A Lesson in Cooperation on Ghost Towns of the Quake : Federal, state, local officials work together to further rebuilding

Intentionally or not, the Clinton Administration and Congress left some maneuvering room in the nearly $12-billion federal-aid package that is fueling Los Angeles’ recovery from the Northridge quake. For example, there was an estimated $400-million surplus in federal funds allocated for repairing quake-damaged schools and freeways. It was that cache that an alert Mayor Richard Riordan wisely focused on two weeks ago, hoping to use it to bridge a multimillion-dollar gap in quake-related housing repairs.

One week later, President Clinton agreed, saying that a shift of $225 million of those funds to housing relief would represent a “down payment on our partnership with the cities to solve this ghost-town problem.” About $200 million would go to Los Angeles, with another $25 million earmarked for Santa Monica.

The U.S. Senate approved the transfer on Thursday. The matter will be taken up this week in conference with the House of Representatives. It deserves final approval. Housing and Urban Development Secretary Henry Cisneros made the point last week when he stood outside a vacant apartment building in Granada Hills, one of 13 ghost towns in the San Fernando Valley, Mid-City and Hollywood areas. In these locations, owners are struggling to rebuild or still weighing the pros and cons of even trying. Meantime, their empty units are prey to opportunists and vandals.

“You can see that this is uninhabitable, unacceptable for the long run,” Cisneros said, later adding: “The loser when an apartment owner walks away from an apartment like this is the community.”

The funding is another welcome sign of commitment and cooperation. The Riordan Administration and the governor’s Office of Emergency Services, under Richard Andrews, have done a good job thus far in cooperating with federal officials, providing them with badly needed information and suggestions and promptly applying federal aid where it is needed most. More remains to be done, however. The city and the federal Small Business Administration, for example, had identified some 855 affected business and residential properties in the ghost towns. There was an approval rate of about 58% for owners who applied for SBA loans, but 188 owners were denied. Local officials will have to question another 310 ghost-town property owners who never applied for SBA assistance to determine whether they obtained funds to rebuild from other federal sources or from their own insurance coverage.

But for those condominium and apartment owners who applied for both Federal Emergency Management Agency and SBA funds and were either denied or left short, the addition of another funding mechanism could be crucial, according to Gary Squire, general manager for the city’s housing department. “We are trying to cure financial damage as well,” he said.

The $225 million would be used for 30-year no-interest loans with no payments due for six years. It would not be a panacea; not everyone could rebuild, particularly in Santa Monica, where rent control has made reconstruction even tougher. But it would arm some residential owners with the edge they need to avoid foreclosure. For some, it could be the difference between giving up and carrying on. We’re already beginning to see a benefit from negotiations among city officials, lenders and owners.

The vacant apartment where HUD’s Cisneros made his remarks, for example, will be rebuilt through a package that includes $2 million in federal loans, $1 million in interest write-downs by a bank and $250,000 in cash from the owner. Along similar lines, the Los Angeles City Council has already approved another $7.75 million in federal loans that will help the owners of another set of five apartment buildings in the Valley that were headed for foreclosure avoid that fate and rebuild. This is exactly the kind of help that Cisneros and the mayor want to duplicate.