Allowable Census Tracts
The number of allowable census tracts in configuring TEAs
received a fair amount of discussion and debate, but the
final proposal was poorly thought out and, in my opinion,
deliberately misleading. The original proposal back in June
2015 was frankly absurd. Only census tracts that by themselves
met the 150 percent of U.S. unemployment rate criteria could
qualify as high unemployment TEAs. This essentially would
have “unqualified” approximately 90 percent of existing high
unemployment TEAs, if they were currently being evaluated.
and for median family incomes of not more than 80 percent
of the greater of the statewide or MSA median family income.
These two add-ons are innocuous but unnecessary, and just
add an extra layer of confusion. Most areas that would qualify
on the poverty or income basis should also be able to qualify
with a combination of contiguous tracts. Furthermore, the
income criteria should be the lesser of, not the greater of the
statewide or MSA median family income, as it could make
qualifying too easy in higher income metropolitan areas where
median income is well above statewide averages.
Unemployment rates are not based on where the jobs
are located but on where the residents reside. As a result, a
downtown area that is not primarily a residential area can
have very low unemployment rates. Workers rarely live in the
immediate area where they work and areas with low unemployment are often in close proximity to high unemployment
areas. A project located in one of these census tracts will have
little or no impact on the unemployment rate of the project
tract, if few or no workers reside in the tract. It can, however,
have major impact on creating job opportunities and reducing
unemployment in those nearby neighborhoods where residents
are not only in close proximity to the project area, but also
have easy access via public transportation. In a concentrated
area like New York City, where one census tract might only
encompass a few square blocks, a high unemployment census
tract can be very close in distance to a project area even if it is
many census tracts away.
The second new category, called a Special Investment Zone,
allowed for up to 12 contiguous tracts. Referred to by some
as the California approach which has been fairly effective in
enabling TEA development in the higher unemployment
and more populous areas of Los Angeles, Riverside and San
Bernardino counties, the 12-tract limit does not work as well
in other parts of California and also would be less effective in
most other states. Furthermore, when California implements
new TEA data on May 1, many existing TEA projects in Los
Angeles, Riverside, and San Bernardino counties will no longer
be eligible for recertification under the existing California
12-tract approach.
In early December, a modification to the bill essentially
allowed joining one contiguous census tract to the project
tract (with ambiguous language, which makes it unclear
whether a non-qualifying project tract can even be combined).
It was hardly an
improvement
– most existing
TEAs would still
not qualify. This
ne w category,
called a Priority
Urban Investment
Area, was part
of a two-step
approach. Added
on to the Priority
Urban Area
unemployment
rate definition were
new definitions for
poverty rates of at
least 20 percent
While these two new categories of TEA definitions were
flawed, what occurred at the eleventh hour was downright
outrageous. In what looked like a disingenuous attempt to
slip in some new language that would deal a blow to urban
interests, the latest December version changed the Special
Investment Zone definition to read that the 12 contiguous
census tracts must include each census tract contiguous to the
project tract. It is very common for one census tract to have
six to eight immediately contiguous tracts. In a case with eight
contiguous tracts,
most or even all
of the contiguous
tracts might have
non-qualifying
unemployment
rates, leaving only
three potential
high unemployment tracts that
could be brought
in to impact the
weighted average.
This should no
longer be referred
to as the California
approach because
it would severely
There should definitely be
limits on TEA formation to
prevent blatant attempts at
gerrymandering,
but allowing unlimited configurations
within an MSA should be permissible.
Continued to page 12
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