Commerce Department Dedicating $1 Billion to Spur ‘Regional Industry Clusters’

Commerce Secretary Gina Raimondo announced on July 22 that the U.S. Economic Development Administration is allocating $3 billion to six new competitive grant programs aimed at “accelerating the economic recovery from the coronavirus pandemic and building local economies that will be resilient to future economic shocks.” Of the total, $1 billion is for a “Build Back Better Regional Challenge” program that will support “regional industry clusters” through grants for infrastructure improvements and workforce development, among other activities.

The funds were provided to EDA through the American Rescue Plan legislation that President Biden signed into law in March. Congress is currently considering further legislative proposals to formally establish a program within the Commerce Department for supporting initiatives focused specifically on regional innovation.

Momentum increasing behind support for regional innovation

EDA’s regional industry cluster challenge is planning to distribute grants through a two-phase process that will be guided by the agency’s investment priorities , which it updated in April to include emphases on equity, sustainability, and “technology-based economic development.” Announcing the new EDA programs at the White House , Raimondo stated that the “number one investment priority is equity” and that applicants for funding will have to demonstrate they “have an equity lens.”

“I have to make sure that women, people of color, veterans, people who’ve been left out will be included in this. So it’s a lens that we’re going to take across the $3 billion,” she said.

In the first phase of the regional industry cluster challenge, which is accepting applications until Oct. 19, EDA will provide technical assistance grants of about $500,000 each to between 50 and 60 “regional coalitions” comprising state or local governments, tribal communities, nonprofit organizations, and universities that “share a common vision” for how to spur specific industries. From this group, EDA will select between 20 and 30 coalitions to receive implementation awards ranging from $25 million up to $100 million. At least $100 million of the program’s funding is reserved for supporting communities “negatively impacted by the downturn in the coal economy and that are transitioning away from coal.”

EDA requires applicants to propose between three and eight “tightly aligned projects” that together focus on “developing a long-term, transformational vision and execution plan for a region’s industry.” It notes that such an effort could “reflect a hub-and-spoke model, anchored around a ‘hub’ such as a city, business park, port, educational or research institution, or technology center and complemented by significant investment strategies in multiple ‘spokes’ that represent demographic and geographic diversity.”

As possible examples of regional clusters, EDA lists an “artificial intelligence corridor”, an “agriculture-technology cluster in rural coal counties,” a “blue economy cluster” in coastal regions, and a “climate-friendly electric vehicle cluster.” For the AI corridor example, EDA states its grants could support projects such as improvements to roads and utilities in industrial parks, a partnership with a local university to create new AI training and commercialization programs, and rural manufacturing initiatives to integrate more local companies into the supply chain.

Among all eligible uses of funding are construction of “water and sewer system improvements, industrial parks, shipping and logistics facilities, business incubators and accelerators, brownfield redevelopment, technology-based facilities, food aggregation, processing and distribution centers, wet labs, multi-tenant manufacturing facilities, science and research parks, transportation enhancements, and telecommunications infrastructure (e.g., broadband) and development facilities.” Eligible non-construction activities include “design and engineering, technical assistance, economic recovery strategy development, entrepreneurial support, demand-driven workforce training, new academic curricula, market feasibility studies, and the capitalization of revolving loan funds.”

Apart from the Build Back Better Regional Challenge and existing programs such as EDA’s Build to Scale program , Congress is gearing up to establish a major new Commerce Department regional innovation program.

The U.S. Innovation and Competition Act, which the Senate passed in June, recommends that Congress provide $9.4 billion over five years to support at least 20 hubs. Last week, the House Science Committee approved the Regional Innovation Act, a bill that would recommend Congress provide $6.8 billion over five years to establish at least 10 regional technology hubs, each receiving up to $150 million in the program’s first phase.

In addition, the House bill includes a provision recommending Congress provide the Department of Energy $250 million over five years to create regional clean energy innovation partnerships. Both bills include provisions directing the hubs to coordinate with other federal programs, such as the public-private institutes in the Manufacturing USA network.

Whatever proposal may eventually emerge from negotiations, the regional innovation program would still have to be funded through separate appropriations legislation.