$100,000,000 VOTE : A Federally Funded Empowerment Zone Is Good News for L.A., but Its Limited Size Will Exclude Many Needy Areas. 'You Have a Bunch of People Fighting Over It,' One Community Activist Says

By ROBERT J. LOPEZ

Nov. 7, 1993 12 AM PT

TIMES STAFF WRITER

After a decade of dashed expectations, Los Angeles is on the verge of benefiting from a major federal program that will provide millions of dollars for community development and tax incentives for businesses in poor areas. But what will be a boon for some neighborhoods will be a missed opportunity for others.

Under legislation signed into law in August by President Clinton, six urban areas nationwide next year will be designated “empowerment zones,” each entitled to $100 million for programs ranging from job training to child care. In addition, business owners in the zones will be eligible to receive a variety of federal tax credits.

Administration officials, hoping to use areas in Central Los Angeles as the showpiece of the Clinton urban agenda, have said the city is virtually assured of receiving one of the six zones. With its combination of funds and tax breaks, city officials say, the empowerment zone will be the most significant federal community-economic development program to be bestowed on Los Angeles in more than 20 years.

There is just one problem: The zone can only be 20 square miles with no more than 200,000 residents, assuring that many needy areas will be left out and forcing city officials to make difficult choices in determining which area will receive the federal assistance.

“It becomes tough to pick such a small area when there are so many needing help,” said Reynold Blight, director of enterprise zone programs for the Los Angeles Community Development Department, the city agency that will run the federal empowerment zone program.

Business groups and community organizations from the Eastside to South-Central and Watts are expected to lobby for a piece of the action. The final decision on the economically--and politically--lucrative zone will rest with the City Council and the mayor’s office.

“It does create a situation where you have a bunch of people fighting over it. I know my group wants a piece for sure,” said Ezekiel Mobley, executive director of the Central City South Assn. of Commerce and Industry, a consortium of about 50 businesses near USC that incorporated in September in part to lobby for the zone benefits.

Empowerment zones are a spinoff of the enterprise zone concept. First developed in Britain during the 1970s, enterprise zones operate on the assumption that economic recovery will be encouraged by creating special areas where businesses receive tax incentives and red tape is minimized.

In the United States, the zones were popularized in 1980 by then-presidential candidate Ronald Reagan, who championed the idea as a private-sector solution to revitalizing blighted neighborhoods. Throughout the 1980s, enterprise zone legislation was introduced during each session of Congress, only to be voted down or die in committee.

In anticipation of federal zones, more than 1,300 state enterprise zones were established nationwide. In 1986, the California Legislature adopted its enterprise zone program to create areas where businesses would receive an initial layer of state tax incentives to be supplementedby a second level of federal tax breaks. There are three state enterprise zones in the central city--one that spans parts of Watts and South-Central, one near USC and the other on the Eastside.

There are also neighborhoods in state enterprise zones in Pacoima and in Wilmington/San Pedro that officials say could receive federal empowerment-zone designation.

The empowerment zone program goes beyond the “passive” approach of relying solely on tax breaks by providing $100 million for job training and child care, which will “nurture the basic human elements needed for development,” said Parker Anderson, general manager of the Community Development Department.

“It appears to represent a comprehensive approach to urban development,” said Anderson, who has called empowerment zones the most important federal program in Los Angeles since the Model Cities community-economic development program of the late 1960s and early ‘70s. Under that program, federal funds were provided for job training and social programs on the Eastside and in Watts.

Considering that federal grants for community development and job training for the entire city totaled about $80 million last year, $100 million restricted to 20 square miles could have a considerable effect on the chosen area, both for residents and businesses that could benefit from more jobs and social programs, and for the politicians and activists who make it happen.

But before the zones are selected next year, the scene in City Hall could become contentious as council members push to get a piece of the pie for their districts, political observers say.

“Usually, any program like this gets caught up in who gets what and where it goes,” said James H. Johnson, director of the UCLA Center for the Study of Urban Poverty.

Under the incentives, the federal government will provide payroll tax breaks of up to 20% of the wages of workers who live in the area. Business owners also will be able to receive accelerated depreciation on equipment, allowing them to write off the machinery as a loss as soon as it is purchased, instead of the normal five- to seven-year period.

And to draw additional money to a zone, business owners can sell tax-exempt facility bonds ranging from $1 million to $3 million to investors. Such bonds are attractive to investors because they do not have to pay taxes on interest earned from their investment.

“Any time you can reduce federal taxes as an incentive, that should help,” said John Boyd, who owns a struggling furniture manufacturing company that employs about 100 in a neighborhood near Manchester and Central avenues in South-Central. “It sounds encouraging.”

The neighborhoods near Boyd’s business are among the poorest in the city and were visited in May by Housing and Urban Development Secretary Henry Cisneros, who said an empowerment zone would provide an “opportunity for a truly intensive, experimental, innovative program.”

Cisneros is expected to begin selecting empowerment zones next summer after HUD officials review applications that will be received in the spring from cities across the nation.

Although HUD will also select 65 urban “enterprise communities,” which will receive about $3 million each in federal assistance, the big prize will be the empowerment zone designation. Though the federal zone boundaries will not necessarily mirror the borders of the state empowerment zones, city officials say neighborhoods in the three state zones in Central Los Angeles will receive strong consideration.

Under federal guidelines, the empowerment zone can be divided into three non-contiguous areas, as long as the limits on size and population are met and at least half of the census tracts have poverty rates of 35% or more. So rather than select one of the three state zones, city officials are likely to attempt to spread the wealth by carving out pieces of some or all of the zones to avoid infighting on the City Council.

The three state zones in Central Los Angeles are:

* Central City Enterprise Zone--With 68,155 residents in a four-square-mile area, the Central City zone is the smallest of the three state zones. It is also the poorest. The $5,407 per capita income is about a third of the countywide average of $16,149. The zone also has the highest percentage of undereducated adults, with 75% having three years or less of high school.

“The need is there,” said David Henry, a board member of the Dunbar Economic Development Corp., which is part of a coalition of six community organizations working on development projects along the zone’s Central Avenue corridor.

In addition to its social and economic needs, Mobley said, the area merits an empowerment zone because its Central City business association is ready to work closely with local officials, as required by federal guidelines. Those rules state that the city must submit a detailed plan with its application explaining how it will collaborate with business and community groups. Members of the Central City association include USC and the 32nd Street Market.

Mobley said his group plans to lobby Councilwoman Rita Walters, who represents the Central City zone and parts of the nearby Watts zone, to push for including the area in the federal zone. Walters declined to comment on the empowerment zone.

Proponents argue that the area also has the advantage of being close to Downtown, having two freeways and a major rail line within its boundaries, and commercial vacancy rates of about 30%, providing ample space for business expansion.

The zone is bounded roughly by the Santa Monica Freeway on the north, Martin Luther King Jr. Boulevard on the south, Figueroa Street on the west and Alameda Street on the east.

* Eastside Enterprise Zone--Home to 188,866 residents, the zone is a 17-square-mile area that includes Lincoln Heights, El Sereno and Boyle Heights. The $6,649 average per capita income is the highest of the three enterprise zones, but is still far below the countywide average. Of the area’s 117,345 adult residents, about two-thirds are high school dropouts.

Although the riots focused nationwide attention on South-Central, Eastside advocates say their area is equally deserving of federal assistance. “Just because the Eastside didn’t riot doesn’t mean the needs are not there,” said Raul Escobedo, a principal with Barrio Planners Inc.

He and other Eastside advocates say the Eastside empowerment zone would be ideal because it is crossed by six freeways, includes several rail lines and has two job-training centers.

“From a transportation standpoint, you couldn’t ask for a better location,” said Stephen Wise, president of Furniture Profiles Inc.

Wise, whose Boyle Heights furniture-making company employs 100, said the zone’s labor force is one of its biggest assets because many workers there also live in the area. “There’s a better chance for every dollar paid to a Hispanic laborer to be better spent in the Eastside zone than anywhere else,” he said.

Proponents also say a $160,000 revitalization study, recently completed by Barrio Planners in conjunction with Councilman Richard Alatorre’s office and a 38-member resident committee, contains a detailed development strategy that will help them argue for inclusion in the federal zone. The study recommends that the Eastside zone be included in the city’s empowerment zone application.

Although Alatorre declined to comment, parts of the zone are also represented by Councilman Mike Hernandez, who said the area will “definitely be in on the (empowerment zone) action.”

The zone’s boundaries run along Alameda Street on the east and snake across an area above North Broadway to Cal State Los Angeles, then roughly cut south on Indiana Street to Washington Boulevard.

* Watts Enterprise Zone--With 298,946 residents in a 19-square-mile area, the Watts zone is the largest of the three zones. (Portions of the zone extend into unincorporated county areas and several Southeast Los Angeles cities and are administered by those jurisdictions. Not all of the state zone could be included in an empowerment zone because its population exceeds 200,000.)

The $5,789 average per capita income of area residents ranks it between the Central City and Eastside zones. Nearly two-thirds of the area’s 171,283 adults did not finish high school.

The zone includes areas that were hardest hit by the April, 1992, rioting and its neighborhoods are among the city’s most crime-ridden.

“This is the most volatile area of the city,” said business owner Boyd, who constantly packs a handgun and complains of repeated vandalism and burglaries. “We need help here because it’s like a volcano. You can feel the tension.”

Although the Watts zone lacks established commercial groups such as those in the other two zones, local urban development consultant Lewis Kramer is trying to form a business organization along the Slauson Avenue corridor. Kramer, who is working with Walters’ council office on his plan, said the efforts show government-private sector cooperation.

Councilman Rudy L. Svorinich Jr., who also represents portions of the zone, declined to comment.

The zone is bounded roughly by Martin Luther King Jr. Boulevard on the north, Vermont Avenue on the west, Imperial Highway on the south and Central Avenue on the east.

The Community Development Department and several other city agencies are collaborating on a study that will identify neighborhoods with the greatest need and the best potential for economic development. The recommendations are expected to be forwarded to the City Council and the mayor’s office in the spring.

Councilman Hernandez, whose Community & Economic Development Committee will consider the matter before making a recommendation to the full council, said the empowerment zone devised by the city will more than likely be broken up among the state zones to appease the council members. “Politically, it will probably be the only way it will pass,” said Hernandez, who expects to conduct hearings next month. The matter also will be considered by the Community Redevelopment & Housing Committee, chaired by Councilman Mark Ridley-Thomas. He said he would support breaking up the zone provided it would not lessen its benefits.

Corde Carrillo, director of economic development and redevelopment for Los Angeles County, said he believes the most competitive application would be a joint filing between the county and the city for a zone in South Los Angeles.

Some in the community believe that dividing the zone would decentralize the program’s effects. “$100 million is not a lot of money considering the need down here. And if you dilute it, it would not be good,” said Henry of the Dunbar Economic Development Corp.

With business groups and community leaders planning to lobby the council for inclusion in the federal zone, there is potential for bickering among council members who are under pressure to bring home the bacon for their districts, said Johnson of UCLA.

“Unless you can overcome the political gridlock that often characterizes responses in Los Angeles, I think it’s going to be problematic at the implementation stage,” Johnson said.

Even if the zone is parceled out, many deserving areas will still be left out, city officials acknowledge.

“Compared to the need, it’s a drop in the bucket,” said Marilyn Lurie, director of commercial development for the Community Development Department.

Added Kramer, the South-Central consultant: “You have a wide range of communities that need access to federal monies. Those people who are going to be left out are just as needy as everyone else.”

Key Players

Although the entire City Council and Mayor Richard Riordan will have a hand in deciding which area of Los Angeles will be designated a federal empowerment zone, two city councilmen and one member of President Clinton’s Cabinet will be instrumental in the process. They are:

Councilman Mike Hernandez

* Position: Chairman of the Community & Economic Development Committee. Hernandez will chair hearings studying which neighborhoods have the greatest economic and social needs and the highest potential for business development, and he will bring the committee’s recommendations before the full council. Hernandez says the empowerment zone will more than likely have to be split among existing state enterprise zones to appease council members.

Councilman Mark Ridley-Thomas

* Position: Chairman of the Community Redevelopment & Housing Committee. Ridley-Thomas will also conduct hearings on which area should be designated a federal empowerment zone. He says he will support breaking up the zone if it can be shown that such a move will not dilute the zone’s impact. Ridley-Thomas said he will await a report from the Community Development Department and other city agencies before submitting his committee’s recommendation on the empowerment zone.

Henry Cisneros

* Position: Secretary of Housing and Urban Development. Cisneros will select six urban empowerment zones after HUD officials review applications from cities nationwide. In a visit to South-Central in May, Cisneros said an empowerment zone would be an intensive, experimental program that would help cure the city’s urban woes.

Eastside Enterprise Zone

Square miles: 17

Population: 188,866

Residents living in poverty: 26%

Average per capita income: $6,649

Countywide average: $16,149

Educational attainment:

67% of the 117,345 adults did not finish high school

Countywide, 31% of all the adults did not finish high school

Central City Enterprise Zone

Square miles: 4

Population: 68,155