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Board Election Guidance - Background On March 25, 2002, the 7 CFR 25

By Brent Ward,2014-05-07 17:08
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Board Election Guidance - Background On March 25, 2002, the 7 CFR 25

    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

    regulation changes.

    ? 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

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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

    EPost 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

    asked include:

    * 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 representa 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?

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    * 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

    communities.

    * 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

    tract residents.

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.

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Appeals Procedure

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

    definitions.

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

    55% minimum.

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:

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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

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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:

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    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

    designated community.

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.

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    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

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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 periodwith

    standard forms widely availableand 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.

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