Turning Point for Inner City Federal Help : Urban renewal: Breaks to create jobs and spur low-income housing signal more interest by Washington in solving community problems.

After watching the flow of federal assistance shrink in the past decade, community development officials see signs of a potential turnaround in the proposed federal budget, which would direct investment into poor communities and extend the life of low-income housing tax breaks.

But officials are quick to point out that the assistance--primarily in the form of tax breaks--still falls short of what is needed to rejuvenate depressed communities and satisfy the demand for affordable housing.

“Unquestionably these proposals represent a major step in the right direction,” said John W. Mack, president of the Los Angeles Urban League. But “the President and the Congress can’t now sit back and rest on their laurels and say the battle has been won. The battle has not been won. It’s only the beginning.”

With the backing of Housing and Urban Development Secretary Jack Kemp, the proposed federal budget earmarks $1 billion in tax credits over the next five years to businesses in so-called enterprise zones. The Bush Administration proposal calls for the creation of 25 such zones nationwide in economically disadvantaged areas, which would have to compete for enterprise zone status.

The federal enterprise zones are modeled on the several hundred that have already been created around the nation. In California, the state has designated 19 enterprise zones in which businesses receive tax credits for hiring unemployed workers and purchasing new equipment installed in the zone.

In San Diego, the state enterprise zone that encompasses depressed neighborhoods south and east of the downtown area takes credit for finding jobs to about 1,100 unemployed workers in nearly four years. About 60% of those jobs did not exist before the zone was created, said zone coordinator Michael Jenkins.

Jenkins said he was “delighted to see” the new proposals. “The funding for these kinds of activities from the federal government has continued to decline since the late 1970s. Nobody would deny that the need is there in low income areas.”

Still, the federal tax breaks for enterprise zones will be spread thinly. “By (spreading it over) the 30-odd states with enterprise zones, I think it would be diluted pretty fast,” said Paul Hiller, program manager for California’s enterprise zone program.

The federal budget would also extend for another year about $200 million in annual tax credits to those who build and invest in low-income housing.

“This is the only significant federal (low income housing) subsidy that remains,” said Patrick Johnson, of the Local Initiatives Support Corp., a national nonprofit community development organization. In many California projects, federal tax credits account for 50% of the financing, he said.

The federal tax credits have played a major role in attracting corporate investors to low-income housing, said Johnson.