Guidance on the Board Membership
Requirements in the New Rural EZ/EC Regulations
Empowerment Zones and Enterprise Communities (EZ/EC) program regulations,
published in the Federal Register March 25, 2002, contain language clarifying the post-
designation procedures that rural EZ/EC, Champion Communities and Rural Economic
Area Partnerships (herein all referred to as the ―designated community‖ or an ―EZ/EC
community‖) must follow to maintain their designation. It is the responsibility of the USDA Rural Development State Office to ensure compliance with RD program
regulations, as reflected in the state director performance element (program management).
Because board membership requirements were not specified in the regulations prior to the
March 2002 publication, some EZ/EC community boards are currently not in compliance.
As part of the USDA Rural Development State Office oversight responsibilities, board
composition must be reviewed and corrective action taken for instances of
noncompliance with the new regulations. This document provides guidance for
implementing the regulation changes.
Background: On March 25, 2002, the final rule for the Rural EZ/EC program (7 CFR Part 25) was published. Included in the new EZ/EC regulations under Subpart E – Post
Designation Requirements, ?25.404 Validation of designation, is a clarification of post-
designation procedures that rural EZ/ECs must follow to maintain their designation.
The most significant change to the EZ/EC regulations cited in the following amendment
is the requirement that at least 55 percent of the board members to be elected. Additional
guidance is being issued to assist communities in determining how to implement these
? 25.404 (b)(3) Board membership. The membership of the board must be representative of the
entire socio-economic spectrum in the designated community including business, social service
agencies, health and education entities, low income and minority residents. Board membership
may be determined by either broad-based election or by appointment to meet this diversity
requirement; however, not more than 45 percent of board members may be selected by
appointment. Elections of community residents to the board may be done by any locally
acceptable process; however, at least one board member from each of the designated community's
census tracts must be elected and representative of the low income residents in their census tract.
The Deputy Administrator, Office of Community Development, may waive the 45 percent
maximum appointment limit only for Tribal Governmental Organizations where the Deputy
Administrator determines, in writing, that a more representative board would be obtained through
the appointment process.
The amendment was crafted in response to program reviews of the first round of
designated communities. Overall, the reviews found that the existing board appointment
process did not build boards that reflected the racial or economic diversity present in the
community, and board decisions did not reflect either the principles of the EZ/EC
program or the best interests of the low-income residents. Inclusion of low-income
residents in the decision making process, i.e. board representation, is a core principle that
sets the EZ/EC program apart from other community development programs. It ensures
local ―buy in‖ to the process, enhances the chances for long-term meaningful change and 1
supports the fullest opportunity for low-income residents to participate in the decision making process via board membership.
Appointed boards might be needed in the start-up phase, and some appointments might be necessary to address special cases such as adequate youth or low-income representation. However, as the community evolves through the program, broad citizen leadership and board members must be grown and community capacity built to last beyond the 10 year life of the program. Board elections can be conducted at the required public meetings with little or no additional cost to the community.
If a designated community is currently not in compliance with the new board membership requirements, USDA will work with these communities to make corrective actions in a timely manner with little additional burden on them.
Scope: The policies and procedures in the new EZ/EC regulations apply to all rural
Empowerment Zones, Enterprise Communities, and Champion Communities, regardless of when they were designated. 7 CFR, Subpart A, ? 25.1 Applicability and scope
applies to all rural empowerment zones and enterprise communities authorized under the Omnibus Budget Reconciliation Act of 1993 (Round I), Taxpayer Relief Act of 1997 (Round II EZs), the Agriculture, Rural Development, Food and Drug Administration, and Related Agencies Appropriation Act, 1999 (Round II EC’s), and the Community
Renewal Tax Relief Act of 2000 (Round III), as well as any Champion Communities designated after application for these rounds.
Accordingly, all USDA State Rural Development Offices (State Office) are advised to take the necessary steps to ensure that each of their Round I, II, or III designated communities are in compliance with the board membership requirements of the new EZ/EC regulations.
This action is critical because based on a review of several bylaws and operating documents on file at the Office of Community Development (OCD) and from discussions with USDA field staff, there is evidence that some EZ/EC boards, as constituted, would not be in compliance with the new regulations. Some bylaws are fairly specific regarding board seat allocation methods, with many implying that all appointments are by organization type, e.g. government, business, etc. Even when seats are allocated to low-income residents elected on a per census tract basis, the number of seats do not come close to the 55 percent elected requirement based on the overall number of board seats.
While questions or complaints regarding the validity of EZ/EC boards have been raised in the past, they had to be considered under previous regulations that contained only general language and little specificity on community representation and board membership. With specific board membership and representation requirements now in the new EZ/EC regulations, there is a firmer legal basis for complainants to question the composition of an EZ/EC board and demand remediation by USDA.
Process for Validating EZ/EC Designation Regarding Board Membership
Each State Office shall initiate the process of determining whether all rural EZ/EC
communities in their state are in compliance regarding board membership under Subpart
E—Post Designation Requirements of the new EZ/EC regulations. A report on the status of each EZ/EC board, including an assessment on the status of compliance with the
regulations, shall be submitted to OCD annually. The steps for reviewing EZ/EC board
membership and suggested corrective actions are as follows:
1) State Office Review of Existing EZ/EC Board Structure
Rural Development state staff will meet with representatives from each EZ/EC
community to discuss the new regulations and the reason for the review. Document the
current board structure: who they are and where they live or work, what organizations,
groups, or geographic areas they represent, and which census tracts are represented on the
board. Review any written documents such as bylaws establishing the procedures for
constituting the EZ/EC board. Compare the language in the bylaws or operating
documents relating to board membership and election procedures with what is actually
being employed by the EZ/EC community. Discuss the election process with community
residents to ensure that the process as described by the board/managing entity is similar
to the process as perceived by the community. Document any discrepancies between
actual and written procedures.
2) Compare Board Membership with the new EZ/EC Regulation Requirements
Boards must be in compliance with the board membership requirements found in
?25.404(b)(3) Board Membership, as determined by RD staff. Questions that will be
* Are a minimum 55 percent of the board members elected? Is there a process in
place for elections? Does the board membership represent the broad spectrum of
organizations, income levels, and racial types found in the community?
* Do all census tracts have a resident on the board? While a board member may
be from an organization that is active--and said to represent—a census tract, not
having a single board member from each tract that is representative of its
residents seems contrary to the EZ/EC principles and does not comply with the
specific language in the new regulations.
* Are residents of the tract aware of the EZ/EC designation and the process for
constituting a board? Outreach is an imprecise science and one that may require
additional due diligence by the State Office, but the process can help illuminate
the reasons why certain sectors appear to be absent from board representation.
Does is it appear the current board and managing entity made any effort to include
residents from census tracts not represented on the board? More importantly,
does it appear systematic efforts were taken by the board to at least tacitly exclude
certain areas or groups?
* Are there well-documented, good faith outreach and communication activities
by the board to ensure that all residents (including low income) have had adequate
opportunity to participate in the board selection process? If it appears one or
more organizations or groups (geographic, socioeconomic, or sector-based) are
largely unaware of their EZ/EC designation and what it means, this is a concern.
Past OCD reviews have found this to occur in some poorly performing EZ/EC
* Does the board appear to be well-balanced? Does the percentage of board seats
made available to low income residents reflective of the percentage of persons
below the poverty level in the designated community? The same question should
be asked for geographic representation and other community characteristics.
There is not a perfect recipe, but large discrepancies are a red flag.
* Is low-income representation required in outmigration communities? For
EZ/EC communities designated under outmigration criteria, the 1990 census
poverty rate does not apply, and there may actually be very few residents of such
an EZ/EC that meet this or any other definition of ―low income.‖ While ensuring
low-income representation on the board may be a moot issue, outmigration
EZ/EC communities still need to meet the 55 percent election requirement, with at
least one board member elected from each census tract who is representative of
3) Prepare a Report on Each EZ/EC Board
The Rural Development state office representative will prepare a report that documents
the status of compliance with ? 25.404 (b)(3)for each designated community board. The
report shall include status of compliance, explanation of their process, summary of
corrective actions proposed if the community is non-compliant (details will be in the
corrective action plan), and other general findings. The report is due to OCD annually, at
a date to be established by OCD.
4) Prepare a Corrective Action Plan.
A plan for corrective action will be prepared for each EZ/EC board not in compliance
with ? 25.404 (b)(3) as identified in the above report submitted to OCD. The action plan
should include a description of the non-compliance, corrective actions including the type
of election procedure the board will employ to become compliant, a timetable, and a
description of the restructured board.
5) Report Progress and Results of Corrective Action to OCD
As the State Office progresses in bringing a designated community board into compliance,
regular progress reports will be made to OCD. When the EZ/EC board comes into
compliance, the State Office will certify this in a letter submitted to OCD for concurrence.
If there is a disagreement between the community and the State Office over the board
election requirements and the corrective actions identified, a community can submit to
the State Office a written request for clarification, an appeal, or mediation services. The
request should outline community’s reasons for the appeal, and any compelling factors
that warrant special consideration. The request must come from the managing entity or a
member of the board. The State Office has the lead role in the board election
certification process, and all appeals will be reviewed by OCD in consultation with the
State Office. The 45 percent maximum appointment limit may only be waived for Tribal
Governmental Organizations. Within two weeks after the request is received, OCD will
issue and initial finding (opinion?) to the community and the State Office.
To help guide the State Office through the EZ/EC board validation process, below is a
discussion on some items relating to board membership referenced in the new regulations.
Issues and Definitions:
Attachment B contains a specific list of questions and answers that contain specific
language relating to the election process. Please refer to this attachment for more specific
Calculating the Number of Board Members to be Selected by Broad-Based Elections:
A minimum of 55 percent of board members selected by election means that at least 6 of
10 members of a board must be elected, 11 of 20, etc. Attachment A is a table to assist
with calculating the number of elected seats needed for a specific board size to meet the
Defining Broad-Based Elections:
The election requirements of the new regulations are not limited to the typical elections
for government officials with formal procedures, election days, ballots, and polling
booths. Attachment C contains Q&As and definitions related to broad-based elections.
Whatever the election process, the most critical element is not how votes are tallied, but
rather that each resident of the designated community have adequate opportunity to
participate, and that the purpose of the election widely known. An open community
meeting in all census tracts, and with all partner groups, with adequate notice and
publicity would be a sufficient vehicle for broad-based elections. This is probably the
most common method used with most community-based, nonprofit organizations. Sub-
zone meetings and elections can also be used.
Census Tract-Based Representation:
Both the new regulations and the principles of the EZ/EC Program require at least one
low income board member be elected from each of the designated census tracts. Many
EZ/EC communities have provisions for at least one board member from each census
tract, but not an elected representative of low income residents. To be in compliance, all
EZ/EC communities must now have at least one elected board seat from each census tract
representing the low income residents of that tract.
The size of the board will dictate the number of required elected representatives. The
average EZ/EC community has about five census tracts. If only one board seat per
census tract is elected, a board with more than nine members would need one or more of
the other members elected. For example, in this situation a 15-member board would
require that 4 more seats would need to be elected to meet the regulatory requirement
(nine of 15). A review of several EZ/EC community bylaws showed that several board
seats not based on census tract representation would have to be converted to an elected
seat to be in compliance with the regulations.
Election Board Members and Representatives of Low Income Residents
The ?25.404 (b)(3) states that at least one board member from each of designated
community’s census tracts must be elected and representative of low income residents.
This does not limit census tract-based board members to low income residents, but it is
clear that the new regulation requires at least one seat per census tract be made available
act in the interest of low income residents. The majority of EZ/EC designations are
specifically targeted to rural census tracts with high poverty rates, and the associated
EZ/EC principles dictate that those residents participate in the process, especially in the
direction of the strategic plan implementation via board representation.
Defining Low Income Residents:
In accordance with authorizing legislation, about 25 percent of the residents of each
designated census tract must be below the 1990 census poverty rate. This poverty rate is
not the only definition of low income. Other factors may be considered such as
unemployment and public assistance. In theory, people generally considered as low
income by the community might actually be above the 1990 poverty rate. Given that
EZ/EC communities by definition are often located in areas with the most systemic, long-
term poverty in the U.S., the majority of a community’s residents may fit the most
generally accepted low income definitions. For program review purposes we rely on the
individual’s willingness to identify themselves as low-income, and the community’s
acceptance of the individual as being of low income. The percentage of residents
meeting the 1990 census poverty rate should be used as a guidepost for validating an
EZ/EC board’s membership. The allocation of board seats should seem proportionate to the number of residents meeting the 1990 census poverty criteria.
Participation of Minority Residents
When the term ―minority‖ is used regarding race, it generally refers to those who are
other than the majority of the population nationally. Locally, however, groups
considered nationally as a minority such as African American, Hispanic, or Native
American, may be the predominant race in a particular community. When considering
minority representation on the board, comparing the relative percentages to board
member representation to local racial composition is valid. If a particular race makes up
the majority of low income residents in a community, the board composition should
reflect this. Racial quotas cannot be put on board seats. If the board racial composition
does not appear to match that of the community, it is likely that a sector of the
community is not participating and an updated outreach plan can be requested, including
corrective actions to be taken.
Board Seats Allocated to Elected Officials
The new regulations do not provide specific guidance on whether board seats allocated to
elected officials are considered ―elected‖ seats. This is a significant issue, as many
EZ/EC communities allocate several board seats to elected officials. The critical question
is: ―Is an elected mayor, county commissioner, etc. who is appointed to the EZ/EC board
automatically considered ―elected‖ under the requirements of the new regulations?‖
OCD supports allowing elected officials to be counted as elected board members on a
case-by-case basis, provided they do not constitute a majority of the elected seats on the
board. OCD approval is required before a board member is appointed in this manner.
Given the overarching EZ/EC principle of broad-based citizen participation and the clear
intention of the new regulations to better ensure the manifestation of this principle in the
process of constituting a board, the argument for allowing the elected officials to also be
considered as elected to the board must consider the following issues:
1. Transparency of the election process in terms of the community residents being
fully aware that when they are electing a specific government official, they are
also designating that individual to represent them on the EZ/EC board.
2. Whether the boundaries of the area served by an elected official match the
boundaries of the EZ/EC as determined by the designated census tracts.
3. The level of support from the residents of the designated tracts for the official (did
they vote for someone else?).
Requests for approval will be sent to OCD and should address these issues.
Ensuring EZ/EC Board Compliance
There are three principal methods that an EZ/EC board can use to meet the broad-based
election and community representation requirements of the new EZ/EC regulations. The
regulations state that elections may be done by any locally acceptable process. However,
any election method must adhere to the following:
1. All community residents and organizations have equal and ample opportunity to
participate in both the election and in serving as board members.
2. Ample (4 weeks) public notice about the timing and purpose of the election. This
could include newspaper and radio announcements, presentations to group
meetings, fliers, and direct mailings.
3. Allocation of board seats is included in the by-laws and reflects the number of
census tracts, types of organizations, and economic and racial composition of the
An acceptable election process does not specifically require formal procedures associated
with government elections.
Corrective Actions for Out-of-Compliance Boards
Adding Board Seats: One straightforward method for meeting the 55 percent elected requirement is to increase the number of overall board seats, with the new seats filled via
election. A 10-member board with one elected from each 5 census tracts would have to
add one new elected member to be in compliance. However, allocating these seats may
not be straightforward. While doubling the number of elected census tract
representatives would easily put the board in compliance, there is always a concern about
creating a large, unwieldy board. OCD has found that boards of between 13-25 members
generally function most effectively.
Converting an Appointed Board Seat to an Elected Seat: Allocating or ―appointing‖ a
board seat to a particular entity or individual without some form of broad-based election
is limited to no more than 45 percent of the board’s membership. Special needs
representation can still be met by appointment, but the intent of the new regulations is to
increase the percentage of board members elected by community members, particularly
those that the EZ/EC program supposed to benefit, low income residents. This may
require converting an appointed seat to one filled through a broad-based election.
Possible methods for converting appointed seats to an elected seat include:
* Community-wide election for ―specialty‖ or ―set-aside‖ board seats, such as
―business‖ or ―elderly.‖ Residents do not have to be affiliated with a particular
sector or entity, or be established experts in the subject matter, but must be able to
represent that groups interest and views. Each nominee for the specialty seats on
the EZ/EC board should state their qualifications and why they want to represent
that particular interest on the board.
* Broad-based election among representatives of a specific sector. A special
election can be held specifically targeted to a type of organization such as
―businesses,‖ ―schools‖ or ―churches‖ to elect from their collective organizations
a board member(s) to represent their interests.
Attachment A: Table on Minimum Number of Elected Board Members Needed to
Total Board Elected Appointed % Elected Meet the 55% Requirement Given a Specific Board Size
Members Members Members
3 2 1 67 4 3 1 75 5 3 2 60 6 4 2 67 7 4 3 57 8 5 3 63 9 5 4 56 10 6 4 60 11 6 5 55 12 7 5 58 13 8 5 62 14 8 6 57 15 9 6 60 16 9 7 56 17 10 7 59 18 10 8 56 19 11 8 58 20 11 9 55 21 12 9 57 22 12 10 55 23 13 10 57 24 14 10 58 25 14 11 56 26 15 11 58 27 15 12 56 28 16 12 57 29 16 13 55 30 17 13 57 31 17 14 55 32 18 14 56
Attachment B: Case Studies
Examples of Broad-Based Elections:
A number of examples already exist within rural communities that can provide models
for EZ/EC boards. Most communities already have some existing boards that exist for
the purpose of improving live in the community. OCD suggest that communities look for
non-profit and community group boards that are functioning well in their community.
* USDA County Committees: One widely used election method familiar to many
communities is the one employed by USDA’s Farm Service Agency to establish county
committees. While these committees are specific to the operations of USDA farm
programs at the local level, they have a similar intent as the EZ/EC board to in terms of
broad-based representation and local control. Their elections are well publicized with
fliers and newspaper advertisements, and have a clearly documented nomination and
election procedure. Some provide up to two months for the nomination period—with
standard forms widely available—and three weeks for votes to be mailed in. Ballots are
mailed to each eligible resident in the county. The downside to the FSA county
committee method is the cost of direct mailings and the verification and tabulation of
votes. The community can consult with a local FSA office about the process and costs as
it evaluates its options.
The EZ/EC board could consider this type of process for both community-wide and
census tract-based elections. The methodology, and not necessarily the scope, is the
critical element. Nominations and the election process for both census tract-level and
entity-based board seats could be used in the same manner.
Use of Open Public Meetings for Elections:
For community-based organizations, the use of open public meetings for elections is
relatively common. For an EZ/EC community, use of these types of meetings would be
an acceptable method for meeting the 55% requirement of the new regulations, as long as
they are open to the public and well publicized as to their purpose.
Many EZ/EC communities use the open public meeting method to elect board members.
A community would be in compliance if they used the following procedure as outlined in
these bylaws on file at OCD:
*Round I EC:
―MEMBERSHIP: The board shall consist of thirty-nine (39) members representing six
(6) counties and ten (10) census tracts comprising the EC community.
(a) CENSUS TRACT REPRESENTATIVES: The local tract shall elect 2 tract
representatives, who meet current poverty guidelines and live in the census tract, at a duly
called and publicly advertised meeting of the Local Tract Organization.