Years of Effort to Attract Investment Undermined

Looting and arson in South Los Angeles after the Rodney G. King verdict set back years of efforts to attract vital seed money to the long-neglected area to help develop business and enable people to buy homes.

Those efforts were showing a few signs of paying off, with developments planned to bring in the kinds of stores that had shunned the area for years and large banks yielding to pressure to commit more money for small businesses and home loans.

But the riots are now sparking fears that investment in the area will again dry up, with businesses and banks avoiding the area to the same degree they did after the 1965 Watts riots.

“If ever there was a reason they could justify it in their minds, here it is,” said Carlton Jenkins, managing director of Founders National Bank in Los Angeles, California’s largest black-owned bank. “It’s very difficult for our community to say we are a good investment when you run the risk of having a building burned down.”

The state’s largest banks have been under heavy criticism in recent months for their lack of activity in South Los Angeles and, in some cases, outright abandonment of the area. Those actions, critics say, have led to a proliferation of pawnshops, finance companies and check-cashing firms that typically charge consumers exorbitant interest rates.

Hearings to approve BankAmerica Corp.’s acquisition of Security Pacific Corp., for example, were a catalyst uniting community activities seeking to draw attention to the credit needs of businesses and individuals in South Los Angeles. BankAmerica has agreed to commit $12 billion in loans over 10 years, mostly for low-income and minority customers throughout the West. But critics have said the bank should do more, such as providing property improvement loans in South Los Angeles.

Likewise, city officials have worked for a year with a consortium of small banks to persuade them to lend money to small businesses in South Los Angeles. Officials expressed frustration that the events occurred at a time when attention has been focused on the loan needs of businesses and consumers in South Los Angeles.

One of the most serious problems expected to discourage new investment and lending, especially to smaller businesses, will be insurance. Insurance in the area is already costly and difficult to obtain. “To the extent you can get insurance now, you’re paying a minimum of 25% to 30% more in South Los Angeles. Now, you may not get insurance at all,” said Greg Boyd, senior vice president with the Economic Resources Corp., a South Los Angeles economic development company.

Some remained undaunted about the prospects for business development. “The residents of SouthLos Angeles will still have the needs for good services, and entrepreneurial businesses will find the ways and means to provide them,” said business consultant Skip Cooper, a director of the Black Business Assn.

Some investment and rebuilding will proceed. A spokeswoman for Smith Food & Drug Centers said the grocery chain plans to open stores in Inglewood and Baldwin Hills, and it remains in serious negotiations for another store in Santa Barbara Plaza in the Crenshaw District. Fred Bruning, partner with Alexander Haagen Co., said two shopping centers developed and managed by the company have been damaged in the riots, but they will be rebuilt. And Food 4 Less said it will repair the 25 of its stores that were damaged.

But Thrifty Drug officials said they doubt they will replace two stores burned in the rioting.

Jim Johnson, director of the center for the study of urban poverty at UCLA, said he fears a growth in subtle and not-so subtle redlining, an illegal practice in which banks avoid doing business with homeowners and businesses in a particular area.

“You can forget about businesses being lured to South Los Angeles,” Johnson said.

Times staff writers Jube Shiver Jr., Patrick Lee, Carla Lazzareschi and Stuart Silverstein contributed to this story.