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¥ ECONOMIC RECOVERY, GROWTH AND DEFENSE CONVERSION ACTIVITIES IN DADE COUNH y I ^Y 4. B 22/1: 103-108 ^Econonic Recoveryi Grouth and Defen. . . FIELD HEARING BEFORE THE SUBCOMMITTEE ON ECONOMIC GROWTH AND CREDIT FORMATION OF THE COMMITTEE ON BANKING, FINANCE AND URBAN AFFAIRS HOUSE OF REPRESENTATIVES ONE HUNDRED THIRD CONGRESS FIRST SESSION DECEMBER 17, 1993 Printed for the use of the Committee on Banking, Finance and Urban Affairs Serial No. 103-108 U.S. GOVERNMENT PRINTING OFFICE 74-989CC WASHINGTON : 1994 ForsalebytheU.S.GovernmentPrintingOffice SuperintendentofDocuments,CongressionalSalesOffice,Washington,DC 20402 ISBN 0-16-044428-4 74-9890-94-1 ' ECONOMIC RECOVERY, GROWTH AND DEFENSE CONVERSION ACTIVITIES IN DADE COUNTY V^ Y 4, B 22/1: 103-108 I Econonic Recovery^ Crouth and Defen. . . FIELD HEARING BEFORE THE SUBCOMMITTEE ON ECONOMIC GROWTH AND CREDIT FORMATION OF THE COMMITTEE ON BANKING, FINANCE AND URBAN AFFAIRS HOUSE OF REPRESENTATIVES ONE HUNDRED THIRD CONGRESS FIRST SESSION DECEMBER 17, 1993 Printed for the use of the Committee on Banking, Finance and Urban Affairs Serial No. 103-108 U.S. GOVERNMENT PRINTING OFFICE 74-989CC WASHINGTON : 1994 ForsalebytheU.S.GovernmentPrintingOffice SuperintendentofDocuments,CongressionalSalesOffice,Washington,DC 20402 ISBN 0-16-044428-4 74-9890-94-1 HOUSE COMMITTEE ON BANKING, FINANCE AND URBAN AFFAIRS HENRY B. GONZALEZ, Texas, Chairman STEPHEN L. NEAL, North Carolina JAMES A. LEACH, Iowa JOHN J. LaFALCE, New York BILL MCCOLLUM, Florida BRUCE F. VENTO, MinnesoU MARGE ROUKEMA, New Jereey CHARLES E. SCHUMER. New York DOUG BEREUTER, Nebraska BARNEY FRANK. Massachusetts THOMAS J. RIDGE, Pennsylvania PAUL E. KANJORSKI, Pennsylvania TOBY ROTH. Wisconsin JOSEPH P. KENNEDY II, MassachusetU ALFRED A. (AL) McCANDLESS, California FLOYD H. FLAKE, New York RICHARD H. BAKER, Louisiana KWEISI MFUME, Maryland JIM NUSSLE, Iowa MAXINE WATERS, California CRAIG THOMAS, Wyoming LARRY LaROCCO, Idaho SAM JOHNSON, Texas BILL ORTON, Utah DEBORAH PRYCE, Ohio JIM BACCHUS, Florida JOHN LINDER, Georgia HERBERT C. KLEIN, New Jersey JOE KNOLLENBERG, Michigan CAROLYN B. MALONEY, New York RICK LAZIO, New York PETER DEUTSCH, Florida ROD GRAMS, Minnesota LUIS V. GUTIERREZ, Hlinois SPENCER BACHUS, Alabama BOBBY L. RUSH, Illinois MIKE HUFFINGTON, California LUCILLE ROYBAL-ALLARD, California MICHAEL CASTLE, Delaware THOMAS M. BARRETT, Wisconsin PETER KING, New York ELIZABETH FURSE, Oregon NYDIA M. VELAZQUEZ, New York BERNARD SANDERS. Vermont ALBERT R. WYNN, Maryland CLEO FIELDS, Louisiana MELVIN WATT, North Carolina MAURICE HINCHEY, New York CALVIN M. DOOLEY, California RON KLINK, Pennsylvania ERIC FINGERHUT, Ohio Subcommittee on Economic Growth and Credit Formation PAUL E. KANJORSKI, Pennsylvania, Chairman STEPHEN L. NEAL, North Carolina THOMAS J. RIDGE, Pennsylvania JOHN J. LaFALCE, New York BILL McCOLLUM, Florida BILL ORTON, Utah TOBY ROTH, Wisconsin HERBERT C. KLEIN, New Jersey JIM NUSSLE, Iowa NYDIA M. VELAZQUEZ, New York MARGE ROUKEMA, New Jersey CALVIN M. DOOLEY, California PETER KING, New York RON KLINK, Pennsylvania ERIC FINGERHUT, Ohio (II) CONTENTS Page Hearingheldon: December 17, 1993 1 Appendix: December 17, 1993 69 WITNESSES Friday, December 17, 1993 Baker, Dorothy R., President and CEO, Miami-Dade County Chamber of Commerce 51 Curtin, Deborah, Director, Project Chart, Dade County; accompanied by Greg- ory Owens, Director, Department of Business and Economic Development, Dade County 20 DeMilly, J.W., III,Mayor, cityofHomestead, FL 29 Epling, Robert, President, Community Bank ofHomestead 55 Hawluns, Hon. Wilbur F., Acting Assistant Secretary for Economic Develop- ment, Economic Development Administration, U.S. Department of Com- merce 7 Knox, George, Esq., Kubicki-Draper Law Firm 58 Muxo, Alex, CityManager, cityofHomestead, FL 33 Phillips, Dr. Rov, President, Tools for Change; accompanied by Elaine Black, President and CEO, Miami-Dade County ChamberofCommerce 47 Pitts, Hon. Otis, Deputy Assistant Secretary for Hurricane Recovery, Depart- ment ofHousing andUrban Development 11 Sandler, Gilbert Lee, Esq., Sandler, Travis &. Rosenberg 43 Scott, Gil, State Recovery Coordinating Office, Florida Department of Commerce 19 Sovia, Kim, President and CEO, Greater Homestead/Florida City Chamber ofCommerce 53 Walker, Nic, Vice President and CEO, Beacon Council 27 Wallace, Otis, Mayor, city ofFlorida, FL 32 Weaver, DavidR., President and CEO, Intercap Investments 23 APPENDIX Prepared statements: Kanjorski, Hon. Paul E 70 Deutsch, Hon. Peter 72 Diaz-Balart, Hon. Lincoln 83 Meek, Hon. CarrieP 79 Baker, DorothyR 215 Curtin, Deborah 101 DeMilly, J.W 183 Hawkins, Hon. WilburF 85 Knox, George 224 Phillips, Dr. Roy 210 Pitts, Otis 91 Sandler, Gilbert Lee 190 Scott, Gil 186 Sovia, Kim 219 Walker, Nic 177 Weaver, DavidR 171 (III) IV Page Additional Material SuBMnrED for the Record Broils, Kevin R., President, Princetoa/Naranja Community Council, re Eco- nomicRedevelopmentofSouth Dade County, with enclosures 272 Deutsch, Hon. Peter, letters from C. Samuel Kissinger, Manager, Village ofKey Biscayne, and Dennis Stewart, President, Florida Community Hous- ingAssistance Corp 77 Curtin, Deborah: Hurricane Andrew Economic Development Administration, U.S. Dept. ofCommerce, Summary ofProject Funding and Status Report for Eco- nomicDevelopment, November 24, 1993 112 Economic Recovery Strategies, Phase II: Long Term Strategies, Melro- Dade County, FL, October 1993 124 Knox, George: "The New Old-Fashioned Banking," by Ronald Grzywinski, HarvardBusiness Review 229 Rios, Bill andJohn Little, city ofMiami, Executive Summary 244 Sandler, Gilbert Lee: Supplement to prepared statement, dated January 25, 1994 203 ECONOMIC RECOVERY, GROWTH, AND DEFENSE CONVERSION ACTIVITIES IN DADE COUNTY FRroAY, DECEMBER 17, 1993 House of Representatives, Subcommittee on Economic Growth AND Credit Formation, Committee on Banking, Finance and Urban Affairs, Washington, DC. The subcommittee met, pursuant to notice, at 9:17 a.m., in the city council chambers, 790 North Homestead Boulevard, Home- stead, FL, Hon. Paul Kanjorski [chairman of the subcommittee] presiding. Present: Chairman Kanjorski. Also present: Representatives Deutsch and Meek. Chairman Kanjorski. The House Subcommittee on Economic Growth and Credit Formation holds the sixth in its series of field hearings on credit availability and economic growth. I would like to thank my colleagues, Congressman Peter Deutsch and Congress- woman Carrie Meelc, for inviting the subcommittee to Dade County to hold this hearing, and for taking the time out from their busy schedules to join us today. I also want to thank the people of Dade County for their warm hospitality. As most ofyou know, the 1992 election brought major change to Washington. In addition to changing control of the executive branch, the voters sent an unprecedented number of new Members to the U.S. Congress, 110 to be exact. Peter Deutsch and Carrie Meek are two excellent examples of the change that has taken place in the Nation's Capitol. As a Member first elected in 1968, I am here to tell you that that change has reinvigorated the House ofRepresentatives. These new Members and their colleagues come to Congress with a fresh perspective, a mandate for change, and an unwillingness to put up with business as usual. I discovered very early on that most also share my desire to promote economic growth and job creation. For years, we have heard that American workers must retrain themselves to be more productive and competitive in the international marketplace. This is true. But few people have fully grasped the concept that retraining is not enough. There must be jobs available for workers when they are trained. This is a reality which my colleagues from Florida and I understand, and that is why we come to Dade County today, to hear directly from men and women on the frontline of how the Federal (1) Grovemment can help areas like Dade County create new jobs and new businesses. The issue ofjob creation is particularly important in Dade Coun- ty because in the last 2 years it has been hit by a triple blow of economic problems. In addition to its longstanding economic problems, southern Dade County was devastated by the natural disaster from Hurricane Andrew and a manmade disaster when the closing ofHomestead Air Force Base was announced. This unique confluence of economic problems allows us to use Dade County as a case study to examine several areas under the subcommittee's jurisdiction: Disaster assistance, particularly the Disaster Assistance Programs administered by the Economic Devel- opment Administration; defense conversion; and credit availability and economic development assistance for business andjob creation. We are honored to have with us today two major players from. President Clinton's economic development team: The Honorable Wilbur Hawkins, Acting Assistant Secretary for Economic Develop- ment from the U.S. Department of Commerce, who is in charge of several important Disaster Assistance, Defense Conversion, and Economic Development Programs; and the Honorable Otis Pitts, Deputy Assistant Secretary for Hurricane Recovery from the De- partment of Housing and Urban Development, who has been overseeing the Federal recovery efforts in Dade County in the wake ofHurricane Andrew. Our other expert witnesses today cover a broad spectrum oflocal elected and appointed officials, business leaders, and community activists. They will tell us which Federal programs have worked, which ones have not, how existing programs can be improved and how we can create new programs to more effectively meet the needs ofDade County. The advice we receive today will help us advise our colleagues in the Congress on the steps we can take to expand credit availability for economic growth and job creation. Without objection, our witnesses' prepared statements will be submitted in full for the record of the hearing. After Congressman Deutsch and Congresswoman Meek make their opening statements, I will ask each participant to identify themselves and then summarize in 5 minutes or less, the main points of their written statements so we may have some question and answer dialog which will help the subcommittee extract out what we may not understand as a problem, or so that we can gain more insight from your written statements as they will appear in the record. So I thank you very much for being here today, I look forward to a nice warm temperature outside and nice cool atmosphere in the hearing room and with no further ado, I would like to have my friend and colleague on the Banking Committee, Peter Deutsch of Florida, have his opening statement. Mr. Deutsch. Thank you very much, Mr. Chairman, and I really appreciate very much you bringing the subcommittee down to south Florida and the opportunity to hear from witnesses today. I also want to thank my south Florida colleague in particular, Con- gresswoman Carrie Meek, who is with me and serves on the Appro- priations Committee in Congress, and I do not know if their representatives are here, but I know that Lincoln Diaz-Balart is plan- ning on coming as well. Next year, the House Banking Committee, in cooperation with the House Committee on Public Works and Transportation, begins work on legislation to reauthorize, re-fund, and ifnecessary, reform the Economic DevelopmentAdministration. I can think of no better place to begin learning about the issues presented by this legislation than Homestead, Florida.—The experience of Homestead in the wake of Hurr—icane Andrew the largest natural disaster in our Nation's history gives us an excellent opportunity to examine three critical issues. First, how does an economy recover after a natural disaster has literally destroyed the infrastructure that ties its disparate parts together? Second, how can we convert a cold war defense base to perform useful services in the post cold war era? And finally, what long-term and long-range strategies do we need to promote economic growth in Homestead, Dade County, and other areas in need ofeconomic revitalization? Immediately after Hurricane Andrew struck in August 1992, Congress and President Bush authorized EDA to spend $50 million on disaster relief projects in Florida. In addition to Mr. Hawkins and Mr. Pitts, the panel will hear testimony from 10 witnesses, many of whom will explain to us their hands-on experience with the expenditure of these funds. I want to tell people a few things about several ofthe witnesses from my district. The first witness on the panel will be the mayor of the city of Homestead, Tad DeMilly; and the city manager, Alex Muxo. The city of Homestead, which I, Congresswoman Meek, and Congress- woman Ros-Lehtinen represent, was literally in the eye of Hurri- cane Andrew's landfall on August 24, 1992. As a result, much of Homestead's physical and social infrastructure was destroyed. Mayor DeMilly and City Manager Muxo will give us some construc- tive criticisms regarding EDA's efforts in helping the citizens of Homestead rebuild the decades worth of infrastructure that was wiped out by Hurricane Andrew. The first witness on panel 2 will be attorney Gilbert Lee Sandler, who represents the Miami Free Trade Zone, one of the few foreign trade zones anywhere in the United States which is profitable. Mr. Sandler will echo in detail some of the concerns I have expressed in public statements and directly to the Economic Development Ad- EDA ministration that is unwisely spending scarce hurricane relief dollars outside the directly impacted areas of Homestead, Florida City, and other areas south of Kendall Drive. In at least two in- EDA stances, has spent or is considering spending millions of dollars in downtown Miami, whose experience during Hurricane An—- drew can best be described as an unusually heavy rain shower intense perhaps, but hardly devastating. EDA has already approved $2.5 million for refurbishing the Omni International Mall in downtown Miami and is considering spending $5.5 million on a grant to the Wynwood Free Trade Zone which would enable the latter to compete with the Miami Free Trade Zone, which is privately funded, financed, profitable, and has a great deal ofunused capacity. It makes no sense to spend 10 per- cent of the hurricane relief project on a single project which is not even near the area impacted by the hurricane, especially where the hurricane-impacted area of Homestead, Florida City, and Dade County south of Kendall Drive remain littered with the shells of destroyed or otherwise unusable buildings, shopping centers, and storefronts. Some of those devastated buildings were either owned or leased by businesses represented by another witness on the second panel. Ms. Kim Sovia is the president and chief executive officer of the Greater Homestead/Florida City Chamber of Commerce, many of whose members suffered devastating losses during Hurricane An- drew. To give you an idea of the devastation Hurricane Andrew wrought, the chamber lost three-quarters ofits members as well as its headquarters in the old town hall in downtown Homestead. The chamber was forced to move its headquarters into a trailer, where it has operated for 16 months while it awaits reconstruction of its old facility. The chamber has regained much ofits membership and has been working actively with the city of Homestead, Dade Coun- ty, the Beacon Council, and We Will Rebuild to get Homestead back on its feet. Immediately after Ms. Sovia, we will hear from Bob Epling, who is president of the Community Bank of Homestead. In addition to his role at Community Bank of making much needed credit available to numerous individuals and businesses who suffered losses in the wake of the hurricane, Mr. Epling is cochairman, along with Alvah Chapman, a senior executive at Knight-Ridder Newspapers, of We Will Rebuild, which was established by another one of the panel 1 witnesses, David Weaver, to coordinate the distribution of public and private hurricane relieffunds. I ask my colleagues to pay close attention to the experiences these and other witnesses will relate to us, so that the reauthorized Economic Development Administration will be a reinvented Eco- nomic Development Administration that can more effectively promote economic growth and revitalization. Thank you, Mr. Chairman. Chairman Kanjorski. Thank you, Mr. Deutsch. Ms. Meek. Ms. Meek. Thank you very much, Mr. Chairman. Let me join my colleagues in Dade County, particularly my colleague. Representa- tive Deutsch, in welcoming you to our area. When I testified before your subcommittee early on, right after the hurricane, you said to me, "I will come to south Florida and I will conduct a hearing to understand on site what is going on." And we thank you, Mr. Chairman, for doing that, and bringing your subcommittee here. The title and jurisdiction of your subcommittee, Economic Growth and Credit Formation, are exactly what are of the greatest interest to our community here. This community is aggressively pushing forward to rebuild and enlarge our business and commer- cial base and create new job opportunities for our citizens. And the availability, Mr. Chairman, of working capital and investment is very crucial in this effort. As you will hear today, Dade County has had to bear up under unbelievable burdens over a very brief period of time. Our citizens have had to deal with the cost and logistics for the housing, feed- ing, health care, education, and employment of tens of thousands