. Where does the subsidy come from?
    Mr. Grossman. The subsidy is built into the SRF program. We 
are lending money out at a lower rate of interest than interest 
payments on the bonds.
    Senator Voinovich. Money from the SRF money coming, and 
when that money comes in, they don't require--what is the 
interest rate they set on that or is that just----
    Mr. Grossman. It is based on a market rate of interest. For 
most communities, the lowest rate it can be is 3.25 percent. 
For small communities or impoverished communities, it can be a 
1 percent level or 0 percent level.
    Senator Voinovich. That is based on the formula coming out 
on the SRF, if they have different categories----
    Mr. Grossman. This is a State decision. Each State sets its 
own interest rates.
    Senator Voinovich. So you decide how that is. What happens 
is is if the ones that are getting the lower interest rate, the 
other ones are picking up on the tab on that, too.
    Mr. Grossman. They are picking up the tab or running it, 
but the overall thing is that we are still borrowing money at a 
higher rate of interest than we are lending it out, but given 
that we've made over $3 billion in loans, even in the mid-term, 
Ohio is in good shape with respect to funds to lend out. The 
long-term, it is going to be a problem.
    Senator Voinovich. Mr. Hughes, you have been studying this.
    Mr. Hughes. I think this is on excellent place to have a 
dialog. We started our study thinking that we were going to be 
focusing mostly on the needs, but that, in my opinion, is not 
the most interesting story. They are big numbers. They are 
scary numbers. What are we going to do? Somebody has to 
document those. What we found which was fascinating was that 
there are 13 States in the ARC region, and there are 13 
approaches at each State level, and we were able to look at in 
our study where the public funds go in each individual State, 
how much is spent, how much is loaned, how the things are 
packaged together.
    There are some States like Ohio that have a pretty high 
degree of coordination. There are other States where it is four 
or five, sometimes six or seven different funders out there, 
folks like Ken on the ground. We are fortunate people to have 
someone like Ken that can understand those six, but put 
yourself in--the mayor of a small town steps up to the plate 
and tries to figure out six or seven programs. We found States 
where--Ohio, West Virginia, and Kentucky come to mind, where 
they did great jobs pulling this all together.
    In our study, this is where we probably spent the bulk of 
our time. We collected information from 50 or 60 different 
funding programs, all with different rules. I am not a critic 
of this because on the ground you see that these funding 
programs have different objectives. The EPA programs, as you 
know, are environmentally oriented. USDA is a rural development 
program. So the trick is, you have water and wastewater. It is 
a public service and it is an economic development. The trick 
is at the local levels, how do you put all of these together. I 
think that the ARC as a leveraging element has been 
instrumental in that. I think there is still a lot of work to 
be done.
    I think having an across State organization like the ARC 
let's the folks from Mississippi and Alabama hear what the 
folks in Ohio and West Virginia and North Carolina are doing. I 
am particularly passionate about this because I think my home 
State has a lot to learn from what you do in Ohio.
    Senator Voinovich. The ARC is the yeast in a lot of these 
projects. That is where it begins, then you build from there.
    Mr. Hughes. It's a small--both on the technical assistance 
side it is the yeast, and then also, as a couple of people 
mentioned, it sometimes can be that $300,000 that can be 
missing from a $4 million project. One thing I didn't say
    Senator Voinovich. This is mostly we are talking about safe 
drinking water. We are not talking about clean water.
    Mr. Hughes. I think the ARC has been instrumental in 
wastewater. They took out more straight piping systems in North 
Carolina than any other organization in the State. But if you 
look at the region as a whole, I am an advocate of loan 
financing. I think that grants can get communities in trouble. 
I came in somewhat a skeptic of the study. I am leaving the 
study feeling like without some targeted grant money, these 
project will not work.
    People in the ARC already pay a higher percentage of their 
income on water and wastewater than any other place in the 
county. West Virginia is by far the highest per capita basis, 
what people currently pay. There are counties--and McDowell 
County is one of our case studies in West Virginia, they are 
paying more in absolute terms than Orange County where I come 
from, a very wealthy county in North Carolina, in absolute 
terms.
    Senator Voinovich. It is interesting, we were able to get--
we authorized a billion and a half--do you remember? A billion 
and a half dollars, I think back when I was chairman of--I was 
chairman of the Infrastructure Tax Division my first 2 years. 
The thing is, we got the money authorized, but we did not get 
it appropriated.
    I would be really interested if you could sit down with 
some of your colleagues to look at where you put--how do you 
really, you know, once you identify--and we are going to come 
to the number, but the question is how do you go about funding 
the thing. You do need the grants, because we have seen from 
the testimony here today that these counties and areas do not 
have the wherewithal to do it as you would have in the larger, 
urban area, and the septic tanks and all of the other stuff you 
have to contend with.
    The question that I have is, if we are talking about 
wastewater, which is probably the big number, wouldn't you say?
    Mr. Hughes. It is high, but it is not
    Senator Voinovich. Now we are talking about the lines, not 
just the treatment facilities.
    Mr. Hughes. We are talking about both.
    Senator Voinovich. In your study, you did the treatment, 
too.
    Mr. Hughes. We were looking at everything. But there is a 
very large type view of wastewater; sewers are it. The ARC 
really suffers nationally because half of the population is 
septic systems. So when someone comes in to document the need, 
what do they do? They start by going to the local sewer plant 
and asking, ``What is your need?'' Those numbers are the 
numbers that you see. Nobody goes to the individual people with 
failing septic systems and says, ``What is it going to cost to 
run you to the city system or fix your system?''
    All of the estimates to the ARC are grossly under 
estimated, in my opinion, on the wastewater side.
    Senator Voinovich. It is interesting that the major 
improvement in waste treatment in the country occurred during 
the early seventies. My first resolution for bond issue when I 
came to the legislature was $375 million to do waste treatment 
facilities. When the Federal program came in, it was 75/25.
    I will bet you if you go back and look at that program, 
that Appalachia fell behind then because that money was going 
to the larger cities, and you had no--you didn't have any 
governmental entity to deal with it. I bet they were just 
completely kind of ignored during that period of time.
    If you came up with a new program, I believe if you want to 
make progress, you need to come up with something like that 75/
25 for a while, or 50-50, something that would have a special 
ingredient or program to deal with the situation in the 
Appalachia.
    I want to thank you very much for being here. It has been a 
great hearing, and I got a lot out of it and I'm hoping some of 
your thoughts this morning, this afternoon, we can fold into 
the legislation. We are going to try to get it done, and I 
thank all of you for what you are doing in your respective 
positions. It makes a big difference to our country and to your 
respective communities. Thank you.
    Hearing adjourned.
    [Whereupon, the hearing was adjourned at 12:37 p.m.]
    [Additional statements submitted for the record follow.]
                              ----------                              

         Statement of Anne Pope Federal co-chair, Appalachian 
                          Regional Commission
    Thank you, Senator Voinovich. It is indeed a pleasure to be with 
you here in Appalachian Ohio to review the work of the Appalachian 
Regional Commission (ARC). We appreciate your strong personal 
commitment to the future of the Appalachian region and the work of ARC. 
Since I have traveled with you several times around Appalachian Ohio, I 
know that this is a subject that you feel passionately about. All of us 
in Appalachia appreciate your leadership.
    This hearing affords us a chance to assess the effectiveness of the 
2002 reauthorization, review how ARC's programs are working, and 
examine the economic development challenges facing rural communities 
across Appalachia
    I am particularly pleased that you have chosen to hold this hearing 
in the heart of Appalachia. Southeast Ohio shows both the significant 
payoffs of prior ARC investments and the continuing need for the 
Commission's assistance as a profound restructuring sweeps across the 
economy of Appalachia. I am delighted to be here at Washington State 
Community College, which has partnered with ARC on a number of 
important projects
    The region's traditional reliance on low-skilled jobs--particularly 
in manufacturing, natural resources, and extractive industries--is 
rapidly shifting to more knowledge-based employment. While this 
transformation offers the promise of higher incomes and improved 
standards of living, many Appalachians--and their communities--are at 
risk of being unable to compete for these new jobs and businesses.
    Education and workforce development programs geared to high-growth 
high-demand jobs, entrepreneurial strategies to capitalize on local 
assets, access to broadband technology, and adequate basic 
infrastructure are essential if Appalachia's communities are to compete 
in the global economy. ARC's flexibility, its ability to adapt quickly, 
and its expertise in crafting regional approaches make it an effective 
partner in helping communities put these critical components in place.
                              arc overview
    I should take just a minute to review ARC's mission and structure, 
as I think that is a key to ARC's success. The Commission has been 
charged by Congress with helping bring Appalachia's 410 counties and 
their 23 million people into socioeconomic parity with the rest of the 
Nation. The Commission represents a vital partnership between the 
Federal Government and the 13 Appalachian States. The 13 Governors and 
the Federal co-chair collectively set policy and allocate ARC's dollars 
in a true partnership that requires a consensus on priorities. I am 
pleased to be joined today by T.J. Justice, Director of the Governor's 
Office of Appalachia and Governor Taft's Alternate to the Commission. 
Throughout his 8 years in office, Governor Taft has been a vigorous 
advocate for Appalachian Ohio and the ARC, and T.J. has been effective 
in carrying out the Governor's vision for Appalachian Ohio.
    While the formal policies of the Commission are established by the 
Governors and the Federal co-chair, the real strength of ARC rests in 
our local partners, the local development districts. These multi-county 
planning organizations act as our local eyes and ears, identifying 
potential projects, providing technical assistance to small 
communities, piloting innovative development approaches. They are 
indispensable to our effort to move Appalachia into economic parity 
with the Nation.
    Every Appalachian county is served by one of the 72 local 
development districts (LDDs) in our region. You have three excellent 
ones here in Ohio: the Ohio Mid-Eastern Governments Association, the 
Buckeye Hills-Hocking Valley Regional Development District, and the 
Ohio Valley Regional Development Commission. I am glad that Don Myers 
is here this afternoon to represent the LDDs. He is a forceful advocate 
for innovative regional development.
                          2002 reauthorization
    Mr. Chairman, I am pleased to report that the reauthorization that 
you sponsored--and that President Bush signed--in 2002 has worked quite 
well. As a result of the legislation, and bolstered by the 
Administration's support for the work of ARC, we have become more 
performance-based, we have increased our leveraging, we have expanded 
our partnerships, and we have focused on innovative, regional 
approaches to economic development.
Performance-based Agency
    ARC is a performance-based organization, with clear goals and 
performance measures driving everything that we do. I believe that 
successful organizations are ones that develop a plan, implement it, 
and then measure what they have accomplished. Last year we implemented 
a new strategic plan to guide the Agency for the next 5 years. We did 
not just sit in Washington and write a document. Rather, we went out 
into the region to listen to the people of Appalachia and hear how they 
thought ARC could best help their communities. We held five town hall 
meetings across the region, with participation and voting by more than 
a thousand Appalachian citizens. Then our States, the local development 
districts, and I sat down to shape these comments into a new plan to 
govern our investments. That plan articulates four major goals:

     Increase job opportunities and per capita income through 
business development and diversification strategies that will 
capitalize on the region's unique assets, foster local 
entrepreneurship, expand trade, and encourage technology-related jobs.
     Strengthen the capacity of the people to compete in the 
global economy through increased workforce participation and 
productivity, with emphases on improving educational attainment and 
training and reducing disproportionately high rates of certain chronic 
diseases.
     Develop and improve regional physical infrastructure, 
particularly in economically distressed areas, as an essential step to 
increase potential for private sector growth by addressing the need for 
clean water and wastewater treatment facilities and advancing the 
access to and use of high-speed telecommunications.
     Build the Appalachian Development Highway System, designed 
to reduce the historic physical isolation of the region and link 
Appalachia to national and international commerce.

    Performance measurement is an integral component of the strategic 
plan. The Commission has outlined annual and 10-year performance 
targets that are aligned with these four goals. We analyze each project 
to see what it contributes to one of these targets.
    Those 10-year regional performance targets are as follows:

     Create and/or retain 200,000 jobs in Appalachia
     Position 200,000 Appalachians for enhanced employability
     Provide 200,000 households with basic infrastructure 
services
     Open 250 miles of the Appalachian Development Highway 
System

    I am pleased to report that we are well on our way to meeting these 
10-year targets.
Leveraging
    Meeting these targets will require the investment not just of ARC 
dollars but of funds and resources from other Government Agencies and 
the private sector. We have worked to increase our leverage of outside 
dollars. Last year, the $66.3 million in grants that we funded 
attracted $170 million in additional project funding, a ratio of almost 
3 to 1, and $560 million in leveraged private investment. That means 
that for every dollar that ARC invested in a project, the private 
sector invested $8. Since many of our projects are in areas with weak 
economies, and they often meet needs that are almost pre-development in 
nature, this private investment is particularly striking and has a 
significant economic impact.
    In our role as advocate for the region, we have been the catalyst 
for other investments as well. Parametric Technology Corporation (PTC), 
a leading developer of sophisticated engineering and design software 
for industry, NASA, and the Defense Department, has worked with ARC to 
make their Pro-DESKTOP software available for free to all high schools 
and colleges in the Appalachian region that have a faculty member 
trained in using the software. So far 31 community colleges, 4 
technology centers, 44 high schools, and 1 middle school across 9 ARC 
States have participated in the project. To date, the market value of 
the software PTC has donated is $24 million.
Partnerships
    Achieving the goals or our strategic plan requires an extensive 
network of partnerships with the private sector, the non-profit 
community, and other Government Agencies. Expanding our partnerships 
has been one of my primary goals at the Commission. I think we are 
making excellent progress in this area.
    The Interagency Coordinating Council on Appalachia, which the 2002 
legislation created, has been an effective tool for strengthening our 
partnerships with other Federal Agencies. Last fall, for example, Labor 
Deputy Assistant Secretary Mason Bishop and I convened a field meeting 
of the Council at Zane State College in Zanesville to discuss 
strategies to prepare Appalachia's workers for high growth, high demand 
jobs. Presidents of 17 community colleges from across Appalachia, along 
with economic development and business leaders, participated in the 
conversation.
    At that time we announced an innovative pilot program to train 
workers for jobs in the electric utility industry. An interstate 
partnership between Zane State here in Ohio, Ashland Community College 
in Kentucky, and West Virginia State Community and Technical College 
will yield a rich curriculum, open to students in all three colleges. A 
key private sector partner, AEP, will work with the colleges to make 
sure that the curriculum matches the jobs that AEP offers. AEP will 
also offer internships that are integrated into the program. This 
regional approach to workforce development is just the sort of 
innovative collaboration that both ARC and the Department of Labor are 
seeking to foster.
    Our relationship with the Centers for Disease Control and 
Prevention is another innovative Federal partnership. Since 2001 the 
CDC has committed over $1.4 million to special work in Appalachia 
targeted to certain diseases, such as diabetes and cancer, that 
disproportionately affect our region. That partnership has led to three 
successful ongoing projects: a jointly funded initiative to reduce the 
high rate of cervical cancer mortality in Appalachia, a partnership 
with East Tennessee State University to implement a comprehensive 
cancer control program, and a collaboration with Marshall University to 
reduce the impact of diabetes on people in Appalachia. For each of 
these, the CDC has looked to ARC as its connection to local communities 
and local needs.
    We also understand the importance of the private sector and 
sectors, and we have worked to create new partners here as well. In a 
first-of-its kind collaboration, ARC worked with the National 
Geographic Society to develop a geotourism mapguide to Appalachia, 
boosting the tourism industry and the jobs that flow from it. The map 
features 356 sites, including 24 sites in Ohio. Marietta is one of 
them. This special map is the kind of activity that could only be 
accomplished through an organization that has a specific, regional 
focus.
    Over the past 2 years we have worked with Microsoft Corporation to 
make computer software available to more than a hundred organizations 
across our 13 States. Microsoft initially committed $1 million in 
software donations, but when they saw the enormous need there was for 
this across our region, they quickly increased it to $2 million. At 
this point Microsoft has distributed $1.5 million of that, and an 
additional $400,000 is in process. Microsoft has been a great partner 
for us, and we appreciate their commitment to Appalachia.
Innovative Regional Approaches
    ARC stresses innovation and regionalism in building thriving local 
economies. One of our model innovative programs, the highly successful 
Appalachian Higher Education Network, originated here in Ohio. It 
provides funding, training, and assistance to high schools to encourage 
students to undertake postsecondary education. We know that the jobs of 
tomorrow are going to require enhanced training and education, yet the 
``college-going'' rate for high school students in Appalachia lags 
behind the rest of the Nation. Our Appalachian Higher Education Network 
speaks directly to this gap.
    We have taken the Ohio model, which won an ``Innovations in 
Government'' Award from Harvard, and are replicating it across 
Appalachia. There are now 10 centers in 9 States. Since 1998, the 
network's programs have reached nearly 11,000 high school seniors in 
Appalachia, of whom 68 percent have enrolled in college. This is an 
increase of almost 20 percentage points over pre-intervention college-
going rates.
    We seek opportunities by which our States and communities acting 
regionally can accomplish more than if they were acting on their own. A 
good example of regional innovation is the Southern Appalachian Fund. 
In response to ARC studies that documented the lack of equity capital 
in Appalachia, five States Tennessee, Kentucky, Mississippi, Alabama, 
and Georgia came together and ARC invested $1 million to help 
capitalize a venture capital fund focused on Appalachia. This attracted 
$11.6 million in funds from other public and private sources, including 
BankOne and Wachovia, to yield an overall pool of $12.5 million of 
venture capital that can only be invested in Appalachian businesses.
    The Southern Appalachian Fund is off to a great start. It has now 
made investments in eight companies, totaling $4.4 million, resulting 
in the creation of 100 jobs and leveraging $18.3 million of additional 
equity and debt investment. All the money has been invested in low-
income census tracts. Here again, without ARC's special regional focus, 
these venture capital dollars would not be available to grow businesses 
in Appalachia.
    Another area where we have fostered innovation is 
telecommunications and technology, one of the key elements of the 2002 
legislation. Through the first 4 years of the program (we are now in 
the fifth year), the Commission spent $32.2 million on activities 
related to this important initiative. This has been matched by $6.5 
million in other Federal funds, $10.3 million in State dollars, and 
$41.3 million in local support. These activities are projected to 
leverage an additional $61.7 million in private investment.
    ARC's program has been built around four broad areas: increasing 
affordable access to broadband services, providing training and 
educational opportunities related to telecommunications and technology, 
increasing the use of e-commerce throughout the region, and increasing 
entrepreneurial activities within Appalachia in the technology sector. 
Projects in these areas stress innovation and regionalism.

    The direct economic impact of the telecom program has been 
substantial:
     2,600 jobs created and 2,100 jobs retained
     45,000 students served with enhanced academic offerings 
through distance learning and new technology
     65 community and regional plans for telecommunications 
networks and applications

    In Ohio, ARC funds have supported a widespread community outreach 
and strategic planning effort, a technical assistance ``circuit rider'' 
traveling across the region to work with communities and private-sector 
providers, and 5 cluster demonstration projects. The number of 
telephone central offices that are enabled with DSL services jumped 
from 46 in 2002 to 168 in 2004, while the number of counties with cable 
modem access grew from 8 to 28. In addition, 16 Appalachian Ohio 
counties now have some form of limited wireless broadband. That is 
significant progress, led by the private sector and supported by ARC, 
in expanding broadband access in the region.
    A couple of examples from other States suggests the range of ARC's 
work in the telecom area. In Delhi, New York, in partnership with 
Motorola we used a wireless canopy demonstration system to provide the 
first broadband access to the community. Working through the local 
college, the project created a network among village and county 
Government offices, the high school, a senior citizens' center, the 
State Department of Transportation regional office, the community 
library, and the SUNY Delhi campus. As a result of the broadband access 
provided by the project, Delhi is now considering establishing a 
technology-oriented business incubator to spur new businesses and jobs. 
This option would never have been possible without ARC's wireless 
telecom project.
    Last month I joined Mississippi Governor Haley Barbour in 
officially ``lighting'' a new fiber network that will serve the bulk of 
northeast Mississippi. ARC provided $2 million of a total $7 million 
project, in partnership with TVA, HUD, and the private sector, to 
install a fiber loop that will link major State universities, the 
largest rural teaching hospital in the Nation, several small cable 
companies, and a growing number of private businesses. This project has 
the potential to transform the economy of that part of Mississippi.
    As you can see, Mr. Chairman, the telecom authority provided in the 
2002 legislation has enabled us to make significant progress in 
connecting Appalachia to the information highway, and I encourage you 
to continue this authority.
                                highways
    While the primary focus of today's hearing is ARC's nonhighway 
program, I do want to touch briefly on the status of the Appalachian 
Development Highway System, since it is the linchpin of our efforts to 
connect Appalachia with the international economy. As of September 30 
of last year, 2,632 miles 85 percent of the 3,090 miles authorized were 
open to traffic or under construction.
    We are only a few miles away from one of our important corridors, 
Corridor D, which you know as U.S. 50. Construction is now underway on 
the bridge across the Ohio River at Parkersburg, which is the last 
remaining work to be done on this important east-west corridor.
    Last year's Highway bill provides funding for the ADHS out of the 
Federal highway trust fund at $470 million per year. This will enable 
us to make significant progress in completing our highway system, and I 
thank you and your colleagues for your leadership in ensuring that the 
ADHS was included in SAFETEA-LU.
                       strategies for the future
    As you look to the future, Mr. Chairman, I want to discuss briefly 
the steps ARC is taking to ensure that our programs respond to the 
challenges of Appalachia's changing economic landscape.
    Targeting.-- First, we are continuing our focus on the areas of 
Appalachia that have the greatest need. To help us do that, we recently 
developed an economic condition index that enables us to directly 
compare the condition of our counties with those of the rest of the 
Nation. Using unemployment, poverty, and per capita market income, the 
index assigns a score to every county in the country, and then divides 
those counties into quartiles. Attached to my testimony is a map that 
shows the distribution of counties across the Nation according to the 
index. The index reveals that Appalachia has more of the worst counties 
and fewer of the best than it would if the region was at the national 
average.
    We have traditionally focused special attention on those counties 
that are formally classified as economically distressed. This year 
there are 77 of those across the region, with four (Athens, Meigs, 
Pike, and Vinton) in Ohio. But many of our counties are just on the 
cusp of being distressed; and therefore, ARC is focusing attention and 
resources on them to ensure that they do not become distressed.
    The Commission now has begun formally designating these ``at-risk'' 
counties. In FY 2006, there are 81 of them, including six in Ohio. 
Under our current statute, projects in these distressed counties are 
subject to the same match requirements (50 percent) as those in 
counties with stronger economies, though projects in distressed 
counties are eligible for up to 80 percent ARC funding. We believe that 
targeting funding to those counties that continue to have weak 
economies and limited financial resources is the most effective way for 
ARC to help move the region to economic parity with the country.
    Telecommunications.-- As I noted earlier, over the past 5 years we 
have had a robust telecommunications program that has significantly 
expanded the access and use of telecom and technology in Appalachia. 
But the region continues to lag behind the Nation in access to 
broadband, and businesses and communities too often fail to capture the 
economic potential offered by new technology.
    According to a study we conducted initially in 2002 and updated in 
2004, Links to the Future, in December 1999 there were 44 percent of 
Appalachian zip codes with at least one high-speed provider, compared 
to 60 percent for the Nation. In December 2002, the Appalachian 
percentage had increased to 63 percent. That is definite progress, but 
the national rate had grown to 88 percent, actually increasing the gap 
between Appalachia and the rest of the Nation.
    We expect to continue our work in this area. We are pursuing 
several strategies. One is ensuring that whenever we do a basic 
infrastructure project, we consider whether there is value in including 
a telecommunications component as well. Another is to continue our 
focus on e-commerce, training our small businesses to take full 
advantage of the business opportunities and efficiencies offered by the 
Internet. Finally, we will continue our commitment to distance 
learning, telemedicine, and demand aggregation projects.
    Asset-Based Development.-- ARC is now in the second year of a 
special initiative designed to help tap the full potential of the 
region's natural, cultural, leadership, and structural resources. Too 
often we in Appalachia tend to focus on our deficits, on the barriers 
to economic development. And much of what ARC does is help overcome 
those barriers. But I come from the business world, where the balance 
sheet has two sides the deficits, or liabilities, AND the assets or 
revenue streams. ARC is working with our communities to help them 
identify their assets and put in place strategies that will capitalize 
on them.
    This initiative has sparked considerable enthusiasm around the 
region, as communities take a new look at the economic development 
resources they have within their own borders. Some examples include the 
following:

     Mingo County, West Virginia has used water in abandoned 
mines as the basis for a thriving aquaculture business that grows and 
sells artic char to high-end restaurants along the East Coast.
     In Virginia, the 250-mile ``Crooked Road'' driving trail 
links 8 music venues in 10 counties in an exploration of the region's 
rich musical heritage.
     Appalachian Pennsylvania is capitalizing on some of the 
finest hardwood forests in the world to promote sustainable 
agriculture, value-added wood products, and job creation.

    Both ARC and our communities believe that this asset-based approach 
to local economic development affords a realistic opportunity to 
diversify our local economies.
    Patterns in global trade and technology have shaken Appalachia's 
historic reliance on traditional manufacturing, extractive industries, 
and tobacco, threatening many communities whose local economies were 
already fragile. For example, Appalachian coal mining, long a mainstay 
of the economy of central Appalachia, has fallen from 101,500 workers 
in 1987 to 46,000 in 2003, largely because of productivity gains. 
Similar employment declines have occurred in manufacturing, with 
significant Appalachian job losses in textiles and apparels and primary 
metals. Our asset-based approach offers an additional tool for 
communities as they refocus their economies.
    Energy.-- One asset class to which we are dedicating special 
attention is energy. Appalachia is rich in energy resources fossil 
fuels, renewables, and the research capacity to develop alternative 
energy sources. From coal to oil and gas to wind to biomass, all of the 
Appalachian States have significant energy assets.
    Earlier this year the Appalachian Governors and I committed the 
Commission to developing an ``energy policy blueprint'' for Appalachia 
that can boost the region's economy. We are currently conferring with 
energy experts, as we work to have our regional energy blueprint ready 
to unveil at our annual conference this fall.
    The challenge is to craft regional strategies that will use these 
resources to spur widespread economic growth and job creation. Tapping 
Appalachia's energy potential for economic development is about more 
than just getting additional coal out of our mines. Rather, it requires 
looking at the entire energy supply chain research, commercialization, 
manufacturing, exporting and seeing it all as one comprehensive 
economic development strategy for our region.
    Basic Infrastructure.-- The bulk of ARC's funding continues to go 
to basic infrastructure. Lack of adequate water and wastewater systems 
is frequently a major impediment to local economic growth.
    ARC recently commissioned a study to document the region's funding 
resources and gaps for drinking water and wastewater infrastructure. It 
found that, using EPA data, Appalachian counties require investments of 
at least $11.3 billion for drinking water needs and $14.3 billion for 
wastewater needs. According to the study, Appalachia's water and 
wastewater service lags behind the United States, and local technical, 
managerial and financial capacity is significantly lower in Appalachia. 
On average, community water systems in distressed counties have greater 
financial needs per person served than systems in non-distressed 
counties.
    ARC will continue to help communities with these challenges in a 
number of ways:

     Targeting our infrastructure investments. ARC will 
continue to focus its funding on those communities with the greatest 
economic need and those with critical public health and safety issues.
     Strengthening our partnerships with other Federal 
Agencies. We have historically had a strong relationship with Rural 
Development at the Department of Agriculture, and we have been 
expanding our partnership with the Environmental Protection Agency.
     Fostering regional approaches to water and wastewater 
service. Economies of scale and improved service reliability occur when 
small communities come together to develop interconnected systems that 
operate on a county-wide or regional basis. ARC will continue to 
emphasize a regional approach to basic infrastructure.
     Encouraging innovative solutions to infrastructure needs. 
The combination of rugged terrain and low incomes puts traditional 
systems beyond the financial reach of some of the more remote, 
distressed communities. This calls for alternative approaches, such as 
the Self-Help program in Virginia, innovative financing options, and 
alternative technologies. ARC will examine ways of deploying these 
alternative solutions across Appalachia.
                               conclusion
    Mr. Chairman, since ARC was created, Appalachia has experienced 
significant economic improvement:
     The number of economically distressed counties has been 
cut by more than half, from 223 distressed counties in 1965 to 77 
counties in 2006.
     The per capita income gap between Appalachia and the 
United States has been reduced from 22 percent below the national 
average in 1965 to 18 percent in 2001, and the poverty rate has been 
cut more than half, from 31 percent to 13 percent.
     Appalachia's infant mortality rate has been cut by two-
thirds, and more than 400 ARC-funded rural health facilities have 
expanded access to health care across Appalachia.
     The percentage of Appalachian adults with a high school 
diploma has increased by over 70 percent (from 45 percent in 1960 to 77 
percent in 2000), and ARC has helped build and equip 700 vocational 
education facilities.
     In the past 5 years alone ARC grants have provided clean 
water and sanitation facilities for over 183,000 Appalachians.
     Since 1977 ARC has invested $36.7 million in revolving 
loan funds that generated $115 million in loans for small businesses 
and leveraged $8.59 in other investment for each ARC dollar, helping 
create over 30,000 jobs.

    Despite these significant improvements, Appalachia still does not 
enjoy the same economic vitality and living conditions as the rest of 
the country. I have already outlined some of the challenges in 
telecommunications, infrastructure and employment, but let me suggest a 
few more of the region's continuing needs.
     Widespread poverty. One fourth of Appalachia's counties 
have a poverty rate more than 150 percent of the national average.
     Persistent unemployment. A majority of Appalachian 
counties have a higher unemployment rate than the national average.
     Lower per capita income. Appalachia trails the rest of the 
Nation by 18 percent in per capita income.
     Educational attainment gaps. The number of Appalachian 
residents with a college degree is less than three-fourths of the 
national average and the gap is widening.
     Health disparities. Appalachia has higher rates of cancer, 
heart disease, diabetes and chronic obstructive pulmonary disease 
compared with the Nation as a whole.

    Mr. Chairman, we are on the right track; the region is moving 
forward, but we still have key obstacles to overcome if we are to move 
Appalachia to economic parity with the Nation. We believe that ARC can 
be a key partner in helping achieve this ultimate goal, and we look 
forward to working with you and other Members of Congress.
[GRAPHIC] [TIFF OMITTED] 42277.035

    Statement of T.J. Justice, Director, Ohio Governor's Office of 
              Appalachia, Appalachian Regional Commission
    Good afternoon. I am thankful to you--Senator Voinovich--for 
providing me with the opportunity to present formal testimony regarding 
the re-authorization of the Appalachian Regional Commission on behalf 
of Ohio's 1.4 million Appalachian residents located across a 29-county 
area. I would like to thank you for your exceptional support of the ARC 
as well as your leadership and dedication to this part of Ohio and the 
other 12 States that create the Appalachian Region of the United 
States.
    Senator, I am privileged to have had the chance to work for you 
while you served 8 years as Governor of Ohio and I want to make certain 
you are aware of the appreciation the people in eastern and southern 
Ohio have for the ``dear colleague'' letters you initiate to members of 
the U.S. Congress in Washington, DC. You have not been reserved in your 
interest to maintain and expand the level of funding for the ARC.
    I also want to thank President Bush and ARC Federal co-chair Anne 
Pope. It is no secret that domestic spending is tight for obvious 
reasons. To ensure our country's safety the Administration has been 
constrained to look more closely at how and where it spends Federal 
dollars in our homeland. Although many programs are proposed to be cut, 
the Bush administration has recommended flat funding of $64.8 million 
for the ARC. This is a testament of Miss Pope's ability to represent us 
within the White House and also reflects the measurable success of the 
ARC.
    Before I share my views on why reauthorization of the ARC is 
warranted, I want to recognize Congressman Bob Ney. A close friend of 
mine as well as my own Congressman in Jackson county, where I reside. 
Bob knows what is important to his constituents, whether it's advocacy 
for the ARC, the community development block grant program or other 
successful programs for his district and the region as a whole.
    This Appalachian Regional Commission breathes success and it fuels 
partnerships that have led to organizations such as the Ohio 
Appalachian Center for Higher Eduation--Or OACHE--being formed. This 
program focuses on encouraging students to go to college and aims to 
increase the low educational attainment level of Appalachian citizens. 
The OACHE provides career planning and financial aid funding, starting 
as early as 6th grade to help kids dream big and find adequate 
resources to make those dreams come true.
    On a more personal note, I would like to share an OACHE story with 
you in hopes that it will move you in the same way that it moved me. 
While visiting with some of the OACHE students at South Webster High 
School 2 years ago, a senior approached me and wanted to let me know 
how this program had impacted his life. He told me that he came from a 
family who discouraged him from going to college. His very own father 
told him to not even try--that he should take his high school diploma 
and get a job at a local auto or body shop. OACHE found him. He told me 
that despite what his father had told him, he knew inside--that he had 
always wanted to try college. Today, he is a sophomore at Hocking 
College in Nelsonville, OH training to become a police officer.
    This young man is the work of the Appalachian Regional Commission. 
This is how the investments of this entity make a difference for people 
of all walks of life.
    ARC's model and success here in Ohio has been so highly regarded 
that Governor Taft not only recognized that early in his first term, 
but he replicated it. Ohio's allocation of ARC funds has generally been 
in the $4.1-$4.5 million range excluding highway funds. The Taft 
administration created its own State Appalachian Program with an equal 
amount of funds operating under the same guidelines and goals of the 
ARC thus doubling the amount of investments able to be made each year 
by the Governor's office of Appalachia and the Appalachian Regional 
Commission in Ohio.
    Senator, this program works. It creates jobs and stimulates health 
care in areas like southern Perry County near Corning and New 
Straitesville where a new health clinic partially funded by the ARC is 
providing health care services that otherwise would not be provided. It 
supplies dental services in Meigs County for uninsured and underinsured 
individuals. It offers a mobile diabetes unit at Ohio University that 
screens residents in Pike, Vinton, Athens, Meigs, Hocking and other 
Appalachian counties.
    The ARC's commitment to communities in the Appalachian Region has 
led to the development of new programs. For example, the Ross County 
Child Development and Family Service Center at Ohio University in 
Chillicothe is now able to furnish and equip its facility to 
accommodate educational, rehabilitative and social welfare services to 
360 children and their families. As a direct result of the ARC, the 
city of Wellston, in Jackson County retained more than 1,000 jobs with 
the upgrade of a water treatment plant. The foundation for healthy 
communities can assist 11 hospitals in Appalachian Ohio and acquire the 
diagnostic equipment needed to conduct hearing screenings for all 
newborns. These projects have all been made possible, and in most 
cases, would not have occurred had it not been for the ARC's 
involvement.
    This is a program that has produced countless employment 
opportunities, whether it's entrepreneurs creating 2 and 3 jobs at a 
time at Hickory Ridge in Morgan County or Acenet's agribusiness 
incubator in Athens County. It also generates hundreds of jobs at other 
large manufacturers by supporting the necessary infrastructure in 
places like Zanesville's industrial park where Wendy's bakery and the 
Dollar General Distribution Center are located or Buckingham coal in 
Perry County.
    The Appalachian Regional Commission is also a dependable resource 
in times of need. Ohio used $1 million of ARC funds for flood recovery 
efforts during catastrophic flood events that occurred 18 months ago. I 
can tell you that repairs were made in critical areas that otherwise 
would not have occurred due to FEMA policies. An example is the 
restoration of a shortline railroad in Guernsey County that supported 
180 jobs at a manufacturing facility in Byesville.
    On behalf of Governor Taft and the residents, employers, and local 
Government officials of Appalachian Ohio, I submit to you--Senator 
Voinovich--that there are few, if any other, Federal programs that are 
as effective and worthy as the ARC. I am very proud to represent the 
people of this region--a region that my 14-year old daughter and I live 
in and believe in --and I'm hopeful that my remarks today will help you 
in obtaining a 5-year reauthorization of the ARC. Thank you.
                               __________
          Statement of Don Myers, Director, Ohio Mid-Eastern 
                        Governments Association
    I thank you for the invitation and privilege of testifying today, 
to you and the Senate Environment and Public Works Committee, at this 
field hearing being held at Washington State Community College in 
Marietta, OH. The primary purpose of this hearing is to receive 
testimony on the Appalachian Regional Commission (ARC) and the impact 
of the last reauthorization of this program and issues regarding the 
upcoming reauthorization.
    I testify to express my comments and those of the Ohio Mid-Eastern 
Governments Association's (OMEGA) Board and to seek your consideration 
and support in securing funding and reauthorization status for the ARC 
and its programs. In addition, we ask that you and the committee 
support retaining the original mission of the program as a flexible, 
locally driven program that provides valuable assistance to county 
commissioners, mayors and development officials working to improve 
local communities and the needs of those communities.
    As Executive Director of OMEGA, I represent an organization that 
serves as a Council of Governments (COG), a Local Development District 
(LDD) and an Economic Development District (EDD) serving a 10-county 
region with a population of 593,221 residents in eastern Ohio.
    At our most recent Annual Board meeting (April 12, 2006), 90 
officials, including commissioners, mayors, county engineers, 
development officials, educators and private business leaders spoke of 
the critical importance of continuing funding and reauthorization of 
the ARC program.
    At this meeting, we held discussion on this hearing today and our 
Board in its entirety requested your support and leadership in securing 
proper funding and reauthorization of this most important ARC program.
    As a former development director in Belmont County, Ohio, I have 
had the privilege of working with you when you were Governor of the 
State of Ohio on three (3) separate development projects and they were: 
the $80 million Ohio Coatings Electrolytic Tin Plating Plant in 
Yorkville, OH, the Shadyside Stamping Mayflower Plant built at a cost 
of $32 million and the Belmont Correctional Institution built at a cost 
of $38 million. These three (3) development projects were built at a 
total cost of $150 million and when I left Belmont County in 2001, 
these three (3) development projects had approximately 900 employees 
with an annual payroll and benefit package of over $35 million. Belmont 
County and its people benefit today because of these developments. 
These special projects could not have happened had it not been for the 
ARC program and others like it.
    Records that we have in the OMEGA office from 1968 through 2005 
report the OMEGA region of 10 counties has received a total of $75.4 
million in Federal and State ARC grant awards. These grants have 
enabled us to complete 360 projects addressing local health, safety, 
welfare and education projects totaling over $305.385 million. These 
ARC grants are so important to our region and to the individual 
counties and cities they benefit.
    Our infrastructure needs are many not only here but also throughout 
the country. Last summer, the American Society of Civil Engineers 
prepared a report which addresses 12 categories of infrastructure that 
gives the Nation's transportation, water and energy system and overall 
grade of ``D'' plus. Both drinking water and wastewater received a 
grade of ``D''. The report states the Nation's 54,000 drinking water 
systems are aging rapidly and some sewer systems are 100 years old. We 
need quality programs like the ARC that address these issues of concern 
and importance.
    In closing, I would like to reiterate my strong support for the 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-chair's 
office is not conducted in a manner that many would consider to be 
``typical Washington bureaucracy''. The ARC has shown that it is a 
program that seeks to simplify rather than complicate. It does not try 
to operate under a rigid or lengthy review or approval process that in 
many other agencies tend to frustrate and confuse the applicant. Of 
extreme importance is that the ARC administration operates with a 
programmatic mindset that seeks to work with the States and local 
Governments in order to get their priorities funded.
    You have done much for the people of Ohio and for economically 
disadvantaged citizens throughout the United States. We ask that you 
continue to look out for those in need and in the shadows of life. With 
a sluggish economy and three (3) major floods that occurred recently, 
our 10 member counties need your help and that of Congress more than 
ever. We ask for your continued support of this most worthy program and 
we ask for your leadership in securing reauthorization status and 
proper funding needed for so many projects within the ARC region.
    We thank you for your consideration of this report and for all that 
you do for the OMEGA region.
                               __________
   Statement of David Matusoff, Principal and Director of Technology 
                Planning Whiteboard Broadband Solutions
    Senator Voinovich and other distinguished colleagues, thank you for 
the invitation to speak with you this morning regarding the 
reauthorization legislation of the Appalachian Regional Commission. It 
is my pleasure to come before you to discuss the importance of the ARC 
and the critical role the ARC has played in the improvement of 
broadband availability in the Appalachian Region of Ohio. Your role and 
leadership regarding ARC's last reauthorization has been a critical 
factor in the successes I'll be discussing today.
    My partnership and consulting with the ARC started in 1999 through 
a project called Access Appalachia and has continued through today. To 
date, I've managed three large-scale broadband assessment and 
improvement projects over a six year period and I'm currently in 
discussions with ARC to begin implementing some exciting new wireless 
broadband projects in communities without any current access to 
broadband services.
    I spend a significant amount of time proselytizing about the 
importance of broadband services to improve economic development 
opportunities throughout rural America. Central to that discussion and 
critical to any rural broadband improvement project is the role of the 
``sparkplug.'' It does not matter if this individual comes from the 
public or private-sector, or if this person understands much about 
broadband technologies, but without their determination and 
persistence, rural broadband projects won't work. These sparkplugs are 
responsible for creating broadband availability in spite of all the 
market-based factors that suggest, ``This is not a place to invest in 
broadband services.'' Without these local visionaries, rural broadband 
efforts would go the way of other rural communities that lost economic 
opportunities as the result of lack of access to other forms of vital 
infrastructure like adequate water, roads and sewers.
    It is my sincere belief that the ARC has served as a regional 
sparkplug for broadband efforts in the Appalachian Region of Ohio. 
Without the financial support and programmatic focus on broadband 
improvement by the ARC, the Appalachian Region of Ohio would be 
woefully underserved with respect to broadband availability and lack 
educated public officials who aspire to improve broadband access in 
rural Ohio. The impact of the last part of that sentence can not be 
underestimated. Through the ARC's education efforts, the culture 
regarding the importance of broadband availability has changed 
throughout the region. In many instances, changing culture is much more 
meaningful than a new investment in broadband service and will serve 
the region for years to come. The ARC's efforts in this area have made 
significant impacts both directly and indirectly.
    Although it's not always an easy task to measure the exact or 
direct impact of ARC investments on the quality of life and business 
climate in the Appalachian Region of Ohio, here are a few examples of 
broadband improvements that I believe are a result of ARC investment in 
the region:

     2003 TechNet Survey ranked Ohio 5th nationally with 
respect to Broadband deployment and use policies- The ARC funded Access 
Appalachia project was sited as a critical factor to that ranking
     Between 2002-2004, DSL availability doubled in the 
Appalachian Region of Ohio- PUCO requirements were given to telecom 
companies as a result of data collected through the Access Appalachia 
project
     The region now has Thirteen counties/communities with 
broadband improvement plans that are currently seeking funding

    As an example, Marietta, the lovely City we are in this morning 
makes an excellent case for both the direct and indirect benefits of 
ARC investment on broadband availability within the Appalachian Region 
of Ohio. Mayor Michael Mullen, or Moon as he is commonly referred to 
down here heard me speak at a meeting in Chillicothe that was part of 
the outreach I was conducting for the Access Appalachia project. 
Through that educational process, he became a sparkplug for broadband 
improvement locally. Eventually, the Mayor responded to an RFP for a 
broadband planning grant funded through the ARC. He was successful in 
that effort and today, Moon has a plan to create a wireless broadband 
network within Marietta that will enhance municipal, educational, 
safety services, business and economic opportunities within Marietta. 
Although he is still pursuing funding to implement the project, I 
guarantee his persistence will lead to eventual success for his project 
and the region will benefit as a result.
    I can't stress enough about the importance of ARC's investments and 
leadership with respect to broadband improvement within Ohio. Without 
their assistance, the Appalachian region of Ohio would not have the 
coordinated effort to improve broadband services we've seen to date. 
The ARC's investment started first with providing the benchmarking of 
broadband supply and demand, and then transitioned to education and 
local broadband planning projects. Through your leadership with the 
reauthorization, my sincere hope is that we will be discussing 
implementation projects next.
    I appreciate your commitment to the ARC and would be happy to 
answer any questions. Thank you.
                               __________
Testimony of Gary Little, President, Information Technology Alliance of 
                            Appalachian Ohio
    Thank you Senator Voinovich and members of the Senate Committee on 
Environment and Public Works for this opportunity to speak in support 
of the reauthorization of the Appalachian Regional Commission. I am 
Gary Little, President of the Information Technology Alliance of 
Appalachian Ohio, Inc., a nonprofit organization fostering economic 
development for the information technology sector of the region. For 
clarity, this sector includes computer, internet, ecommerce, and 
related businesses and industries, and also all the various computer 
applications found in public sector organizations including education.
    ITAAO, the State of Ohio, Governor's Office of Appalachia, and the 
Appalachian Regional Commission have partnered on several occasions 
over the past 5 years to create an information technology community, an 
information technology visibility in Appalachian Ohio where it barely 
existed before. I often find myself on a soapbox promoting the region. 
Appalachian Ohio not only has a significant information technology 
sector, but we are leading the way in some areas.
    Shawnee State University in Portsmouth, for instance, is one of the 
few universities in the country to offer two bachelors degrees in 
interactive digital technology development; one with a digital arts 
concentration and another with computer science/engineering 
concentration. Student enrollment is now over 100 bright, exceptional 
students from all around the country and locally. An article recently 
published by the Associated Press told of Michael Zyda's astonishment 
with the program, the creativity, and enthusiasm for computer game and 
serious game development in Appalachian Ohio. Zyda was the lead 
researcher on the U.S. Army's recruitment and instructional game, 
America's Army, and is Director of the GamePipe Laboratory at the 
University of Southern California. Zyda presented at the Shawnee 
Conference 3.0 on Interactive Digital Technology in 2005. This 
conference gained national attention in 2004, in part because of the 
support of the Appalachian Regional Commission. This is an example of 
great return on your investment. The small, but important, $5,000 grant 
generated nearly $20,000 in support on that specific event in 2004, but 
the real value is measured in the national publicity for Interactive 
Digital Technology (IDT) development, for Shawnee State University's 
IDT degree programs, and also for related degree programs that are 
developing at Ohio University, Washington State Community College, 
Hocking College, and an existing computer animation degree program at 
Kent State University's Tuscarawas campus.
    That event in 2004, grew from the original concept of a Region of 
Excellence in Interactive Digital Technology (IDT) when ITAAO Board 
Chairman, Bill Sams; Adena Ventures president, Lynn Gellermann, Shawnee 
State University Fine and Digital Arts Chairman, Tom Stead, Ohio 
University Provost, Kathy Krendl, and Shawnee State University 
President, Rita Rice Morris germinated the idea in 2003. This has now 
grown to the development of a prototype ``cyber park'' in the GRID 
(Game Research and Immersive Design) Lab at Ohio University with a 
$247,500 ARC grant. From an original local match commitment of 
$62,000., Ohio University has now dedicated nearly $250,000 to this 
project, with additional funds from various local sources of nearly 
$20,000. The Lab has also developed research and project relationships 
with the Smithsonian Institute, with a Columbus, OH company, a 
Massachusetts company, and a New York City serious game development 
company to develop educational and instructional games, and recently 
developed a partnership with Intel. To expand upon this success Ohio 
University has now announced its intentions to create an IDT research 
and development institute seeking Ohio Third Frontier support. Hundreds 
of thousands, and very possibly millions of dollars of program, 
research, and education activities are about to explode onto the scene 
only two years after ARC made its initial $247,500 investment, and in 
the previous year a $5,000 investment. Without these funds you would 
not now see the interaction and possibly business development in 
Appalachian Ohio by some of the nation's leading computer and IDT 
development companies.
    Shawnee State University also has further expansion plans, and is 
now seeking private and public support to develop a whole new immersive 
arts and technology center that will include the most advanced motion 
capture facility for digital animation east of the Mississippi River.
    The Appalachian Regional Commission has been instrumental in the 
blossoming of this concept, and will be a valuable partner in our 
continued efforts to create an innovation economy for this century.
    A huge economy continues to grow nationwide (estimated at $100 
billion this year in computer games, educational and health 
applications, and corporate/business applications) and worldwide in 
interactive digital technology and there is no reason why our students, 
our young entrepreneurs, and retrained workforce cannot and should not 
take advantage of it.
    All we need to do is focus upon the polygon--in IDT terminology--
and strive for it.
                               __________
    Statement of Angela Stuber, Executive Director, Ohio Community 
                           Computing Network
                                summary
    ARC's understanding of technology literacy has led to ARC 
investment of time and resources to improve the digital literacy skills 
and broadband access of Appalachian residents and businesses. They are 
excellent at connecting organizations and individuals with 
complementary goals. ARC recognizes the benefit of utilizing existing 
infrastructures while also leveraging local funds with federal funds. 
All of which is accomplished in projects controlled locally, not by the 
ARC.
    ARC also recognizes there is a continuing need to expand broadband 
access and digital literacy programs in Appalachia. The continually 
expanding resources online are profound, from medical information, to 
financial resources to homework assistance, those without broadband 
must wait for pages to download, taking hours to complete tasks that 
should only require minutes. ARC is a great supporter of Community 
Technology Centers. They have seen the connection users form to their 
Centers and the variety of tech skills they obtain from the CTCs.
                           my qualifications
    I have been the Executive Director of the Ohio Community Computing 
Network (OCCN, www.ohioccn.org) for six years. I have served on the 
Community Technology Centers Network (CTCNet, www.ctcnet.org) Board of 
Directors for four years and as the Board President for one and a half 
years. I also serve as the Board Secretary for Grassroots.org 
(www.grassroots.org) and on the Board of Advisors of the Association of 
Community Networking (www.afcn.org). In addition, I blog about 
community technology issues at www.angelastuber.blogspot.com.
                            occn and ctcnet
    The Ohio Community Computing Network (OCCN) is a member-driven 
organization supporting community technology to promote full 
participation in a digital world. OCCN is committed to ensuring that 
every Ohioan can make full use of modern computing and networking 
technology for personal and community empowerment and enrichment.
    OCCN was originally established in 1995 as the oversight and 
evaluation organization for the 14 community computing centers created 
and funded by the Ameritech Advantage Ohio alternative regulation case 
settlement. This was the first time in this country that a settlement 
before a state public utility commission included the funding of 
community computing centers in low-income neighborhoods. It was an 
important breakthrough in the effort to make computers and 
telecommunications technology accessible to people of all incomes. 
Community technology centers provide basic computer training and 
support to people with limited opportunities to learn about or use 
computer technology. CTCs are not developed by any Government Agency or 
program. They are developed by communities who see a need for 
technology access and training, usually focused on low income, disabled 
or rural populations. OCCN has distributed over $5 million to community 
technology programs through agreements between the Public Utilities 
Commission of Ohio, regulated telecommunications companies and 
interested community organizations.
    In June of 2005, the OCCN membership accepted the board and staff's 
recommendation to expand OCCN's mission beyond support to CTCs. OCCN 
now supports community technology efforts that include public access 
centers, mobile labs, computer refurbishing programs, online trainings 
and broadband access programs.
    Our expanded mission led to OCCN helping form the Ohio Digital 
Divide Working Group (ODDWG). The Ohio Digital Divide Working Group is 
a unified effort to incorporate the goals of universal basic digital 
literacy & ubiquitous, affordable high-speed Internet access in 
regulatory, development and educational policies.
    The Community Technology Centers' Network (CTCNet) was founded on 
the recognition that in an increasingly technologically dominated 
society, people who are economically disadvantaged will be left further 
behind if they are not provided access to and training on information 
tools. CTCNet envisions a society in which all people are equitably 
empowered with these tools. CTCNet is a national network of over 1000 
Community Technology Centers.
                  arc support of community technology
    Without ARC's support, the STEP UP program of Mission West 
Virginia's E-Impact initiative would not have been possible. STEP UP 
provides modern computer labs and high speed Internet access--for 
free--to some of the most rural areas of southern and central West 
Virginia. These labs utilize existing space in churches and community 
organizations while also leveraging the funds spent by Workforce 
Investment Board and state Department of Education officials, who use 
these labs to teach their curricula. The approach to partnering with 
community assets already in place also helps create a strong 
stakeholder relationship--again, improving sustainability and creating 
stronger communities through the use of ARC dollars.
    ARC secured a million dollar Microsoft software donation, twice. 
Eligible applicants are nonprofits providing computer access or 
trainings. Microsoft limited distribution of the software from 
libraries and schools because they were already participating in 
Microsoft distribution programs, which leaves Community Technology 
Centers (CTCs) to receive the free software licenses. Partners in 
various states helped eligible organizations submit applications to ARC 
who would ensure the applications were complete and forward on to 
Microsoft. OCCN helped with the distribution in Ohio. To date, seven 
CTCs in the Appalachian region of Ohio have received free Microsoft 
software at a total retail value of over $90,000.
    ARC, in working with Microsoft and CTCNet, would like to expand 
CTCs in more areas of Appalachian Ohio. Distributing the Microsoft 
software licenses resulted in ARC realizing many Appalachian 
communities do not have CTCs. The ARC staff is currently discussing the 
development of a new program with CTCNet to create CTCs where there are 
none. This is a very exciting program which could intensely impact the 
lives of Appalachian residents in the target states. In Ohio we have 
seen tremendous success among the youth served by the CTCs in the 
Appalachian region of Ohio. The CTCs in this region have been very 
innovative in using online learning tools (Muskingum County), 
multimedia technology such as video cameras (Perry County), and after 
school family focused programs (Coshocton County). The youth have 
become engaged in the CTCs to such an extent that they feel the centers 
are ``theirs''. As they should.
    ARC has supported OCCN's attempts to find community technology 
programs we are not currently aware of in order to introduce them to 
existing resources and provide assistance to them. One exciting 
initiative found is the community technology efforts in Chesterhill, 
OH. Utilizing an OSU developed transportable satellite dish, Ohio State 
University installed a wifi network in Chesterhill. To maximize use of 
the new broadband and to ensure residents have the opportunity to learn 
digital skills, the community is also creating a CTC. OCCN will 
continue to work with the community members and project partners to 
point them to resources and provide advice for them to choose their own 
path. Chesterhill now has a wifi network. They will be deciding whether 
to sustain it as a community network, a municipal network or a pubic/
private network. OCCN very much supports local control and the 
opportunity for communities to choose what is best for themselves.
                 the digital divide has not been closed
    The attention of local leaders and the ARC to broadband access and 
digital literacy issues is commendable but this in no way should allow 
one to declare the digital divide now closed. Many residents of 
Appalachia still do not have access to broadband. When you are given 
statistics of how many do have access, I encourage you to ask how those 
numbers were derived. Most likely you will be told the data comes from 
Internet Service Providers (ISPs) reports to the FCC. ISPs may report 
they provide service to a zip code if they provide service to at least 
one customer with a particular zip code. In rural areas, zip code 
regions can be quite large. This is not a method by which to determine 
actual broadband access in the rural United States. To determine where 
broadband access in rural America actually exists, a true research 
study would need to be conducted.
    To expand broadband to all, we must not restrain broadband 
competition and expansion. There is much discussion currently about 
national franchising creating broadband competition. We need to keep in 
mind that allowing national franchising without equitable buildout will 
only provide competition in neighborhoods most likely to provide high 
profit margins to the providers. In addition, if we restrict the rights 
of municipalities to create their own broadband networks, we are 
reducing one more potential source of broadband access.
    We must remember that access to broadband is only half of the 
problem. We must also ensure our citizens know how to use a computer 
and the Internet. There are no focused sources of financial support for 
technology training. For a digitally literate workforce and citizenry, 
we need a continued source of funding for community technology 
programs. And we need to help local organizations create community 
technology programs in regions where there are currently none 
available.
                               __________
    Statement of David Scholl, Ph.D., President and CEO, Diagnostic 
                              Hybrid, Inc.
    I wish to thank you for allowing me to testify on this important 
issue that affects the vitality of Diagnostic Hybrids and that of other 
businesses trying to get a start or maintain their operations and 
growth in the Appalachian Region.
    So that I do not fail to summarize, I would like to begin at the 
end--operating as a business enterprise in a global marketplace means 
having ready access to:

    1) A telecommunications infrastructure capable of delivering you to 
the world, and the world to you, each and every second of the day, 24/
7; and
    2) The necessary human resources to assist business operators with 
implementing productivity applications such as Enterprise Resource 
Programming (ERP), bar coding technology, web-enabled business 
applications, EDI for processing business transactions, e-mail, and 
internet security solutions.

    Diagnostic Hybrids has been successful to date for multiple 
reasons. Underpinning the national recognition we received in 2004 and 
2005 by being named in consecutive years to Inc. 500 Magazine's list of 
the Fastest Growing Private Companies in America are our people. Our 
employees are dedicated, committed and talented, and we attract them 
from within a 50 mile radius of Athens, OH.
    We invest heavily in workforce development, both inside DHI and 
within the community, to help us meet our projected need for talent, 
particularly in the specialized manufacturing and laboratory technician 
area. This commitment is paying off and is a great investment for our 
Company.
    Meeting our needs at Diagnostic Hybrids for telecommunications 
infrastructure is a bit more daunting task. Certainly, much progress 
has been made in focused areas of our region to build the 
telecommunications infrastructure necessary to meet the two primary 
needs I mentioned above. For example, The Ohio University Innovation 
Center, a small business incubator affiliated with Ohio University, is 
equipped with broadband capability. Access to the telecommunications 
infrastructure provided by The Innovation Center is absolutely critical 
to our past and future growth.
    I am sure there are other good examples.
    Unfortunately, I can drive 10-15 minutes in any direction from our 
headquarters in Athens, OH where we employ nearly 170 of the best and 
brightest biotech employees in the world and likely be without (1) cell 
phone service for lengthy stretches, (2) wireless internet access, and 
(3) broadband capability.
    Not too surprisingly, the many areas of the Appalachian Region in 
which this major deficiency, or digital divide, exists are 
characterized by those that develop telecom infrastructure as rural and 
under-populated, and thus economically not feasible to establish proper 
infrastructure.
    Perhaps even more demoralizing, both personally and professionally, 
is to hear ``outsiders'' characterize those people that live within 
these areas (including me) as economically and intellectually 
impoverished because we are ``not connected'' ? at a minimum, we are 
viewed as out-of-step with today's global economy and perhaps more 
fundamentally, today's world!
    The impact of this situation sooner or later ends up as a non-
viable outcome for those without access. The impact is first felt with 
reduced educational aspirations on the part of our young people and 
ends with a lack of opportunity on the economic side ? forcing many to 
``move'' to somewhere that has the infrastructure and thus the 
opportunity.
    My recommendations for you to act upon would include providing 
incentives or grants to communities and/or businesses to acquire:

     Towers to increase the density within the region to enable 
DSL and wireless connectivity.
     Underground cable to provide for greater access to 
broadband.
     Consulting service talent to enable implementation of 
important productivity IT applications to help businesses run more 
efficiently and cost-effectively.

    In summary, telecommunications infrastructure has become a vital 
utility to the global educational and business community in a fashion 
similar to the value placed on water, sewer, and transportation 
infrastructure. Without immediate and aggressive attention paid to this 
regional need, residents of the very beautiful and scenic region known 
as the Appalachian Region are destined to fall behind even further.
    Thank you, and most sincerely.
                               __________
   Statement of Jeff Hughes, Director, Environmental Finance Center, 
  University of North Carolina at Chapel Hill, Institute of Government
    My name is Jeff Hughes and I am the Director of the Environmental 
Finance Center at the University of North Carolina. We are one of nine 
environmental finance centers across the country created to identify 
and address the finance challenges related to protecting and managing 
our nation's environmental resources.
    Our center currently works primarily on drinking water and 
wastewater infrastructure issues. We recently completed an applied 
research project in which we examined the current status of water 
infrastructure services, needs, and funding throughout Appalachia. Over 
a period of two years, we visited numerous communities; interviewed and 
surveyed hundreds of local, state, and federal officials; and analyzed 
needs, funding, environmental, and demographic data from throughout the 
region.
    I would like to briefly present what we uncovered, particularly in 
relationship to the type of water and wastewater support provided by 
the ARC.
                               background
    As you know, the way in which water and wastewater services are 
funded in the United States changed dramatically from the 1970s to the 
2000s. The country moved from a sizable federal wastewater grant 
program that accompanied the passage of the 1972 Clean Water Act to a 
more complex system in which a smaller amount of funding is delivered 
through grants and loans administered by a wide variety of Federal and 
State Agencies including the ARC.
    Around 2000, several national studies concluded that the level of 
spending on water and wastewater services in this new, more complex 
system is inadequate to meet the nation's needs. Some studies 
quantified the needs, other quantified the gap between the need and 
what was likely to be available to meet the need. These numbers were 
quite large and as they were intended to do, caught the attention of 
many policy makers, funding agencies, and the media. Looking at these 
state level and nationwide studies, it was difficult to disaggregate 
the situation in a region like the ARC that cuts across state 
boundaries.
    While we began by trying to look at the 410 county ARC region as a 
unit independent of the rest of the country, one of the first things 
that became obvious to us was that from a water quality standpoint, the 
boundaries of the water resources of the region can not be separated 
from the rest of the country. The familiar saying ``What goes on in --
------, stays in ----------!'' definitely can not be applied to water 
quality in the ARC. Water quality protection successes and failures 
flow downstream without regard to political boundaries. Federal policy 
makers should realize that Appalachia is home to the headwaters of 
almost all the important rivers of the eastern United States. Thus 
whatever happens to Appalachian waters has major consequences far 
beyond the 410 counties within the ARC region.
    Our work and findings revolved around a series of policy questions 
as follows:

What is the Current State of Water and Wastewater Services in 
        Appalachia?
     Coverage by community water systems--that is, systems that 
provide water to the public for human consumption and serve at least 
25-year-round residents--has expanded significantly in the last 15 
years in Appalachia (to reach 74 percent of the population) but still 
lags significantly behind national coverage (85 percent of the 
population). Wells remain the primary source in some subregions (more 
than 75 percent of households in portions of the Appalachian 
Highlands).
     More people in Appalachia (33 percent) are served by small 
and medium-sized systems than people in the nation (20 percent) are. In 
general, the smaller the system, the higher the costs.
     Community water systems in Appalachia rely much more 
heavily on surface-water sources than systems in the nation as a whole 
do?18 percent versus 11 percent. Systems that rely on surface water 
tend to have significantly higher operating and capital costs than 
systems that treat groundwater.
     Proportionately more people in Appalachia than in the 
nation as a whole rely on onsite wastewater disposal. In 1990, the last 
year in which national data were collected by the Census Bureau, about 
75 percent of U.S. households reported being served by public sewers, 
versus 52 percent of Appalachian households.
     In the scattered Appalachian places where careful surveys 
have been made, substantial numbers of people have failing onsite 
systems or no wastewater treatment systems at all. In many parts of the 
region, some individual systems are nothing more than ``straight 
piping'' (discharge of waste directly into a stream).
     Some of the highest-quality and most outstanding resource 
waters in the eastern United States are in Appalachia, but in many 
areas, surface water and groundwater are seriously impaired. For 
example, West Virginia has 878 impaired streams, covering approximately 
6,170 stream miles.
     Water and wastewater infrastructure and services in 
Appalachia are intrinsically linked to and influenced by the natural 
environment of the region. Most of the environmental factors in 
Appalachia lead to higher costs, especially in the Highlands.
What are the Critical Infrastructure Needs in the Region?
     Appalachia accounts for about $26 billion of the drinking 
water and clean water needs documented or projected in recent EPA 
surveys completed in 1999 and 2000. These survey numbers clearly 
represent a lower limit on the entire water and wastewater needs of the 
region, and even the EPA does not assume they are an accurate 
representation of true need. The surveys omit or underreport many needs 
either because of their definitions of what constitutes ``need,'' their 
methodologies, or their rate of nonparticipation.
     This estimate does not fully include many categories of 
needs that are disproportionately high in Appalachia, such as 
improvements to failing septic systems, extension of service to people 
with inadequate or no central water and wastewater treatment, watershed 
restoration for areas impaired by historic resource extraction and 
industrial activity, and better stormwater handling. Nor does the 
estimate include the funds necessary to operate and maintain new 
facilities or facilities that been neglected. Including these other 
needs likely raises the region's total capital requirements to $35?$40 
billion.
     Several states carry out needs surveys that are separate 
from the EPA surveys. Their definitions of ``need'' and their 
methodologies differ widely. The more comprehensive surveys that some 
states have carried out have uncovered needs not reported in the EPA 
surveys.
What Public Funding Options Are Currently Available to Meet Critical 
        Infrastructure Capital Needs?
     Relatively few communities in Appalachia, especially in 
economically distressed counties, have credit ratings for water and 
wastewater purposes from major rating agencies. This lack of credit 
worthiness limits their direct access to the private capital market.
     Federally supported and coordinated programs disbursed 
about $3.6 billion to Appalachian communities for water and wastewater 
projects between January 1, 2000, and December 30, 2003, and state 
programs disbursed about $1 billion. More than $1.5 billion was 
provided to communities as grants, and about $3.1 billion took the form 
of loans.
     The special programs established by individual states 
accounted for 22.8 percent of the public fund investments. Such 
programs have been important in some states and nonexistent in others. 
States in Appalachia employ vastly different funding strategies, which 
lead to major differences in the types of assistance and incentives 
that reach local communities.
     Capital funding comes from a wide variety of independent 
and autonomous sources, making planning and management of applications, 
and timing of grants, loans, and matches a significant challenge for 
communities.
     The number of public funding programs and the amount of 
public funding to upgrade existing decentralized wastewater systems in 
Appalachia or build new, decentralized ones are extremely limited.
     Funding sources for project planning and other up-front 
aspects of water and wastewater projects are relatively few. ARC 
remains one of the few sources of grants funds available for planning.
What Types of Gaps Exist, and What Is the Capacity to Bridge Them?
     At the system level, many small utilities have 
insufficient revenues to cover future cash-flow requirements, once debt 
repayments and increased operating costs linked to necessary planned 
facilities are taken into account. These utilities are characterized by 
small and often shrinking customer bases. In some cases, even if grants 
for capital were available, the utilities would be unable to meet the 
operating costs associated with their facilities.
     In comparison with the nation as a whole, households in 
many Appalachian counties are paying a higher proportion of their 
income for water and wastewater services, so high in several areas for 
large numbers of households that asking them to pay more for improved 
service is infeasible. This household affordability gap has become the 
critical challenge for many utilities.
     Management shortfalls in the region range widely. At one 
end of the spectrum, some small systems are unable to support trained 
and educated staff. At the other end, some large systems have yet to 
shift from a reaction-oriented paradigm characterized by high 
maintenance costs and continual capital stock crises, to a more 
aggressive approach that includes asset management systems, proactive 
investments, and continual staff training.
What Financial Management and Funding Strategies Are Likely to Have the 
        Biggest Impact on Service in the Region?
     In general, no single strategy or group of strategies 
identified in recent national studies of water and wastewater 
infrastructure will close the gap between services and needs in 
Appalachia as a whole. Instead, strategies must be designed and 
deployed on the basis of particular community characteristics.
     Regionalization?with its attendant consolidation of 
providers--offers widely varying possibilities for achieving economies 
of scale in Appalachia. It has helped some communities pool their 
resources and reduce costs enough to remain viable. However, some 
states have a history of regional entities and have institutional and 
regulatory frameworks favorable to regional systems. Other states have 
a go-it-alone culture, a historic model of a single provider prevalent 
in their system of government, and a relative lack of tested regional 
models. Promoting regionalization in these latter states requires 
addressing the structural obstacles. ARC funding has played a role in 
many complicated regionalization projects.
     Appalachia has shown that many communities can contribute 
to meeting their needs but many cannot generate adequate revenue to 
meet future needs with price increases alone. The ability to implement 
``full-cost pricing''--that is, setting rates at a level that generates 
sufficient revenues to cover all the capital and operating costs of 
providing service--offers only limited promise for bridging the capital 
gap in many parts of Appalachia, particularly in small and low- or 
negative-growth communities. Without external subsidization, many of 
these systems may collapse completely or slowly decline because of lack 
of system maintenance and investment.
     Some funding programs encourage or require communities to 
follow the principles of full-cost pricing to the extent possible 
before receiving funding. Such inducements or requirements often result 
in greater community contributions, showing that affordability 
constraints were less than previously stated.
     Privatization offers some communities a way to attain the 
economies of scale that regionalization brings, as well as access to 
greater technical and managerial capacity than is likely in a go-it-
alone approach. However, private systems often have few financial 
incentives to reach the most remote and difficult-to-serve communities 
in Appalachia.
     Improved management strategies and expanded capital 
investments often carry a cost in terms of higher customer rates. ``You 
get what you pay for'' is a dangerous public health truism.
What Steps Can Funding Agencies and Technical Assistance Providers Take 
        to Improve and Expand Service in the Region?
     For many communities with marginal fiscal capacity, 
careful manipulation of funding terms may offer the best hope of 
stretching limited public dollars. In some situations, long-term loans 
(for thirty or forty years) can make a capital project feasible for a 
community.
     The degree of cooperation and coordination among different 
funding programs varies significantly across Appalachia. Some states 
have coordination strategies and institutions that streamline local 
funding requests and assist in matching and optimizing different 
funding sources. In other areas of the region, the go-it-alone approach 
requires individual communities to navigate the complex funding options 
and seek the best deal they can get.
     External grant funding remains an essential component of 
an overall funding strategy. Without a significant amount of such 
funding, a certain number of communities would be unable to generate 
sufficient revenue to protect the public health and their surface-water 
quality. Some states in the region have integrated funding programs and 
strategies that rely on small amounts of grants to leverage loan funds, 
enabling communities to access the capital they need while covering the 
majority of the costs themselves.
     Some individual funding programs and some groups of 
funding programs carefully design funding packages that include a mix 
of grant and loan funding. In states where such coordination is weak 
and grants are not strategically linked to loans, communities 
consistently seek out grant funding even if they clearly have the 
ability to take on loan financing.
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      Statement of Steve Grossman, Executive Director, Ohio Water 
                         Development Authority
    My name is Steve Grossman, and I am the Executive Director of the 
Ohio Water Development Authority (OWDA). The Authority has existed for 
38 years and is proud that Senator Voinovich had the insight to help 
create the Authority, and that the USEPA used the work of the Authority 
as its model when it created the State Revolving Fund Program in the 
mid 1980's.
    Since its inception, the Authority has made over $7.3 billion in 
loans to Ohio communities. From 2000 to 2004, loan programs that are 
financially managed by the Authority accounted for approximately 47 
percent of all funding for water and wastewater construction in Ohio.
    In cooperation with the leadership from several State Agencies, 
OWDA helped create the Small Communities Environmental Infrastructure 
Group (SCEIG), an association of Federal and State Agencies, local 
Governments and groups, service organizations, and educational 
institutions, designed to help small communities in meeting their 
environmental infrastructure needs.
    One of the key committees of SCEIG is the Appalachian Environmental 
Infrastructure Strategy Workgroup, whose mission is to strengthen an 
effective delivery of technical and financial assistance from multiple 
sources, to areas in Appalachia most in need of wastewater and water 
infrastructure improvements.
    It is with this background and my strong interest in knowing and 
understanding all the funding sources for water and wastewater in the 
state that I come before you today.
    Referring to Attachment 1, during the 2000 to 2004 period, 
approximately $4.15 billion was invested by Ohio communities in water 
and wastewater projects. All the sources for this money are shown in 
Appendix 1. Of this amount, 12 percent came from grants, 45 percent 
came from loans with an interest rate that has been subsidized by a 
governmental body, and 43 percent came from loans at a market rate of 
interest. As noted in Attachment 1, for the preceding 10-year period, 
the percentages were 14 percent, 37 percent and 49 percent 
respectively.
    While the percentages have gone down, actual funding has increased. 
Attachment 2 shows an annual average for the five year period of 2000 
to 2004 to be $829.5 million, compared to the ten year average (1990-
1999) of $505.7 million. This is an increase of 64 percent. While there 
was an increase in funding of 37 percent in grants and 43 percent in 
loans at a market rate of interest, the greatest increase of 103 
percent came from loans with an interest rate that has been subsidized 
by a governmental body. Further analysis reveals that the SRF programs, 
both for water and wastewater, primarily accounted for this increase; 
thus enabling the state to keep up with the 64 percent increase in 
demand.
    Having set the overall state picture, one needs to address what has 
happened in the Appalachian region of Ohio. As Attachment 3 
demonstrates, the breakdown by funding types is significantly different 
in Appalachia as compared to the rest of the sate. Where the rest of 
the state received 9 percent of its funding from grants, Appalachia 
received 32 percent. As the rest of the state received 46 percent of 
its funding from loans at a market rate of interest, Appalachia 
received 15 percent. The difference for loans with an interest rate 
that has been subsidized by a governmental body is not as dramatic; the 
rest of the State received 45 percent compared to 53 percent for 
Appalachia.
    Appalachia also is significantly different from the rest of the 
state in terms of program participation in funding water and wastewater 
projects. Historically, bonds issued by a local Government and the SRF 
Programs account for more than 75 percent of project funding outside of 
Appalachia. Within Appalachia (Attachment 5) they account for only 34 
percent of funding.
    Ohio, as compared to many other states, has a relatively large 
variety of programs to assist communities in funding their water or 
wastewater projects. With this variety come complexities and an 
increased need for program coordination. This is clearly shown in 
Attachment 4 and 5, where the role of each program is shown. There is 
no one dominant program. Each community, with the assistance of its 
technical assistance provider and/or consulting engineer, sorts through 
a variety of programs, choosing the group of programs that the 
leadership of the community feels is best suited for its needs.
    While 5 percent of total funding (Attachment 5) comes from the 
Appalachia Regional Commission, Attachment 6 shows that this is 15 
percent of all grant money, a critical component for funding projects 
in Appalachia.
    As one looks toward the future (and by future; assume a period of 
no more than 4 years), it is clear that there will be no let up on the 
demand for project funding in Appalachia. Based upon the Ohio EPA's 
intended use plans for both water and wastewater, recent applications 
to the Ohio Public Works Commission, information entered into the 
Appalachia Bulletin Board (an initiative of the Appalachian 
Environmental Infrastructure Strategy Workgroup) and recent quarterly 
project planning reports submitted by communities to OWDA, there is 
already a demand for approximately $340 million. I believe that this is 
the minimum demand for funding that will be requested during the next 
four years. As noted in Attachment 2, the total demand has grown in the 
state and it will continue to grow.
    If the number of $340 million proves to be accurate for a period of 
four years at $85 million/year; it would exceed the annual average of 
$80 million (Attachment 3) for the period of 2000 to 2004. The 
estimates are not precise and, as I have discovered in my 17 years with 
the Authority; the seriousness about any one project comes and goes. 
But one thing is certain; decreases in any grant funding will provide 
an increasing financial burden on any community.
    One only has to look at the increasing water and sewer rates as 
compiled by the Ohio Environmental Protection Agency (Attachments 7 and 
8) to see that user fees for both water and wastewater are increasing 
at a faster pace than inflation; and this increase, given today's 
economic conditions and environmental demands, is only going to 
continue to increase at this higher pace.
    If one was to look at all sources of grants in the state, one would 
conclude that, at best, it will remain the same during the next four 
years. While grant funds from the Ohio Public Works Commission will 
increase by approximately 20 percent, this will not occur within the 
next 6 years. There is continuing pressure on the US Department of 
Agriculture's Rural Development Program to reduce the percentage of 
grants it provides to communities (a decrease has been occurring in 
recent years), and the Community Development Block Grant Program is 
under continuous pressure to having its funding reduced. Besides the US 
Department of Commerce's Economic Development Program (which plays an 
important but minimum role in the Appalachian region of the State), the 
only other program source of grant money is from the Appalachian 
Commission.
    Decreasing these funds would have a significant impact in 
Appalachia. I might add that a major unknown in all of this is federal 
appropriations (See Attachment 6) coming from Ohio's congressional 
delegation to Ohio communities, through State and Territorial 
Assistance grants and through the Army Corps of Engineer's 594 Program. 
While I recognize this is a Congressional prerogative, I believe that 
it is not going to increase.
    I think that the increase in actual demand, as demonstrated in 
Attachment 2, is going to continue. It will not be as dramatic as all 
the national studies proclaim it will be, but it will increase. Where 
will the funding sources to meet the demand come from? There only are 
three possible sources.

     Debt Issued by the Community, which (See Attachment 5) 
infrequently occurs in Appalachia;
     OWDA's Market Rate of Interest Loan Program and its 
Community Assistance Program; or
     The SRF Programs.

    Regardless of which of the three financial programs is selected in 
the future, users in the communities will be paying more. Obtaining a 
five year reauthorization of the ARC will be an alleviating financial 
factor in Appalachia.
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 Statement of Ken Reed, Director, Vinton County Community and Economic 
                 Development, Vinton County Courthouse
    My name is Ken Reed and I serve as the Development Director for the 
Vinton County Board of Commissioners. I would like to thank the 
committee for giving me this opportunity to share with you the impact 
Appalachian Regional Commission funding has made in my community.
    Vinton County is one of the most economically distressed, most 
rural counties in Ohio. For the last 16 years I have been a community 
and economic development practitioner working to improve the quality of 
life there. Daily, I face the challenge of trying to address many basic 
human needs with limited resources.
    Over the years, ARC funding had been an invaluable resource in 
implementing new projects in my community. Without ARC funds Vinton 
County would not have 911 service, our only dental clinic would not 
have equipment, and many residents would not have a reliable, 
affordable source of potable water.
    Vinton County has been successful in using ARC funds to leverage 
additional State, Federal, and private funds. Without ARC funds Vinton 
County would not be able to access these additional financial 
resources. In a community such as mine, with very limited local 
resources, ARC has been an invaluable source of matching funds for many 
projected that would not have happened had it not been for ARC funds.
    Having administered a wide variety of State and Federally funded 
programs over the years, I can testify to the efficacy of ARC funding. 
Working in tandem with the State of Ohio, through the Governor's Office 
of Appalachia, and the local development district, we at the local 
level are able to develop potential ARC projects and prioritize them. 
This local input ensures that local needs are identified and addressed 
by those who are most familiar with the area.
    ARC funding has had a quantifiable impact on the quality of life in 
Vinton County. I implore this Committee to reauthorize the ARC so that 
we can continue to improve conditions in my community. The Bible says 
``a man reaps what he sows''. How true that is of the ARC. The local 
projects that have been seeded with ARC finds have resulted in a 
harvest of improved living conditions for the residents of Vinton 
County, If you continue to furnish us with the seeds, we at the local 
level will continue to plant, water, and cultivate, and we as a society 
will all reap the benefits.
                               __________
  Statement of Jeff Spencer, Executive Director, Ohio Valley Regional 
                         Development Commission
    I appreciate the opportunity to express some of my views regarding 
the impact of the current program of the Appalachian Regional 
Commission (ARC) and regarding pending ARC reauthorization legislation.
    First of all, I am Director of the Ohio Valley Regional Development 
Commission (OVRDC) which is the largest of Ohio's 3 Appalachian Local 
Development Districts (LDD'S) with 11 Appalachian counties and 1 non-
Appalachian County. Secondly, I am currently the First Vice President 
of the Development District Association of Appalachia (DDAA) which 
represents 72 Development Districts throughout the 13-State region.
    The Appalachian program has had an enormous positive economic and 
community development impact on southern Ohio during its existence. One 
example that indicates this significant impact on just one distressed 
county, Pike County, is that ARC grant assistance has enabled the 
construction over 55 miles of rural water lines to thousands of 
residents who did not previously have a safe, reliable source of water. 
ARC has provided hundreds of miles of key waterlines to un-served rural 
residents throughout our region. In addition, all 11 of our Appalachian 
counties have developed at least 1 key industrial park with the help of 
infrastructure grant assistance from ARC. These industrial parks have 
created an average of over 200 jobs per park in just the last 2-3 
years, which totals approximately 2,500 jobs.
    Our southern Ohio region, it is clear would not have made the 
economic advances that it has over the last 5 years without the key 
infrastructure grants provided by ARC. ARC grants have helped provided 
not only improvements in the traditional water and wastewater 
infrastructure but other key community infrastructure as well. For 
instance, ARC grant assistance has been key in developing several new 
comprehensive day care and child development centers in our region. 
Since fiscal year 2001, ARC grants have assisted in the development of 
4 new child development centers. These centers have been key to 
providing quality day care for working parents as well as key preschool 
educational development skills for the regions children.
    Another important type of critical need addressed with ARC grants 
is the need to update college and vocational school curriculum and 
equipment. In order for our southern Ohio students and residents to 
compete with comparable job skills with the rest of the state and 
nation it is imperative that our schools have the resources to update 
their equipment and curriculum to address the higher skill job 
requirements. During the last five (5) years an average of 1 education 
project per year has received ARC grant assistance to provide critical 
new equipment needed to keep courses, curriculum, and students up to 
date on their training and jobs skills.
    One of the important types of grant assistance which the ARC 
program provides is the Annual Administrative grants to the 72 Local 
Development Districts, who provide the regional development leadership, 
planning and technical assistance to enable their local communities to 
receive grants and develop resources and infrastructure. Each LDD's is 
actively involved and provides staff assistance to local communities to 
plan and address their key community and economic development needs. 
Many small communities and villages simply do not have the financial 
and staff resources to address their key needs without the assistance 
of the staff of their LDD's.
    These administrative grants to LDD's allow them to support and use 
their staff to pursue other federal, state and foundations funding that 
will help address important needs of each region. LDD staff not only 
help local communities plan and secure grants, but for many small 
communities they will also administer the grant and meet all reporting 
requirements. A recent report developed by the DDAA cites a key 
statistic regarding federal, local and state grants administered by 
LDD's: ``Between 1990 and 2005, our LDD's administered almost 7,700 
grants and projects totaling more than $5.5 billion in pass through and 
programmatic funds.'' These LDD administrative grants provide the 
critical support to LDD's so that they can remain regional leaders and 
assist their communities with development needs. With increasing LDD 
professional staff salaries and health care costs it is important that 
these LDD Administrative grants be increased in the next few years.
    Although the region's infrastructure and economic develop prospects 
have improved over the last 5 years, continued improvements are needed 
in southern Ohio in order for us to reach parity with the rest of the 
state and nation. Unemployment still remains higher in most our 
counties, poverty rates remain higher, average salaries in almost all 
sectors remain significantly lower and average educational attainment 
remains lower. All of these key statistics indicate that much still 
remains to be addressed in order to bring the region to a par with the 
nation. Therefore, ARC reauthorization legislation is critically needed 
in order for us to continue to address the needs of the region.
    Some of our southern Ohio counties have improved in economic 
conditions just enough during the last 4-5 years to be removed from the 
ARC designated list of distressed counties. The OVRDC region has seen 
the number of distressed counties reduced from 7 to 2 counties during 
this period. However, we need to look more closely at the statistics in 
order to more comprehensively assess the economic situation of these 
counties. Many of these counties saw improvements in poverty rates or 
per capita income of just a few percent. The changes were just enough, 
however, to move them from the ARC distressed county designation. These 
counties economically, however, remain closer to their sister 
distressed counties than the other more prosperous transitional 
counties.
    It has creating a hardship the last few years for these 5 counties 
that left the distressed county category and yet still have serious 
economic problems. The current ARC legislation requires a 50 percent 
match for any potential ARC projects. ARC has classified 4 of OVRDC 
counties as at-risk for fiscal year 2006 (Adams, Jackson, Lawrence, and 
Scioto) and Ohio Appalachian has 6 counties at-risk (Morgan and Perry 
also). In the 13 state Appalachian region there are 81 counties 
classified as at-risk.
    Under current ARC legislation, the at-risk counties still have to 
provide 50 percent local match. I am urging you to address the need of 
these at-risk counties in the ARC reauthorization legislation by 
enabling them to receive 70 percent grants with a 30 percent local 
match. This will make it significantly easier for our at-risk counties 
to develop ARC grants to address their critical community and 
infrastructure needs.
    Another need I would like to see addressed in the ARC 
reauthorization bill is to designate entrepreneurship as a special 
regional initiative with funds set aside for entrepreneurship 
facilitation projects. Since all national and regional economic 
development studies have consistently show that 80 percent of new job 
development comes from existing employers and new start-up businesses 
it is critical that ARC funds are available for entrepreneurship 
assistance. I realize that ARC project guidelines do currently allow 
for entrepreneurship assistance to be eligible projects. However, the 
reality is that most entrepreneurship projects do not compete 
successfully with the larger industrial park infrastructure projects at 
the regional or state level. I think it is important that ARC put more 
emphasis on entrepreneurship assistance especially in smaller 
communities. A special regional initiative with a set aside of funds 
would help emphasize entrepreneurship in the region.
    In closing, I want to emphasize that the ARC program has been one 
of the most effective and successful development assistance programs in 
the country. It has certainly had a significant positive impact on our 
southern Ohio region. ARC assistance, however is still needed and I 
support legislation to reauthorize ARC for 5 years. Thank you for your 
time and consideration.
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