Pacoima Bid for Enterprise Zone Hits Snag
Pacoima’s efforts to be designated one of 10 state enterprise zones has been dealt a setback by a city report recommending that Los Angeles drop its application for the program designed to revive blighted urban areas, community leaders said.
The report, issued last week, will be considered at a joint meeting Tuesday of the City Council’s Industry and Economic Development and Grants, and Housing and Community Development committees.
“All of a sudden it feels like we’ve had the rug pulled from under our feet,” said Mel Wilson, president of the Pacoima Chamber of Commerce and head of a citizens’ enterprise zone advisory committee. “My feeling is that the city has to prepare the final application. It will be devastating to us if they don’t. How can the city turn their backs on us now?”
Pacoima is among 20 finalists for the enterprise-zone designation, which community activists say could turn Van Nuys Boulevard into a thriving commercial center, establish new industrial sites near San Fernando Road and, most importantly, create up to 3,000 jobs in an area with 18% unemployment.
Three Reasons Cited
The city’s Community Development Department, which is responsible for preparing the application, has cited three basic reasons for its recommendation to pull out of the competition:
An unrealistic state application time-frame that “discriminates against large, complex urban areas.”
“Lack of substance” in the state program.
“Substantial costs” to the city in staff and financial resources to apply for and operate a zone.
Two bills authorizing state enterprise zones were signed into law in March, 1984. Pacoima and central Los Angeles were selected from among 57 applicants to vie for the final enterprise-zone designations under one bill.
Another Los Angeles community, Watts, is among four contending for three enterprise-zone slots under another bill. Los Angeles County is preparing that application.
The state-sponsored incentives vary slightly under each bill, although the aim of both is to create capital funding programs, reduce government regulations and provide incentives such as tax breaks to lure businesses into otherwise depressed areas.
The state’s incentives include an employer wage-tax credit for salaries paid to specific disadvantaged individuals hired to work in the zone. The credit is 50% of the employees’ wages for the first year, down to 10% of the wages in the fifth year.
Tax Credits Offered
Qualified employees also can receive a 5% income-tax credit against wages earned in an enterprise zone for one year. The state will give preference to enterprise-zone businesses in certain loan programs and will authorize a maximum of $75 million in industrial development bonds to finance facilities within the 10 zones.
Douglas Ford, the Community Development Department’s general manager, said the incentives themselves are to some extent less important than the perception of what an enterprise zone means.
“There is magic in the words ‘enterprise zone,’ ” Ford said. “It’s something to sell to the business community. It says the state, the city, the community is behind this area.”
For months, Pacoima community leaders met to prepare a list of recommendations for the city to include in the preliminary application. Those in the community supporting the enterprise zone ranged from church leaders to the area police captain. The San Fernando Valley United Chamber of Commerce, which represents 6,000 businesses, also endorsed the program.
Way Out of ‘Doldrums’
“I think this has been the most exciting thing going on in Pacoima for 20 years,” said Stanley Roche, a Pacoima businessman. “We said yes, we do have problems, but we are going to solve them.”
“We see the zones as the only way to take us out of the doldrums we are in and give us a new outlook,” said Henry Rose, a Pacoima businessman and member of the citizens’ advisory committee.
Wilson said the advisory committee was shocked by the Community Development Department’s report.
“From the outset we were under the impression that if we made it to the top 20 we would get full support from the city,” Wilson said. “That’s why this is such a blow. If the city drops the ball on us now, they will hear from every chamber of commerce in the Valley. There will be a lot of angry people.”
Katz Criticizes Report
Along with community leaders, Assemblyman Richard Katz (D-Sepulveda), whose district includes Pacoima, lashed out against the Community Development Department’s recommendation, saying that, if the city gives up, “it will be another instance of Pacoima not getting a fair shot.”
East Valley Councilman Howard Finn said the city is “obligated to put the application through at this point.” He said he will push for its submission.
However, Councilman David Cunningham, chairman of the three-member Grants, Housing and Community Development Committee, called the program a “sham” and said the report reinforces his longtime opposition to it.
“I’m not going to start appropriating city resources to one particular area because of an enterprise zone,” he said. “We have enough tools to assist certain pockets in Pacoima, in Watts, on our own. In my mind we don’t have to line up and fight for two or three zones.”
However, Councilwoman Joan Milke Flores, who represents Watts and who is chairwoman of the Industry and Economic Development Committee, supports the zone concept. “She says let’s work now and get the application approved, then lobby the state for more substantial incentives,” said Bernard Evans, Flores’ chief deputy.
Evans said Flores lobbied for federal enterprise zones, which have been promoted by the Reagan Administration since 1980. The controversial legislation, which critics said would cut federal revenues in an era of spiraling budget deficits, has yet to be enacted.
Since the push for federal enterprise zones began, 21 other states have created their own zones.
In California, the state Department of Commerce will award the zone status to the cities that develop the most effective packages of incentives and regulatory relief to businesses.
During the final phase of the state’s application process, communities must submit a detailed application that requires an environmental impact report, a city planning analysis of the proposed zone and a list of city incentives to attract business.
Applicants must be able to show that the community is “distressed.” They also must show that private investment in the proposed zone is impeded by such factors as high land costs, exhaustive building-permit procedures or low-quality services.
In its preliminary application, Pacoima is described by the city as “the most distressed community in the San Fernando Valley. It has the highest percentage of unemployed and low-skilled workers, low educational achievement, persons living in poverty, pre-1940 housing units and low-quality commercial services.”
However, it also says there is potential for a strong industrial base because of land availability, excellent transportation and an inexpensive labor pool.
‘Jobs Equal Money’
“The bottom line here is jobs. Jobs equal money and money equals self-respect,” Wilson, Pacoima chamber president, said. “Our response to the city at this juncture is that they don’t have anything to lose by going through with the application.”
In judging final applications, the state will use a 2,000-point system.
The city’s incentive package, which the state said should include items such as business loan programs and development and permit fee waivers, is the most important part of the application, with up to 1,000 points awarded.
The Community Development Department has taken the position that the state incentives are “minimal,” offering no new funding or loan programs to the city.
“The city has to put up 95% of the incentives,” said Parker Anderson, the department’s director of industrial and commercial development.
‘Not Worth Frustration’
Cunningham agreed. “All the fights, all the politics over who should be designated an enterprise zone is just not worth the frustration when the city is one that has to provide all the incentives,” he said.
Currently, Pacoima is ranked 16 on the list of 20. Communities ranked in the top 10 include the cities of Fresno, Sacramento and Bakersfield.
“If all remains equal, Pacoima will still be 16,” Anderson said. “We will have to beef up the application or we will not be picked. There is a list of incentives we have to come up with to be competitive with the other cities.”
To boost Pacoima into the top 10, Los Angeles would have to commit about $11 million in loan and bond funding to the enterprise zones, the development department report says. Also, the department estimates that the city would lose about $500,000 a year in business tax and permit fee waivers.
In addition, Anderson said, the Nov. 5 deadline to complete the application is “ludicrous.” He said requests for an extension from the state have been turned down.
“The state has come down with totally discriminatory deadlines for a large urban city,” Anderson said. “It’s a slow process to develop programs. The size of the area we have to evaluate is huge.”
To complete the application on time, the city would have to spend $100,000 on a team of consultants, Anderson said.
However, Richard Whitman, manager of the state enterprise-zone program, said the city has not given a good reason why it cannot get its application in on time.
“I feel that if there is real support behind the application they will be able to complete it on time,” Whitman said. He added that no other finalists indicated they could not complete the applications in four months.
A city review of the top preliminary applications shows that many cities chose to apply for enterprise zones for areas already benefiting from redevelopment programs, said Ford.
This improves their chances of receiving the designation, Ford said, because there is already a solid package of city incentives at work in the proposed zone.
“I have talked to development executives in other cities and they seemed to concur that the enterprise-zone program is weak legislation,” Ford said. “They applied with the attitude that if they didn’t get the designation, it wouldn’t hurt. If they did get it, all the better.”
However, the city did not take that approach, officials said.
‘In a Catch-22'
“Rather than being redundant, we attempted to pick zones that were not active redevelopment areas,” said Anderson of the Community Development Department. “Otherwise it would be like saying the next time a 10-story building goes up in Bunker Hill it’s due to the success of enterprise zones.
“It seems to me that if you have a long list of negatives, but not an equal number of incentives to solve the problems you are a lesser candidate for an enterprise zone,” Anderson said. “You are really in a Catch-22.”
Whitman said about half of the finalists in the competition proposed zones that already are redevelopment areas.
Such is the case for the proposed enterprise zones for Stockton, San Bernardino and Santa Ana, which are ranked first, second and fourth, respectively.
“I think Los Angeles suffers a slight disadvantage” because its proposed zones are not active redevelopment areas,” Whitman said. “However, the city has a lot of resources that other finalists don’t, which balances things out.”
For instance, Whitman said, the city’s budget for normally planned capital improvements such as street maintenance, lighting and utilities is greater than those of other, smaller cities.
He said that in making its final selection, the state will seek a balance of enterprise zones in urban and rural areas, and those with active and weak redevelopment programs.
“My personal response is that the zones will be most effective in areas that are not totally forgotten areas in terms of having resources targeted to them,” Whitman said. “The enterprise zone alone will not be sufficient to stimulate a really substantial amount of development.”